WASHINGTON (AP)– Up until Bernie Madoff’s scheme came crashing down and the most significant Ponzi plan in Wall Street’s history emerged, he appeared as a captivating wizard with a Midas touch. His financial investment advisory service attracted a dedicated legion of customers, including A-list stars, rewarding them with consistent returns that defied market changes.

But he not only conned investors, he seduced regulators. The Securities and Exchange Commission esteemed him as a Nasdaq Stock Market chairman and popular Wall Street figure– and failed to discover his fraudulent plan in spite of getting cautions and reliable problems over 10 years. After it was exposed in December 2008, a shaken SEC scrambled to put controls in location to prevent such episodes from recurring and uncover them early.Madoff was sentenced to 150 years in prison for his crimes. He at age 82. A take a look at federal

regulators ‘actions with regard to Madoff before his conduct became publicly known and later with an eye to prevention: ___ WHAT WAS MADOFF’S RELATIONSHIP WITH THE

SEC?For years, Madoff was a brilliant star in the SEC’s constellation, a legendary financial investment supervisor with celebrity clients, along with plethoras of ordinary investors. He was chairman of the Nasdaq Stock Market in 1990, 1991 and 1993. He rested on SEC advisory committees.All the while, the financier was running a multibillion-dollar Ponzi scheme: the classic swindle in which early investors are paid with later investors’cash instead of real revenues on their investments. By all accounts, Madoff’s rip-off wasn’t awfully advanced or state-of-the-art, utilizing counterfeit account declarations sent to clients, for instance. But it erased thousands of people’s life savings.In Madoff’s words in 2009, it seemed” it never went into the SEC’s mind that it was a Ponzi plan.”Agency examiners”

never ever asked” for standard records to substantiate his operations, he stated in a prison interview with the SEC inspector general. ___ DID THE RELATIONSHIP CAUSE THE SEC TO OVERLOOK MADOFF’S CONDUCT?That was the concern postured in Washington after Madoff was apprehended and confessed in December

2008, when the SEC currently was handling the worst financial crisis since the Great Depression that struck in the previous fall. Top SEC authorities were transported before Congress. Lawmakers from both parties stated Madoff’s scams exposed deep, systemic issues at the SEC. The agency’s enforcement and inspections personnel had actually received reliable problems about Madoff, consisting of particular red flags on his operations from financial analyst whistleblower Harry Markopolos and his private investigators, which were communicated to SEC personnel in Boston, New York City and Washington headquarters.Criticism installed from legislators and financier advocates that Wall Street and regulators in Washington had actually grown too close. Some required a shakeup of the SEC. A 2009 report by the inspector basic detailed how SEC examinations of Madoff were mishandled, with

disputes amongst evaluation staffers over the findings, absence of interaction amongst SEC authorities in different cities and repeated failures to act on genuine problems from outside the

company. ___ WHAT ABOUT OTHER REGULATORS?An internal evaluation by the Financial Industry Regulatory Authority, the securities market’s regulator, found a breakdown on the part of the company in the Madoff case. Like the SEC, FINRA made regular examinations of Madoff’s brokerage operation, which operated independently from his deceptive investment company, and did not capture

wind of Madoff’s fraud. ___ WHAT PREVENTIVE ACTION AGAINST FUTURE FRAUDS DID THE SEC TAKE?Under public pressure, the SEC took a series of actions and made guideline changes, beginning in 2009. The most significant were changes in how the agency carries out examinations of financial investment advisors and brokerage firms. It also took actions targeted at supplying much better protection of consumers ‘assets

held by brokerages and consultants versus theft and abuse. Investment advisors were pushed toward putting clients’assets in the custody of an independent firm, something Madoff hadn’t done. Likewise, the SEC and the stock exchanges were given higher oversight of how brokerages handle custody of their customers ‘funds. Assessment practices were modified to focus more closely on examining possible danger to financiers, and monetary firms were required to send more information. In addition, the firm put in a central electronic system for taking suggestions and complaints to assist discover scams. And the enforcement division was reorganized to stress more substantial cases; specialized units were developed, including one for possession

management. Market experts were employed to work with personnel attorneys and accountants. ___ HOW EFFECTIVE WERE THE CHANGES?” The evaluations and examination systems and programs have all

been boosted,”states James Fanto, a professor at Brooklyn Law School who specializes in banking and securities law.”Moreover, the particular issue in the Madoff case– confirming what an adviser makes with the assets– was particularly resolved, and we have had few problems at the level of Madoff ever since.”Even in Madoff’s case, the SEC likely would have found


problems if personnel had actually done a comprehensive examination, Fanto kept in mind. “Things have improved but SEC examiners run the risk of missing out on problems in successful companies due to the fact that the success discourages them from actually seeing the issues before them, “he said. ___ Follow Marcy Gordon at https://twitter.com/mgordonap