SEC: Fighting Fires, Ignoring Smoke

SEC leaders are calling for more funding and staff to help step up enforcement efforts.

SEC Enforcement Director Linda Thomsen told Congressional leaders that limited resources only allow the SEC to pursue the most promising leads out of the hundreds of thousands of tips it receives every year, according to Bloomberg News. Thomsen provided written testimony to Congress during investigations of the SEC’s failure to pursue Bernard Madoff’s $50 billion ponzi scheme.

Proposed legislation would add 100 staff members to the enforcement division.

Thomsen said the SEC uses “virtually all our resources to pursue fires,” and that more resources would enable it to find “smoke,” Bloomberg reported. The SEC’s inspections unit never examined Madoff’s money- management business after it registered with the regulator in September 2006. The Madoff brokerage operations were investigated in 1999, 2004 and 2005, according to Bloomberg.

Today lawmakers will hear testimony from Boston investor Harry Makropoulos, who provided the SEC with tips on Madoff. Makropoulos mailed SEC investigators a 29-page tip sheet in 2002, taking note of secretive business practices, lack of oversight and suspiciously high profits, according to the Washington Post.

Congress previously doubled the SEC’s budget with the 2002 Sarbanes-Oxley legislation, and the agency currently employs about 3,500, according to Bloomberg.