How the SEC Punted on Madoff

Why did the Securities and Exchange Commission only learn about one of the largest securities frauds in history—its own description—when Bernard Madoff came forward to confess? Financial analysts had raised concerns about Madoff’s practices for at least a decade, and in 1999 one accused the disgraced hedge funder of running a Ponzi scheme. “But the agency did not conduct even a routine examination of the investment business until last week,” The Washington Post reports. Sources tell the paper the SEC should have flagged Madoff “because of the history of complaints against his firm and because of… Madoff’s history of smooth earnings—above 10 percent a year, every year—and his company’s reliance on a small auditing firm that had no other large Wall Street clients.”