In the midst of all the noise surrounding the Goldman Sachs charges of fraud brought by the SEC, another interesting suit was brought. This suit puts the financial regulators, the SEC and FINRA, on the defense. Bloomberg reports, SEC, FINRA Sued in Luxembourg Over Madoff Fund Losses,
The U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority were accused of being liable for losses in a Luxembourg fund tied to New York money manager Bernard Madoff.
The Luxembourg suit, which says the SEC and Finra failed to stop Madoff’s fraud after repeated warnings, seeks an order holding the U.S. regulators liable for losses in Access International Advisors LLC’s defunct LuxAlpha Sicav-American Selection Fund. Irving Picard was also sued for damages, in his role as the trustee tasked with liquidating Madoff’s business.
“The SEC and Finra are liable for their extreme misconduct and failures” to prevent Madoff’s “monumental fraud with disastrous effect on the global investment community, particularly on investors within Luxembourg,” according to the suit filed April 13 by lawyers for Access. “Thanks to their poor functioning they enabled a fraud that lasted many years.”
The SEC has been faulted by U.S. lawmakers for failing to detect that Madoff was operating a $65 billion Ponzi scheme. The SEC said last year it would conduct a “top-to-bottom” review of its regulation. Employees at Finra, the U.S. brokerage industry’s main regulator, failed to fully probe transactions at Madoff’s firm, a report found in October.
SEC spokesman John Heine and Finra spokesman Brendan Intindola declined to comment. Picard’s spokesman Kevin McCue said in an e-mail the trustee won’t comment.
Fernand Entringer, the Luxembourg lawyer for Access, Patrick Littaye, co-founder of Access, and Pierre Delandmeter, a board member of LuxAlpha, said in the court filing the SEC and Finra “should be held accountable” for investor losses.
I am a big proponent of accountability, along with transparency and integrity. In the endless pursuit of these virtues perhaps Entringer, Littaye, and Delandmeter might look to join forces with Helen Davis Chaitman, Richard Greenfield, and Jonathan Cuneo all of whom are involved in legal disputes with our financial regulators.
Strength in numbers typically does not hurt in creating pressure to generate transparency. Certainly the desired results are anything but assured but pressure does have a funny way of helping the process along.