On the contrary—this is the equivalent of missing the elephant in the living room. How could any SEC investigation failed to have noticed that he wasn’t making any trades? Looking at trades should have been the first step in any investigation and should have raised HUGE red flags if uncovered.
There had to be bribes paid to the very top of the SEC. This is the scandal of the century.
I don't see how this is anything other than GROSS NEGLIGENCE on the part of the SEC. If complaints were indeed filed (and I understand from news stories that this is the case), the most cursory of investigations would certainly include a review of trades that Madoff made.
This is going to damaging causing more knee-jerk regulations like Sarbanes-Oxley. People confuse poor oversight with too-little oversight. There's plenty of regs already on the books, we just have incompetent, life-long civil servants enforcing them.
The SEC had no idea how much money Bernie had flowing through his hands ~ and he didn't tell them. So whatever they looked at, being a far greater sum than any of them had, looked "pretty big".
Bernie tricked them.
The Mob does something similar ~ they compartmentalize their activiies. They have a cappo running the whores and booze, another one deals in dope, another in stolen luxury cars, someone else with the unions, and another manages investments in legitimate businesses ~
Now, what does a mobster do with his nieces and nephews who want nothing to do with crime? In my experience they get trucking companies, printing plants, art studios ~ that sort of thing. And if you look at the records ol'Guido doesn't have a share in the business ~ it's all 100% upfront Guido's nephew.
Still, Guido's nephew knows who sent him to college, and what he'll do if he screws up. And there are those all important blood ties ~ having a mobster in the family means all his relatives are held hostage every day of their lives.
Madoff ran his operations kind of like that. I doubt the relatives (his sons, wife, etc.) had any idea how much he'd stolen ~ but I also doubt they were totally ignorant of what he was doing "on the side".