Prof. Jayanth R. Varma's Financial Markets Blog

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Prof. Jayanth R. Varma's Financial Markets Blog, A Blog on Financial Markets and Their Regulation

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Tue, 10 Feb 2009

What if Markopolos had blogged?

Ray Pellecchia writes on his blog that Markopolos could have stopped Madoff simply by writing a blog after his complaints to the SEC fell on deaf years. There is a serious problem with this suggestion – the SEC itself.

Regulators around the world may be too dense to understand the niceties of Madoff’s purported split strike conversion strategy, but they are smart enough to act and act quickly agaist somebody trying to spread what appear to be malicious rumours. (Please remember that there is no such thing as an anonymous blogger when the state is after you.)

The very fact that the SEC investigated the complaint and found no merit in the complaint would have made it evident that that blog post was just a baseless rumour. Add in the fact that Markopolos was a rival hedge fund manager and the grounds for acting against the rumour mongerer are plain as daylight. From whatever I have seen of regulators anywhere in the world, it would have been suicidal for Markopolos to write that blog.

This is an example of how a regulator makes things worse merely by its existence. Absent an SEC or an FSA or a SEBI, a Markopolos could stop a Madoff by blogging. Because such a regulator exists, Markopolos is powerless!

Posted at 17:46 on Tue, 10 Feb 2009     View/Post Comments (4)     permanent link