CREW today issued a report (PDF) that shows the Securities and Exchange Commission (SEC) is instituting its promised post-Madoff-scandal reforms at a slow pace and with limited progress.

Following the agency’s embarrassing 16-year failure to detect Bernard Madoff’s massive Ponzi scheme, SEC Chairman Mary L. Shapiro promised to make fundamental reforms to the Enforcement Division, ranging from the creation of a central database to manage tips, complaints and referrals, to the establishment of specialized units better able to analyze highly specialized and complex areas of security law.

CREW monitored these promised reforms by filing an October 2009 Freedom of Information Act (FOIA) request for documentation showing progress in seven key areas.

CREW found that despite the urgent need for significant structural reform, the SEC has not rushed to implement many of the promised changes. The agency has made the most progress in filling new staff positions and adding new offices, but given how long this has taken, the impact of these steps is not yet discernable. At bottom, the central question of whether the SEC has instituted meaningful and effective reforms to address the systemic problems revealed by the agency’s failure to uncover Mr. Madoff’s blatant criminal conduct still cannot be answered.

CREW’s Executive Director, Melanie Sloan, said today:

Despite its historic failure to prevent Bernie Madoff’s staggering fraud, the SEC is dragging its feet on some of the most urgent structural reforms needed. The SEC may be headed in the right direction, but not at the speed Americans have the right to expect given the agency’s monumental failures.

She continued:

The slow pace of reform is hard to fathom. If we’ve learned anything from the agency’s failure to stop Bernie Madoff and subsequent swindlers, it’s that the country needs an aggressive SEC working to protect Americans’ hard earned dollars.

Click here to read CREW’s report, “Reform at the SEC, Fiction or Reality?”

Click here to read a summary of the report’s findings.

Since the Madoff scandal story broke last December, there have been questions about the role of the Securities and Exchange Commission (SEC). Today's Washington Post reveals that an investigator at the SEC became aware of issues with Madoff's company, but was pulled from the case.  And, her supervisor, according to the Post, went on to marry Madoffs niece:

An investigator at the Securities and Exchange Commission warned superiors as far back as 2004 about irregularities at Bernard L. Madoff's financial management firm, but she was told to focus on an unrelated matter, according to agency documents and sources familiar with the investigation.

Genevievette Walker-Lightfoot, a lawyer in the SEC's Office of Compliance Inspections and Examinations, sent e-mails to a supervisor, saying information provided by Madoff during her review didn't add up and suggesting a set of questions to ask his firm, documents show. Several of these questions directly challenged Madoff activities that much later turned out to be elements of his massive fraud.

But with the agency under pressure to look for wrongdoing in the mutual fund industry, she wasn't able to continue pursuing Madoff, according to documents and two people familiar with the investigation, and her team soon concluded its work on the probe.

Walker-Lightfoot's supervisors on the case were Mark Donohue, then a branch chief in her department, and his boss, Eric Swanson, an assistant director of the department, said two people familiar with the investigation. Swanson later married Madoff's niece, and their relationship is now under review by the agency's inspector general, who is examining the SEC's handling of the Madoff case.