DataGovernor 120000GKJR 2,658 Visits
I've been watching this Madoff scandal unfold with incredulous amusement. Ponzi schemes aren't new but the sheer size and scale of this one I think perfectly epitomizes the gap between financial innovation and regulatory oversight capacity.
Mr. Madoff was certainly a financial innovator. He figured out a way to get thousands of people to part with their money on the promise of consistently good returns and he never executed any investment transactions.
Am I the only one wondering how it is possible that an investment fund can take investor dollars, send out an investment prospectus, never really execute any trades, and that there is no regulatory authority that is connecting the dots between investment claims and results?
I think the answer is that there are many regulatory authorities that have the mandates to monitor these gaps but that none of them have the information infrastructure necessary to connect corporate actions, financial disclosures, regulatory filings, and exchange transactions.
While the Madoff scandal is stunning, one does wonder how many other smaller scandals have not been discovered, or could have been discovered before all investor money was lost. After Congress exhaults in a round of blame and recrimination, I do hope efforts are directed at enabling regulatory authorities to build a 21st Century Information-Driven Regulatory Infrastructure.
Madoff demonstrates the need, now the Government needs to build it.