On Wednesday last week, while most of the nation was transfixed by “stimulus plan” negotiations, the U.S. House Capital Markets Subcommittee held a little-noticed hearing, featuring uber securities sleuth Harry Markopolos, that could rock U.S. securities regulation to its core. As a financial markets player, attorney and professor for over twenty years, I have seen some amazing things in domestic and international financial markets. However . . .
Nothing in my recollection quite equals the drubbing that Markopolos unleashed on the SEC last Wednesday morning. The first 64 pages of Markopolos’ written testimony should be required reading for every financial markets professional and, drumroll, every U.S. senator and representative with a hand in upcoming securities-market legislation. To hear Markopolos tell it, what we need at the SEC is not more money but more brains and fewer arrogant attorneys.
Among the long list of disturbing revelations at pages 62-64 of the 375-page submission:
1. It took Markopolos a mere four hours, back in February 2000, to mathematically prove that Madoff’s fund was a fraud; and
2. Incoming SEC Chair Mary L. Schapiro’s name is distressingly prominent, since at least 2001, as head of FINRA (formerly NASD), a key securities-market SRO that Markopolos believably asserts is not only incompetent but “in bed with the [financial] industry.” Is Schapiro really the best choice to head the SEC?
More information on the hearing, including an archived webcast, is available at the House Financial Services website.