As has been widely reported, one of the reasons why Bernard Madoff may have avoided regulatory scrutiny for so long is that he frequently served as an advisor to the SEC — the very agency that should have been watchdogging him.
And here’s an example of the kind of advice he was giving. During a 2004 meeting to discuss a proposed regulation of market trades, designed to protect investors, Madoff argued for making it easier for investors to opt out of the rule:
Again, you start — have to start with, and I know this — the modern times today does not support, you know, this amount of good faith in your brokerage firm. But you really have to start with the assumption that most of us in this industry really have their clients’ interests, you know, coming first. Not necessarily the firm’s self-interest.
It’s worth being clear that Madoff is talking about brokerage firms, not investment advisers — which is the arm of his business now being accused of massive fraud. But his apparent faith in the integrity of financial managers is striking, nonetheless.