The SEC is coming under fire for failing to spot what may be the biggest securities fraud in history, the Washington Post reports. The regulator received repeated warnings from 1999 onwards that Bernard Madoff's investment fund was fishy, but failed to conduct even a routine examination until Madoff blew the whistle on himself last week. Madoff may have avoided scrutiny because he also ran a high-profile, legitimate business, helped create Nasdaq, and advised the SEC on electronic trading.
Madoff's separate investment business was also designed, like hedge funds, to operate outside most regulation during a period when the government was bullish on these unregulated investments. And some say it's unrealistic to expect the overworked SEC to catch everything. "A very skillful criminal can almost always outfox the regulator or the overseer, " says former SEC chairman Arthur Levitt.