We were wrong. It turns out the SEC wasn’t totally asleep at the wheel. The agency did investigate claims of irregularities at Bernard L. Madoff. But, like a doctor that’s overly focused on testing the patient for one specific disease, the agency totally whiffed.
See, many people thought Madoff’s game was front running, so the SEC examined the claim.
Bloomberg: Madoff also operated a brokerage, and the SEC’s inspectors examined it in 2005, finding three violations of so-called best- execution rules, which require that customer trades be made at the most advantageous prices, agency spokesman John Nester said in a statement. The regulator’s enforcement division completed an investigation involving the company last year without bringing a claim, Nester said.
The SEC opened that inquiry after tipsters and press reports said Madoff’s purported investment returns may have resulted from front running, in which traders buy shares for their own account before filling customers’ orders, a person familiar with the inquiry said. The agency found no evidence that the brokerage did anything improper, the person said.
All clear; no front-running here. Just a gigantic Ponzi scheme.