[JURIST] The US House of Representatives Financial Services Committee [official website] on Monday began hearings [materials] in an investigation into how the Securities and Exchange Commission (SEC) [official website] failed for years to detect the fraud scheme allegedly perpetrated by Bernard Madoff [JURIST news archive]. The SEC had received numerous complaints against Madoff, dating back to 1999, but did not act on them until Madoff was charged with securities fraud [JURIST report] last month. This marks the first congressional hearing on the matter. Witnesses included SEC Inspector General H. David Kotz, Securities Investor Protection Corporation President Stephen Harbeck, and former Madoff investor Allan Goldstein. Kotz told [testimony, PDF] committee members:

I can assure you that our investigation and review will be independent and as hard-hitting as necessary. While we approach these efforts with an open mind and at this stage of the investigation we have not reached any conclusions or made any findings, the matters that have been brought to our attention require careful scrutiny and review. We will conduct our work in a comprehensive and thorough manner and, if we find that criticism of the SEC is warranted and supported by the facts, we will not hesitate to report the facts and conclusions as we find them.

The hearings will be used by the committee as it undertakes a comprehensive rewriting of US financial regulatory laws.

Madoff has been charged with violating the anti-fraud provisions of the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Advisers Act of 1940 [texts]. Madoff allegedly told two employees of his firm last week that his investment advisory business was "basically, a giant Ponzi scheme." Last month, UK financial firm Bramdean Alternatives Limited [corporate website] raised concerns [statement, DOC; JURIST report] about the US financial regulatory process after its value dropped by more than 35 percent following news of its exposure to the fraud. In the week following Madoff's charges, SEC Chairman Christopher Cox [official profile] said that he would launch an immediate investigation [press release; JURIST report] into how the fraud allegedly perpetrated by Bernard Madoff went undetected for so long. Last month, President-elect Barack Obama [transition website] named [press release] Mary Schapiro [professional profile] as the SEC Chairman, replacing Cox.