The Scandal Of Bernie Madoff

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The Scandal Bernie Madoff was known as a hard worker who, at one point, created the largest buying-and-selling market maker at the NASDAQ from being a mere penny stock trader in the 1960s. He was a stock broker, a financial advisor, and a chairman of the NASDAQ. As of December 11, 2008, he primarily became known for being responsible for the largest Ponzi scheme in history. He was able to make $50 billion disappear as if the money had never existed by using new investors’ money to pay out the old. The Securities and Exchange Commission (SEC) had received tips about Madoff’s business, and paid his office a visit for an investigation. However, even after hours were spent searching through fabricated trading records, the SEC wasn’t able…show more content…
Per Liz Moyer, “How Regulators Missed Madoff,” regulators blamed limited resources, a lack of coordination between agencies, and fragmented oversight for letting Madoff operate for so long undetected. Moyer also goes on to list these steps Madoff took to elude regulators: He provided advisory services but did not charge a management fee; and His broker-dealer never had customer accounts, which allowed them to execute order flow for other broker-dealers and then trading for its own accounts. Apparently, the SEC was under staffed and incapable of uncovering fa fraud of this magnitude, while they were able to uncover other frauds on a smaller scale (while still substantial at $370 million). Madoff also failed to register his firm as an investment advisor until 2006, resulting in the SEC never investigating the firm as such. They dropped the ball on the not pursuing potential red flags, particularly ones the arose when it was learned that Madoff kept assets in the firm’s own custody and utilized a small auditing firm to sign off the books (Moyer, n.d.) Additionally, the SEC created the Sarbanes-Oxley Act (SOX) in 2002, after other scandals were uncovered. One of the requirements created under SOX was that brokerage firms, similar to Madoff Securities, are required to be audited by a firm that is registered with the Public Company Accounting Oversight Board
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