The Securities and Exchange Commission’s oversight of Bernard L. Madoff’s activities over the years was “sloppy,” “uninformed,” “irresponsible” and “defied common sense,” according to a Manhattan federal judge. Nevertheless, she has thrown out a suit against the agency by two investors in Mr. Madoff’s Ponzi scheme. Citing the findings of the SEC’s own inspector general, Phyllis Molchatsky and Steven Schneider claimed they suffered more than $2.4 million in losses due to the SEC’s gross negligence in allowing Mr. Madoff’s fraud to continue despite numerous obvious red flags.

Southern District Judge Laura Taylor Swain agreed that the SEC’s investigations of Mr. Madoff between 1992 and 2008 had been “flawed in numerous respects,” but she concluded the suit was barred under the “discretionary function exception” to the Federal Tort Claims Act, which offers a limited waiver of the government’s sovereign immunity.

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