[JURIST] US Securities and Exchange Commission (SEC) [official website] Chairman Christopher Cox [official profile] on Tuesday said that he would launch an immediate investigation [press release] into how the fraud allegedly perpetrated by Bernard Madoff went undetected for so long. The SEC filed charges [complaint, PDF; JURIST report] last week in New York against Madoff and his firm, Bernard L. Madoff Investment Securities LLC [archived website] for an alleged $50 billion fraud scheme. Cox said:
Since Commissioners were first informed of the Madoff investigation last week, the Commission has met multiple times on an emergency basis to seek answers to the question of how Mr. Madoff's vast scheme remained undetected by regulators and law enforcement for so long. Our initial findings have been deeply troubling. The Commission has learned that credible and specific allegations regarding Mr. Madoff’s financial wrongdoing, going back to at least 1999, were repeatedly brought to the attention of SEC staff, but were never recommended to the Commission for action. I am gravely concerned by the apparent multiple failures over at least a decade to thoroughly investigate these allegations or at any point to seek formal authority to pursue them.
Cox announced that there would be a "full and immediate review" of these allegations. The SEC will also look into relationships between SEC officials and Madoff's family members, including Madoff's niece, who married a former SEC lawyer in 2007. In related news, Madoff is scheduled to appear in court [Reuters report] Wednesday for a bail hearing.
On Saturday, UK financial firm Bramdean Alternatives Limited [corporate website] raised concerns [statement, DOC; JURIST report] about the US financial regulatory process after its value dropped by more than 35 percent following news of its exposure to the fraud. Madoff has been charged with violating the anti-fraud provisions of the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Advisers Act of 1940 [texts]. Madoff allegedly told two employees of his firm last week that his investment advisory business was "basically, a giant Ponzi scheme." Madoff, 70, founded his investment firm in 1960. He has served as chairman of the board of directors of the NASDAQ [official website] stock market and was a member of the board of governors of the National Association of Securities Dealers (NASD). According to his firm's website, it ranked among the top 1 percent of US securities firms.