Failure is an understatement. At best members of the SEC are guilty of criminal negligence at worst SEC members were co-conspirators and/or accessories to the crimes.
In December 2008, SEC Chairman Christopher Cox admitted that the agency had failed to thoroughly investigate multiple "credible and specific allegations regarding Mr. Madoff's 50 billion dollar financial wrongdoing," adding "I am gravely concerned by the apparent multiple failures over at least a decade to thoroughly investigate these allegations or at any point to seek formal authority to pursue them."
On 4 February 2009 Harry Markopolos, an independendt certified fraud examiner, testified at the House Financial Services Committee Hearings that he spent nine years investigating Madoff. He explained that he first contacted the SEC in 2000. Then in 2005, after serveral more contacts that failed to propell the SEC into action, he submitted a lengthy report detailing the largest ponzi scheme in history which included no less than 29 red flags. He stated that "I gift-wrapped and delivered the largest ponzi scheme in history to them, and somehow they couldn't be bothered to conduct a thorough and proper investigation because they were too busy on matters of higher priority," Markopolos said: "If a $50 billion Ponzi scheme doesn't make the SEC's priority list then I want to know who sets their priorities."
Additionally, SEC Chairman Cox also declined to hold supervisors accountable who acted improperly in firing Gary Aguirre, a former government lawyer tasked with investigating financial crimes.
Aguirre was fired and his investigation was shutdown after he pushed to subpoena John Mack, the former Chief Executive Officer of Morgan Stanley, during his investigation of possible insider-trading by the Pequot Capital Management hedge fund.
A subsequent report by the internal SEC watchdog found that Aguire's supervisors acted improperly in firing Aguirre and shutting down his investigation. While the report recommended punishment against four officials in the chain of command, Cox declined to hold them accountable.