1. Case 1.12 Bernard L. Madoff Investment and Securities: The Role of the Securities & Exchange Commission (SEC) Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

2. Madoff Case Relevant Technical Knowledge Securities Act of 1933  Securities Act of 1933 has two primary objectives: (1) requiring that investors receive financial information concerning securities being offered for public sale and (2) prohibiting deceit, misrepresentations, and other fraud in the sale of securities.  According to the SEC, “A primary means of accomplishing these goals is the disclosure of important financial information through the registration of securities. This information enables investors, not the government, to make informed judgments about whether to purchase a company's securities. While the SEC requires that the information provided be accurate, it does not guarantee it. Investors who purchase securities and suffer losses have important recovery rights if they can prove that there was incomplete or inaccurate disclosure of important information.” 2

3. Madoff Case Relevant Technical Knowledge Securities Exchange Act of 1934  The Act empowers the SEC with broad authority over all aspects of the securities industry. This includes the power to register, regulate, and oversee brokerage firms, transfer agents, and clearing agencies as well as the nation's securities self-regulatory organizations. The Act also identifies and prohibits certain types of conduct in the markets and provides the Commission with disciplinary powers over regulated entities and persons associated with them. The Act also empowers the SEC to require periodic reporting of information by companies with publicly traded securities. 3

4. 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 4

5. 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: Broker-Dealer Fraud Madoff: Understanding the Client’s Business and Industry 5

6. 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. 6

7. 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 2008.  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. 7