Two New York investors have filed a lawsuit against the Securities & Exchange Commission, accusing the SEC of a "pattern of incompetence" in failing to detect and put a stop to Bernie Madoff's Ponzi Scheme."Had the SEC carried out its functions with even a minimum of reasonable due care, many, if not most, of Madoff's victims would have been spared the financial ruin they face today," the complaint said.
"Plaintiffs relied on the SEC to protect them and, instead, time after time, the SEC's agents looked the other way, allowing an obvious danger to grow exponentially, until massive injuries to the plaintiffs and other Madoff investors became inevitable," according to the complaint.
Well that was their first mistake: relying on the SEC to do their due diligence for them. Financial history is littered with the carcasses of investors who lost their shirts investing in schemes that the SEC and other regulatory bodies should have cracked down on but didn't.
Most legal experts agree that this case won't go anywhere because the SEC is a regulatory agency that gets to decide how it allocates its resources -- and doesn't really have any legal obligation to protect investors from crooks, even though that is its stated mission.
The moral of the story for investors is this: The SEC is incompetent and doesn't have the resources to actually protect investors from crooks. You're on your own.
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Reader Comments (Page 1 of 1)
10-15-2009 @ 12:20AM
sgentilejr said...
The Government and the SEC may claim they are not liable, but is that really true?
The SEC is the only entity that can examine the firms that they give a license to. By the SEC licensing the firms the SEC is giving the firms their blessing and the appearance of the firms being legit.
The SEC shoulders responsibility because it is the SEC who helps and assists the firms in appearing to be legitimate and the appearance the firms are operating under SEC rules.
It is like a city building inspectors roll. If a building is not build to structural codes, the building inspector is responsible.
The same is true of the SEC. Congress created the SEC to overlook and be a watchdog over investment firms.
The SEC cannot get off the hook for not doing what Congress had intended and crated the SEC to do, by merely saying oh well we did not do our jobs.
That is like taking your child to a hospital emergency room and the child dies 12 hours later and the hospital say oh well we are not at fault because we did not have time to treat your child or look him over, so our care and treatment had no effect on his death because we did not treat him. The SEC is saying oh well we did not do our jobs and I doubt anyone on a jury would think that they are not liable.
10-15-2009 @ 5:35AM
al coholic said...
I'm sure there are a number of well intentioned people at the SEC doing their best to monitor the enormous number of infractions taking place at any point in time. It seems like a nearly impossible job to me.
The history of white collar crime is one of special treatment for the offenders who are often portrayed as victims themselves and seldom get treated like common criminals. If the punishment for embezzeling millions of dollars is a stint at a country club prison after enjoying the spoils of the crime for decades, I think it encourages many to cross the line.
Take Madoff for example. Now that he and his family enjoyed years living high off his criminal scheme he suddenly repents and incredulously asserts that he was the only member of the family who knew the company was a total scam. Since he is likely only going to spend a few years in jail before he dies, and his gamily gets off pretty much scott free, what kind of justice do we have?
We need a stiffer response to white collar crime. One that would deter a large amount of it before it happens.