Lessons Learned from Bernard Madoff: Why We Should Partially Privatize the Barney Fifes at the SEC
George Washington School of Business
Arizona State Law Journal, Forthcoming
Financial markets do not function well when fraud is pervasive. Around September of 2009, the investigations into the SEC examinations of Bernard Madoff Investment Securities, LLC were completed and released to the public. The simple facts reveal an alarming level of incompetence and lack of financial literacy on the part of the guardians of the integrity of our financial markets. I suggest two important tools for addressing these problems. One is to supplement enforcement of anti-fraud rules with more private attorney generals by expressly creating a private right of action for aiding and abetting violations of securities laws. This will foster a stronger culture of integrity and ethical conduct in the auditing profession. An additional tool is to increase financial literacy in our law schools which supply the regulators of our markets.
Keywords: securities fraud, secondary liability, auditing, financial literacy
JEL Classification: G18, K22
Date posted: April 29, 2010 ; Last revised: May 8, 2010
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