FINRA failure on Madoff

The Financial Industry Regulatory Authority didn't fully probe Bernard Madoff's firm and repeatedly failed to investigate tips about R. Allen Stanford's alleged $7 billion fraud, an internal report found.

On Stanford, Finra got an anonymous letter calling Stanford's business a "massive Ponzi scheme," but it took six years to reach Finra's enforcement staff.

More detailed account in FINRA missed chances to catch Stanford and Madoff - 2009 October 03

So much for government regulations or self-regulations and enforcement if there is no "skin in the game" or when perpetrators are good ol' boys with Democratic connections.

fail is an understatement and we still dont have any accountability

Exactly. They are now engaged in self-investigations and excuses for "failures" due to "inexperienced" and "untrained" staff, conveniently glossing over that even when the problems were spelled out by whistle-blowers and found to exist - by the same "untrained" and "inexperienced" staff - to exist, nobody had the presence of common sense or followed the procedures to push it up the chain of authority? That simply doesn't wash. Yet Mary Schapiro, on whose watch FINRA failed, has been promoted to Chair of SEC by Obama.

..... The staff of the U.S. brokerage industry's main regulator is "not adequately trained" on its investigative authority, and the Washington-based watchdog lacks procedures to escalate matters to senior management or special investigators "based on the gravity and substance of the fraud allegations," according to a report posted on Finra's Web site today.
The report shows that regulatory lapses linked to Madoff's record Ponzi scheme weren't confined to the Securities and Exchange Commission, which has been faulted by its own internal watchdog for inadequately pursuing tips over 16 years. Finra said it will create a new Office of Fraud Detection and Market Intelligence to ensure that staff with expertise in fraud detection respond rapidly to suspected scams. .....

Should not most of the staff in these agencies be experienced in or at least be aware of "fraud detection" - should not that be the main purpose of their jobs? And how does any [government] agency lack procedures to "escalate matters to senior management" - is not that the very definition of the bureaucracy?

The staff of the industry watchdogs and regulators are "not adequately trained and lack procedures".........

This is so utterly bogus----its inconceivable that they would not know Madoff and Stanford were crooks. Madoff was not even producing trading slips. Stanford was operating "offshore" for crying out loud. Are these not huge red flags?

CONCLUSION The fact is these oversight agencies have been infiltrated. Some of the people there are running a "protection racket" for crooks like Madoff and Stanford---probably getting paid-off to look the other way.

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Let's see how fast they find this Chicago fraud..... connected to Obama and his WH henchmen.

After (cough) leaving the Clinton admin, Rahm Emanuel got rich overnight in the Chicago office of Wasserstein Perella & Co. (w/ his pal Bruce Wasserstein) as it was being acquired by Deutsche Bank.

Rahm put together a merger involving Chicago-based Exelon Corp (also one of WH insider David Axelrod’s biggest PR accounts)......and also financed Obama’s political career.

COS Rahm is defensive about his ovenight deal-making millions......which financed his own rise to power.....and won him the Democratic primary for the Illinois House seat to replace Rod Blagojevich, a former mentor, in 2002.

Recalled one entertained Republican, “I saw a Democratic member of Congress walk up to Rahm and ask, ‘So how did you make $18 million in an afternoon sitting at a table in Chicago?’ And Rahm just turned and walked away. It gets to him.”

This is so utterly bogus----its inconceivable that they would not know Madoff and Stanford were crooks.

"Utterly bogus" is right. After all the tips, and after some follow-up investigations which uncovered serious problems, anybody with common sense, let alone interest in job or career promotion (getting the "whales" like Madoff or Standord would garner a "hero" status and be a boon to one's career), would push this matter to superiors and would not let it die.

And the fact that both agencies are trying to hide behind the identical feeble excuses only emphasizes that they cannot possibly justify, and are really trying to cover up the wrongdoers and the wrongdoing in the agencies through the cloak of "internal investigations".

In private companies, heads would roll and "relationships" would be examined, maybe even on Capitol Hill and DOJ. At least they would be talked about loudly, like in the much smaller case with Abramoff, instead of having the "dead air" on the subject.

Where is the [equivalent of] Michael Moore's movie on Madoff's ties to liberal Democrats, crony socialism and strange "lapses" of regulating and enforcement agencies? Liz, you have enough material, start the ball rolling on the movie. I am sure it could do well, even as DTV / DTDVD distribution.

At the very least we should be able to ask, what good is changing regulations if the government agencies are populated by highly paid, unaccountable, "inexperienced" and "incompetent" staffers who look to find future employment in the companies they are regulating, or overlook misdeeds based on political considerations.

BTW, there is a very interesting exception to the general "inexperience and incompetence" SEC malaise re Madoff in Kotz report that I didn't hear much about - from Top SEC Officials Were Unaware of Madoff Probes: Report - FR / Reuters / CNBC, 2009 September 05.

Some portions of the report were blacked out. Earlier this week, Schapiro said she wanted to safeguard any ongoing law enforcement action, and protect the names of junior staffers who did not play a central role in the examinations or investigations.
Kotz found that former SEC Assistant Director Eric Swanson's romantic relationship with Madoff's niece, Shana Madoff, had influenced the SEC's conduct.
After Madoff was arrested, the SEC's director of examinations' [Lori] Richards recused herself from all matters concerning Bernard Madoff because Swanson had been in her chain of command.

This is something that didn't make it into most publications and didn't make a lot of noise... something that should be followed up.

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