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Madoff Victims Call Out FINRA

Posted by Larry Doyle on September 3, 2009 8:26 AM |

Is Uncle Sam, in the form of the SEC, attempting to issue a mea culpa, mea culpa, mea maxima culpa in the bungling of the Madoff investigation and trying to conveniently turn the page?

The American public learned very little with the release of the SEC Inspector General David Kotz’s review of the SEC’s failure to expose the Bernard Madoff Ponzi scheme. In fact, having just finished reading the Executive Summary of his investigation, I would maintain it is largely an extended regurgitation of much of what Harry Markopolos provided in his Congressional testimony last February.

What was Harry’s conclusion of his exhaustive pursuit to expose the Madoff scam? The SEC is incompetent.

What was the Inspector General’s conclusion from his investigation? In so many words, Kotz lays out the same results. The SEC was incompetent on so many fronts from the early 1990s until Madoff was exposed last December. For those who would like to read Kotz’s 22-page summary of his investigation, just click on the image below.

Is this all the public gets? Is this all the public can expect from our regulators? Nothing more than a mea maxima culpa? How about a real pursuit of the total truth? This Madoff affair has many more legs. Let’s navigate.

Ronnie Sue Ambrosino, head of the Madoff Victims Coalition for Investor Protection (my guest on NQR’s Sense on Cents with Larry Doyle on August 16th), and her husband Dominic comment on the Inspector General’s report and simultaneously call out FINRA last evening during an interview on Fox Business News.

Ronnie Sue and Dominic effectively connect the dots while highlighting the following:

1. Current head of the SEC Mary Schapiro formerly headed FINRA

2. Harry Markopolos defined FINRA as being “in bed” with the industry when he provided Congressional testimony this past February detailing his decade-long pursuit to expose the Madoff Ponzi scam.

3. FINRA had an internal investment portfolio (Sense on Cents would add that the portfolio was invested in hedge funds, fund of funds, and also had hundreds of millions in Auction-Rate Securities).

4. Amerivet Securities has recently filed a complaint against FINRA. The complaint indicates it has information and reason to believe that FINRA’s investment portfolio invested in Madoff.

Sense on Cents would add that the Amerivet complaint looks to have FINRA provide a full and thorough review of the following:

>> interactions with the major Wall Street banks

>> its compensation practices

>> its liquidation of its auction-rate securities position in 2007

>> all investment activities

Sense on Cents would further add that the Madoff family had extensive relationships with the NASD, Nasdaq (Bernie helped establish this exchange) and FINRA.

Let’s listen to Ronnie Sue and Dominic Ambrosino:

Is the Madoff investigation over? Any rational individual can understand there are many more regulatory questions needing answers. Where do those questions lead us? Inside FINRA and specifically to its investment portfolio. Why shouldn’t a Wall Street self-regulatory organization mandated to protect investors be obligated, and if need be compelled, to provide total transparency of all its business dealings?

I can only hope major media outlets and Washington pick up this story and understand the need to fully investigate FINRA.

I ask you again . . . is the Madoff investigation over? Not by a long shot!

What do you think?

LD

Related Sense on Cents Commentary:
“Amerivet Complaint Against FINRA Alleges Madoff Investment” (August 25, 2009)
NoQuarter Radio’s Sense on Cents with Larry Doyle Interviews Head of Bernard Madoff Victims Coalition (August 16, 2009)
“FINRA Is Supposed to Police the Market” (April 29, 2009)
“Riveting Testimony from a Great American, Harry Markopolos” (February 4, 2009)






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