Hedge Funds Politics & Regulation

SEC proposes Madoff-inspired amendments to protect investors


Call it the Madoff proposal. The U.S. Securities and Exchange Commission, responding to Bernie Madoff’s success at running his Ponzi scheme under their radar, has proposed a slate of rules intended to protect investors from their advisers, including so-called surprise exams to be conducted by independent accounting firms.

The proposed rule amendments would also require that custodians holding advisory client assets deliver custodial statements directly to clients rather than routing those statements through the investment adviser, thereby making it difficult for an advisor to fabricate account statements as Madoff did.

“These new safeguards are designed to decrease the likelihood that an investment adviser could misappropriate a client’s assets and go