Deregulatory mindset helped to enable fraud
The likely answer has at least three parts. First, the SEC has recently been hobbled by a deregulatory mindset that staffers had to buy into if they were to advance within the agency. In two respects, this deep-seated bias played a particularly important role in enabling Madoff to continue his fraud. First, Bernard L. Madoff Investment Securities LLC (BMIS) was audited by a fly-by-night auditing firm with only one active accountant who had neither registered with the Public Company Accounting Oversight Board (PCAOB) nor even participated in New York state’s peer review program for auditors. Yet the Sarbanes-Oxley Act required broker-dealers to use a PCAOB-registered auditor. See Section 17(e)(1) of the Securities Exchange Act of 1934.
