The only way to end the cycle is to bite the bullet and fund the necessary office at the SEC. Until we break the cycle, tens of thousands and the integrity of the markets remain at risk to predatory schemes like the one Mr. Madoff ran for years and years, right under the Commission’s nose.
The Dodd-Frank financial reform bill has taken its share of hits over the past few months. This week’s might be the biggest. The Wall Street Journal reported Friday that a lack of funding will force the SEC to delay opening an independent whistleblower office. In the meantime, the SEC’s enforcement division will handle the anticipated 30,000 whistleblower claims per year. Surely you’re not serious; the same SEC that missed Madoff and scores of smaller ponzi schemes?
This delay, just a month after the SEC released its proposed rule governing whistleblowers for public comment. The bill required that the SEC finalize and adopt the rules by April 12, 2011, but what good are rules without a department to enforce them? The incentives provided to whistleblowers under Dodd-Frank are an enormous step forward for investor protection in post-economic-crisis America. Informed citizens alerting the government of fraud and corporate has a proven track record.
Instead, there is a bit of a vicious cycle: poor whistleblower system helps cause crisis, which helps cause budget shortfall, which results in underfunding the SEC, which leads to poor whistleblower intake, and so on. But the only way to end the cycle is to bite the bullet and fund the necessary office at the SEC. Until we break the cycle, tens of thousands and the integrity of the markets remain at risk to predatory schemes like the one Mr. Madoff ran for years and years, right under the Commission’s nose.
Assisted by Zach Kady and David Martin