A stunning claim just made by whistleblower Harry Markpolos helps further explain how the SEC failed to catch Madoff.
Referring to Bloomberg computer terminals, Markopolos said that the agency “might have one per regional office.”
Bloomberg’s terminals sit on the desk of almost every trader on Wall Street, providing a steady stream of live market data. It would be extremely difficult to detect sophisticated financial fraud without this basic tool of modern trading.
We’ve contacted current and former SEC sources to ask whether Markopolos’ claim is accurate, and we’ll keep you posted.
Reader FH writes in to say that Bloomberg terminals aren’t useful for detecting fraud:
I’m a quant at a hedge fund, and have a bloomberg terminal that I share with a colleague.
You detect fraud by runnnig statistical tests on data, or I suppose by forensic accounting (which I don’t know anything about). Not by watching live scrolling news feeds or flickering prices on a terminal.
I would say you should take as your model the 1994 paper by Bill Christie and Paul Schultz that detected implicit nasdaq market maker collusion as how enforcement research is going to be done.
In my view, it does not help his credibility if Markopolos is talking about the paucity of Bloomberg terminals at SEC offices.
Late Late Update:
Robert Fusfeld, who retired in 2006 as a senior enforcement lawyer in the SEC’s Denver office, confirms to TPMmuckraker that when he left, that office had only one terminal.