SEC parts ways with enforcer Thomsen

Linda Thomsen, enforcement director for the US Securities and Exchange Commision (SEC), is to step down after a 14-year stint at the regulator. Her departure follows widespread criticism of the SEC in the wake of the Bernard Madoff scandal.

Thomsen will stay in the role until a replacement has been found. New chairman Mary Schapiro is also in the process of replacing other senior managers.

During her time with the SEC, Thomsen investigated the fallout from energy giant Enron's bankruptcy in 2001. More recently, she has led the SEC's handling of subprime and financial fraud cases, which resulted in actions being taken against former Bear Stearns and Credit Suisse employees.

However, the SEC has come under attack for failing to identify the alleged Madoff Ponzi scheme, despite being warned about it several times by fraud investigator, Harry Markopolos.

Testifying before the US Congress' House Committee on Financial Services on February 3, Markopolos claimed it only took him "five minutes to figure out it was a fraud" simply by looking at Bernard Madoff Investment Securities' (BMIS) purported returns, which he characterised as "a straight 45 degree performance line that never suffered losses".

More specifically, Markopolos criticised the SEC for failing to employ examiners with expertise in derivatives and quantitative finance.

"The SEC did not understand the red flags I handed them and they probably had no-one on their staff system-wide that could do the maths; I don't think you could have figured it out without a derivatives or quantitative background. I would replace the senior staff at the SEC and then go to the bottom examiners, because that team can't be made up of twentysomethings with no market experience," he added.

See also: SEC incompetence and secrecy over Madoff enrages Congress