The SEC and the Madoff Scandal: Three Narratives in Search of a Story

Abstract

This essay, part of a symposium on narrative in corporate law, considers various portrayals of the complicity of the SEC in the Bernard Madoff scandal - including the Commission's own Inspector General's report issued in September 2009. It considers possible explanations (revolving door problems, incompetence and sloth, etc.) but suggests that the story is deeper and more frustrating, arising out of the relative poverty in which the SEC operates, which in turn leads to habits of thought and action that leave too much unnoticed and undone. The interesting question, then: why the poverty? The essay concludes with a political explanation. While by no means meant to excuse the neglect in the Madoff matters, the essay suggests the possibility of a more sympathetic portrayal of the work-a-day world of securities regulation.

Keywords: securities fraud, Madoff, narrative

JEL Classification: K22