SEC and FINRA Sued in Luxemburg re: Madoff Fraud

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.

About Larry Doyle 522 Articles

Larry Doyle embarked on his Wall Street career in 1983 as a mortgage-backed securities trader for The First Boston Corporation. He was involved in the growth and development of the secondary mortgage market from its near infancy.

After close to 7 years at First Boston, Larry joined Bear Stearns in early 1990 as a mortgage trader. In 1993, Larry was named a Senior Managing Director at the firm. He left Bear to join Union Bank of Switzerland in late 1996 as Head of Mortgage Trading.

In 1998, after 15 years of trading and precipitated by Swiss Bank’s takeover of UBS, Larry moved from trading to sales as a senior salesperson at Bank of America. His move into sales led him to the role as National Sales Manager for Securitized Products at JP Morgan Chase in 2000. He was integrally involved in developing the department, hiring 40 salespeople, and generating $300 million in sales revenue. He left JP Morgan in 2006.

Throughout his career, Larry eagerly engaged clients and colleagues. He has mentored dozens of junior colleagues, recruited at a number of colleges and universities, and interviewed hundreds. He has also had extensive public speaking experience. Additionally, Larry served as Chair of the Mortgage Trading Committee for the Public Securities Association (PSA) in the mid-90s.

Larry graduated Cum Laude, Phi Beta Kappa in 1983 from the College of the Holy Cross.

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