HOW THE SEC MISSED MADOFF.

HOW THE SEC MISSED MADOFF. Obviously, when a crime takes place in the open, as Madoff’s did, there must be reasons why nobody noticed. I have a couple of theories that I haven’t seen mentioned. First, young lawyers at regulatory agencies are attracted to cases with novel and interesting legal theories rather than to checking basic facts. Madoff’s fraud wasn’t interesting. He simply made everything up. Second, the SEC regulatory schemes rely heavily on the premise that sophisticated investors don’t need as much protection. Sophisticated investors are expected to do their due diligence on a scale commensurate with the amounts invested. It is naive investors who require protection by the SEC. It would never occur to a regulator that none of Madoff’s investors was doing basic investigation. It’s something like the story of the economist who won’t pick up a twenty dollar bill on a city sidewalk because he knows that if it really were a twenty dollar bill, somebody would already have picked it up. If Madoff were a fraud, he would already have been found out.

This entry was posted in Economics. Bookmark the permalink.

One Response to HOW THE SEC MISSED MADOFF.

  1. Pingback: IS GIVING CHRISTMAS GIFTS WASTEFUL? | Pater Familias

Leave a Reply

Your email address will not be published.