Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Tuesday, January 27, 2009

SEC Enforcement and OCIE Directors Testify on Madoff

Both Linda Chatman Thomsen, SEC Director of Enforcement, and Lori Richards, Director of OCIE, testified today before the United States Senate Committee on Banking, Housing and Urban Affairs about the Madoff scandal.  In her written statement, Ms. Thomsen does not provide much, if any, new information on past SEC investigations into Madoff and why the SEC did not uncover the Madoff ponzi scheme earlier, particularly since they were given, in former Chair Cox's words, "credible and specific" allegations about the fraud at least as early as 1999.  Instead, her written statement discusses the SEC and criminal complaints that were filed in December 2008 and other possible remedies by other regulators and private parties.  She then goes into a long general description of how enforcement handles the "hundreds and thousands" of tips it receives each year and the usual rhetoric about scarce resources, dedicated staff, etc.   

Lori Richards acknowledged the obvious -- that examinations of the Madoff broker-dealer firm did not find the alleged fraud committed by Mr. Madoff -- and stated that the staff did not examine his advisory operations, which first became registered in late 2006. She then went on to describe the risk-based program for selecting firms for examination and the "expansive steps" being taken to identify possible improvements to the system.  Specifically, with respect to Madoff:

The SEC staff did not examine the Madoff investment adviser. The firm registered as an investment adviser in September 2006. As noted above, about 10% of registered investment advisers are examined routinely, every three years.

The Madoff broker-dealer operation was subject to routine examination oversight by the firm's SRO, and was also subject to several limited-scope examinations by the SEC staff for compliance with, among other things, trading rules that require the best execution of customer orders, display of limit orders, and possible front-running, most recently in 2004 and 2005. These examinations were focused on the firm's broker-dealer activities. (As noted above, the firm's advisory business became registered in 2006 and was not examined.) For the reasons I noted, I must not discuss these examinations in any greater detail.

In fairness to both Thomsen and Richards, this is an ongoing investigation, so it was probably a waste of everyone's time to bring them before Congress just to meet the legislators' apparent need to express their outrage over the SEC's failures.

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RBC Bank President Gordon Nixon - Salary $11.73 Million


I'm a commercial fisherman fighting the Royal Bank of Canada (RBC Bank) over a $100,000 loan mistake. I lost my home, fishing vessel and equipment. Help me fight this corporate bully by closing your RBC Bank account.

There was no monthly interest payment date or amount of interest payable per month on my loan agreement. Date of first installment payment (Principal + interest) is approximately 1 year from the signing of my contract.
Demand loan agreements signed by other fishermen around the same time disclosed monthly interest payment dates and interest amounts payable per month.The lending policy for fishermen did change at RBC from one payment (principal + interest) per year for fishing loans to principal paid yearly with interest paid monthly. This lending practice was in place when I approached RBC.
Only problem is the loans officer was a replacement who wasn't familiar with these type of loans. She never informed me verbally or in writing about this new criteria.

Phone or e-mail:
RBC President, Gordon Nixon, Toronto (416)974-6415
RBC Vice President, Sales, Anne Lockie, Toronto (416)974-6821
RBC President, Atlantic Provinces, Greg Grice (902)421-8112 mail to:[email protected]
RBC Manager, Cape Breton/Eastern Nova Scotia, Jerry Rankin (902)567-8600
RBC Vice President, Atlantic Provinces, Brian Conway (902)491-4302 mail to:[email protected]
RBC Vice President, Halifax Region, Tammy Holland (902)421-8112 mail to:[email protected]
RBC Senior Manager, Media & Public Relations, Beja Rodeck (416)974-5506 mail to:[email protected]
RBC Ombudsman, Wendy Knight, Toronto, Ontario 1-800-769-2542 mail to:[email protected]
Ombudsman for Banking Services & Investments, JoAnne Olafson, Toronto, 1-888-451-4519 mail to:[email protected]

"Fighting the Royal Bank of Canada (RBC Bank) one customer at a time"

Posted by: Paul Fraser | Jan 28, 2009 1:18:14 PM

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