Case 1.8 Bernard L. Madoff Investment and Securities: Broker-Dealer Fraud Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction.

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Case 1.8 Bernard L. Madoff Investment and Securities: Broker-Dealer Fraud Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Madoff Case Relevant Technical Knowledge Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010  Broker-Dealer Regulation ( The Dodd-Frank Act “vested the PCAOB with new oversight authority over the audits of brokers and dealers registered with the SEC. Financial statements of broker-dealers filed with the SEC for fiscal years ending after December 31, 2008, must be certified by a PCAOB-registered public accounting firm. Further, the Act expanded the PCAOB's oversight of the audits of brokers and dealers to now include inspections, enforcement and standard-setting authority.” 2

Madoff Case Relevant Technical Knowledge Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010  Title IX: Established a whistleblower program to produce tips about securities fraud Improved the management of the SEC Required the Government Accountability Office (GAO) to oversee the SEC 3

Psychology Literature - How to Best Acquire Knowledge  Feature Repeated Case Experiences with Feedback; and  Teach Technical Concepts within Real- Life Contexts  Consider the following additional cases: Madoff: A Focus on Auditors’ and Accountants’ Legal Liability Madoff: The Role of the Securities and Exchange Commission (SEC) Madoff: Understanding the Client’s Business and Industry 4

Epilogue - Madoff  In March 2009, Bernie Madoff pleaded guilty to 11 different federal felonies, including securities fraud.  On June 29, 2009, Madoff was sentenced to 150 years in prison, the maximum penalty allowed by law. 5

Epilogue - Madoff  On December 11, 2010, Bernie Madoff’s son Mark Madoff committed suicide at the age of 46, 2 years to the day of his father’s arrest in  In November, 2009, David Friehling, Madoff’s CPA pled guilty with a maximum sentence of 108 years. As of September, 2013, he remains out of jail as he continues to cooperate with the ongoing federal investigation. 6

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