SEC Officials Call for More Resources and More Regulation Following Madoff
In testimony before a Senate Committee concerning the Madoff matter, two SEC officials called for more regulation and more resources. Linda Chatman Thomsen, Director of Enforcement, claimed that the SEC was “resource constrained” given the growth in the securities markets and their complexities. She called for a harmonization of regulatory regimes so that products and participants would be regulated similarly. She also suggested that legislators should consider additional disclosure, third party custody, and minimum qualification requirements for auditors. In an effort to defend the Enforcement Division, she explained, “Athletes may score runs or kick goals, but we bring enforcement actions. The filing of an enforcement action is one of the few solid benchmarks of success in the pursuit of our mission.” Lori Richards, Director of the Office of Compliance, Inspections, and Examinations called for greater examination frequencies for investment advisers.
OUR TAKE: We do not blame the SEC for the Madoff matter. The SEC did not defraud investors; Mr. Madoff allegedly did. However, we are not sure that calling for more of the same regulatory medicine makes sense. Perhaps, Congress and the incoming Chairwoman of the SEC should consider an alternative to the examination/enforcement system that failed to uncover the Madoff scheme.