SEC's solution to fraud: Pay informants


The SEC figures it is having trouble catching the bad guys. It has taken a lot of blame for missing signs of Bernie Madoff's schemes. Two of its own lawyers may have been involved in insider trading.

The solution, according to the agency's inspector general, is to aggressively offer incentives to people who turn in law breakers. According to the Financial Times, David Kotz, SEC inspector-general, in letter to Paul Kanjorski, chairman of the House financial services subcommittee on capital markets, suggested that "Although the bounty system has been in place at the SEC for more than 20 years, there have been relatively few awards made."