Post-Madoff, SEC inspection chief for fund managers quits
This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.
The Bernie Madoff scandal may have helped claim another head at the Securities and Exchange Commission.
Lori Richards, the 49-year-old chief of the SEC’s division that inspects money managers, said Wednesday that she would resign.
Richards has lead the Office of Compliance Inspections and Examinations since it was created in 1995.
Congress earlier this year skewered Richards, former Enforcement Director Linda Thomsen and other SEC officials for failing to uncover Madoff’s $65-billion Ponzi scheme. Thomsen resigned in February.
Richards, a 24-year veteran of the SEC who worked in enforcement in the Los Angeles office in the early 1990s, told Bloomberg News that it was ‘completely my decision’ to step down.
‘I’m excited about taking on new challenges,’ she said, without revealing her plans. ‘I’ve been thinking about doing something different for some time.’
U.S. lawmakers were livid that the SEC could have missed Madoff’s long-running Ponzi scheme, despite evidence it was given by a whistle-blower.
As Bloomberg notes:
‘Perhaps most shocking’ about the case is that Richards’ unit never conducted an inspection of the money-management side of Madoff’s business after he registered it with the SEC in September 2006, U.S. Rep. Paul Kanjorski said at a January hearing. Kanjorski said the SEC overlooked ‘red flags’ such as the inability of investors to duplicate Madoff’s returns and his use of ‘an auditor the size of a mouse’ to review a fund ‘the size of an elephant.’
Richards’ defense was that the SEC had about 400 staff members to inspect more than 11,000 money managers.
She told Congress in January that the agency had to ‘prioritize registrants for examination, and to assign examination staff to those advisors and funds that appear to present the greatest potential for having an adverse impact on investors.’
Richards said the process was ‘a form of triage, to help match available staff resources to the most pressing risks.’
But if the process missed Bernie Madoff, it obviously wasn’t very good at identifying ‘pressing risks.’
-- Tom Petruno