As part of its self-examination, the SEC will look into the controversial relationship between Shana Madoff (Bernie’s niece) and one of the agency’s own examiner. We doubt this will prove to be the smoking gun. In other words, we don’t think the SEC looked the other way because of the relationship. It’s probably less sinister than that, as the agency just had massive blinders on when it came to suspecting that a “pillar of Wall Street” might be up to no good.
WSJ: The Securities and Exchange Commission will examine the relationship between a former official at the agency and a niece of financier Bernard L. Madoff, after the SEC’s chief admitted “apparent multiple failures” to oversee the firm at the centre of an alleged $50 billion Ponzi scheme.
In an extraordinary admission that the SEC was aware of numerous red flags raised about Bernard L. Madoff Investment Securities LLC, but failed to take them seriously enough, SEC Chairman Christopher Cox ordered a review of the agency’s oversight of the New York securities-trading and investment-management firm. The review will include whether relationships between SEC officials and Mr. Madoff or his family members had any impact on the agency’s oversight.
As for Shana’s husband, Eric Swanson, he’s now general council at the BATS ECN — which is funny, since at the SEC his job was to regulate electronic exchanges. We’re guessing this won’t provoke much outrage, since the idea of a regulator going to work for the regulated is totally commonplace. If your BATS, then of course you want to hire the guy whose job it was to regulate you, and who still has friends at his old agency.
Among Mr. Swanson’s duties was supervising the SEC’s inspection program in charge of trading oversight at stock exchanges and electronic-trading platforms, according to a press release from Bats Trading Inc., an electronic stock exchange that hired Mr. Swanson as general counsel earlier this year.
Neither person is named in the SEC statement as a target of the probe, which is being led by the agency’s inspector general, David Kotz. But Mr. Kotz said in an interview that he intended to examine the relationship between Mr. Madoff’s niece and Mr. Swanson.
In a statement Tuesday night, a spokesman for Mr. Swanson acknowledged that “the compliance team he helped supervise made an inquiry about Bernard Madoff’s securities operation,” without being more specific. He said the couple began dating in 2006, and were married in 2007.
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