Is the S.E.C. More or Less Scary Today?

I dare you to read this Times report of the S.E.C.’s “investigations” of Bernie Madoff over the years and not gasp in amazement at the agency’s ineptitude. If the S.E.C. were a ship, it would be lying on the ocean floor; if it were a restaurant, it would have poisoned all its customers; if it were a government agency, it would have — oh, wait. Yes.

The Madoff crime will continue to provide work for many lawyers for many years to come. After the S.E.C.’s report, it is hard to believe that the S.E.C. itself won’t be a target of further legal action.

But what I’m wondering is this:

Let’s say you are currently running your own shady investment scheme. Perhaps you, like Madoff, have anticipated many times over the day that you would be exposed. And yet you haven’t yet been. Do the current revelations about the S.E.C.’s ineptitude give you comfort, believing the agency is congenitally incapable of rooting out fraudsters unless they confess to their own sons, or are you more frightened today than you were yesterday, believing the agency cannot possibly perform any worse than it has in the past and that your days are numbered?

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  1. Fred T. says:

    I’m reminded of a news story I saw when I was a teenager living in a metro area that talked about how teens were being recruited to be car thieves because they wouldn’t see a day of jail until they stole something like 10 cars.

    I briefly considered becoming a car thief, but I’m a perpetual victim of Murphy’s Law when it comes to not-quite-on-the-straight-and-narrow activities.

    Me? My days are numbered. Er, um, WOULD be numbered.

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  2. Terry says:

    I would be worried about new competing shady investment schemes – now that everyone knows how low the barriers to entry into the market are.

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  3. AlleyGator says:

    I believe the best way to guarantee a large profit in a competitive market is to obtain privileged information that the rest of the market does not have, since it grants you a competitive edge.

    So thinking economically, I doubt that the examinations into the SEC’s fallacies bode well for all the other fraudsters.

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  4. N.B. says:

    So, the question is: how does the new balance between payoff and punishment look.

    The criminal has an essential element that is different from rest of us: the mind.

    Looking at it from that angle, no amount punishment will deter a determined crook to swindle. In fact, quite the opposite: Bernie Madoff probably was frustrated as to how easy it all was and would have loved a little more challenge, if not relished it.

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  5. jimi says:

    Between this and the kidnapper in Cali, isn’t anyone questioning the effectiveness of ‘government regulation’?

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  6. M.B. says:

    The quote from the Chairwoman of the SCC (in refrence to the skills of the investigators), proves that the agency still has not got it: “better training, more attention to outside tips and the recruitment of “new skill sets””

    The problem does not seem to be the investigators but the vast bureaucracy above that provides huge obstacles and disincentives for anyone to stick their neck out.

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  7. ben says:

    I love the parallels in the commentary about the ship at the bottom of the ocean, the poisoned restaurant customers and the list could go on like “it it were a government agency it would be star-struck by the hedge fund managers it audits.

    It was a brilliant move by Madoff to proactively go out to his
    clients (the scammed people) and proclaim that he’s been
    audited multiple times by the SEC, and that he passed with flying colors! He couldn’t have taken better advantage of the audit than that! The only thing that could of course,
    would be if he were to have the SEC auditors invest in his high return “steady as a rock” investment!

    To top it off as a stroke of genius too, is that he didn’t
    waste a yota of his precious energy to invest a single
    dime of the loot either, but just simply sticking it in a bank account is perfect!

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  8. Jake says:

    I think the SEC is more scary to the people trying to follow the agency’s regulations than to the people trying to break them.

    For scammers, their biggest threat is probably from their partners in crime. Somebody gets mad at you about something or gets into other legal trouble and then they rat you out.

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