Madoff Scandal involved Bernie Madoff convincing investors to bring their money and promising them lucrative and consistent returns. Bennie Madoff was a stock exchange advisor and used his knowledge to bring people into his Ponzi scheme. The affair began in the 1960s and lasted over forty years before it was a fraud in 2008. Thousands of investors collectively invested billions of dollars with the expectation that they would get massive returns ( Martin & Gaviria, 2009) . Although the deals were too good to be true, no one asked questions, which was why the long period of existence. Madoff affair made the Securities and Exchange Commission make numerous reforms on the stock market's policies to ensure that no more scandals resulted. Some of the significant reforms that were put to place due to the scandal include; Enhancing Safeguards for Investors' Assets and enhanced safeguards for investors’ assets.
Enhancing Safeguards for Investors' Assets
The Securities and Exchange Commission considered putting measures to safeguard the assets of the investors. This is strategic to avoid abuse and theft of the investor's assets. The commission needed to assure the investors that the figures shown by their statements and those known to their advisors are similar. This ensures that the investors' money is not stolen or misused in any way ( U.S Securities and Exchange Commission, 2019) . Other strategies that were involved in the reform included surprise exams and third party review. The purpose of surprise exams involves an independent public accountant annually examining the actual existence of the asset. Another investor asset security measure involved the custody report, where quarterly reports showing the assets had to be filed to assure assets in their appropriate state. Additionally, SEC enforced auditor access whereby all transactions had to be accessible and clearly stated so that a public registered accounting firm could access and examine accordingly.
Delegate your assignment to our experts and they will do the rest.
Improving Fraud Detection procedures for examiners
Since the scandal involved many people collectively losing billions of dollars to fraud, the security, and exchange commission considered increasing fraud detection procedures as a strategy of avoiding any further fraudulent activities similar to Madoff's. The commission aimed at identifying any types of violations, and this would be enhanced through reaching out to the custodians and counterparties in the pursuit to verify whether or not the assets exist and the integrity of the client managing the assets ( U.S Securities and Exchange Commission, 2019) . The commission also increased fraud detection procedures for the examiners by expanding joint broker-dealer and investment advisor teams. The broker's involvement would ensure that before any money is transacted, the customer fully understands the involved assets and evaluates whether it could bring the promised interest in return. In the case of the Madoff affair, there no sufficient fraud detection procedures in place. Bernie Madoff operated his firm without any of the accountants or assets are known to the customers. The investors blindly invested their money without asking how the high promised interest rates would be attained. If the brokers and other third parties were available to evaluate assets' presence and their capability to deliver high return rates promised by Bernie, then the investors would not have brought their money.
Conclusion
Madoff Scandal, therefore, was substantial evidence that SSC needed to perform numerous reformations to offer protection to the customers against misuse and fraud. With enhancing fraud detection and safeguarding the investors' assets being among the main reformations, investors' fraudulent violation could be reduced. Investors can now know if the investment is worth it and understand the assets and their capability of delivering the expected returns. Moreover, violation of the investors has been reduced as activities like auditor access, and audience enhancement enable easy identification of issues before they grow beyond control.
References
Martin, M., & Gaviria, M. (2009, May 12). The Madoff affair [Video]. FRONTLINE. https://www.pbs.org/wgbh/frontline/film/madoff/
U.S Securities and Exchange Commission. (2019, July 15). The Securities and Exchange Commission Post-Madoff reforms . SEC.gov. https://www.sec.gov/spotlight/secpostmadoffreforms.htm
