Unfortunately, the book says that it cannot be thrown at the SEC when the SEC is operating—or not operating, for that matter—in an investigative capacity.
“Despite our sympathy for plaintiffs’ predicament (and our antipathy for the S.E.C.’s conduct),” the investors claims are barred because of a law protecting government agencies from lawsuits related to their use of investigatory powers, the United States Appeals Court for the Second Circuit said.
“Plaintiffs allege in detail approximately eight separate complaints the S.E.C. received regarding Madoff and the S.E.C.’s inadequate and often incompetent response to each,” the court wrote. “As a result of the S.E.C.’s repeated failure to alert other branch offices of ongoing investigations, properly review complaints and staff subsequent inquiries, and follow up on disputed facts elicited in interviews, the S.E.C. missed many opportunities to uncover Madoff’s multibillion-dollar fraud.”
Court Expresses Antipathy for S.E.C. in Handling of Madoff Case [DealBook]
Madoff Investors Can't Sue SEC, U.S. Appeals Court Rules [Bloomberg]
Victims of Madoff fraud can't sue SEC: appeals court [Reuters]