Question

In light of the securities fraud committed by Bernard Madoff write an essay of 1-2 pages indicating what the SEC could have done to prevent this type of fraud. In your essay. In your essay consider whether the failure of the SEC to prevent fraudulent conduct related to financial investment might inhibit foreign investors from trading and investing in US financial exchanges.

Answer 1

Explanation

Bernard Madoff scandal is one of the biggest ponzi scheme scandal. It was done madoff and fraud was discovered in late 2008.

SEC was came into question when the fraud was discovered. SEC was sued by investors for non discovery of such a big scandal considering its weak performance.

But there ways SEC could have prevented this fraud. First of all SEC could have given some more additional powers.

Since the SEC has full authority of investigating any unregistered investment entities and hedge funds if there are signs of fraud. There are many questions raised on Madoff trading since 1999 but SEC did not investigated wisely

Madoff was registered as investment advisor and stock broker. This gives full authority to SEC investigate madoff and all of its affiliated businesses. This could have SEC to find any other business run by Madoff.

SEC even investigated other businesses of madoff like short selling and Derivatives and unfortunately such businesses were not carried over by madoff. Here SEC failes in making judgements like which businesses need to be scrutinised.

SEC was busy in investigating other unregistered entities and under this an registered entity like madoff was continously doing fraud.

SEC should make a list of risky investment advisors and should do timely review under proper checklist.

SEC should maintain and update the investors information timely and SEC should also segragate duties for smooth flow of work

Such failure of SEC to prevent fraud can inhibit foreign investors from trading and investing in us financial exchanges.