According to an article by David Hilzenrath in the Saturday, November 12 edition of the Washington Post (here), the SEC disciplined eight employees for their handling of the investigation of Bernie Madoff. The punishments imposed included suspensions, pay cuts and demotions.

The article referenced the August 31, 2009 Report from the Office of the Inspector General, which detailed five examinations and inspections of Mr. Madoff between 1992 and 2006, none of which resulted in a recommendation to the Commission that an action be brought against him. The Inspector General concluded that "the SEC received numerous substantive complaints since 1992 that raised significant red flags concerning Madoff’s hedge fund operations and should have led to questions about whether Madoff was actually engaged in trading and should have led to a thorough examination and/or investigation of the possibility that Madoff was operating a Ponzi scheme." The Report stated that the SEC "never took the necessary and basic steps to determine if Madoff was misrepresenting his trading."

Although the Report also stated that the Inspector General "did not find that the failure of the SEC to uncover Madoff’s Ponzi scheme was related to the misconduct of a particular individual or individuals," the report mentioned 56 employees and called into question the conduct of 21 of them. According to the article,, by March of 2011, 35 of the 456 employees had already voluntarily left the agency.

According to the article, the Commission’s head of human resources and an outside law firm hired to advise the agency recommended that one employee be fired, but Chairman Mary Schapiro elected not to do so because it "would harm the agency’s work," according to an SEC spokesman. Instead, that employee received a 30-day suspension and a reduction in pay and grade. A second employee, an enforcement manager, was given a 5.7 % pay cut. The Post article stated that at the low end of the disciplinary scale, "one employee was suspended for seven days, another for three days and two others were issued counseling memos, a step below a reprimand."