• Two SEC teams investigating Madoff didn't know about each other — until Madoff told them.
•The SEC dismissed detailed complaints about Madoff's purported results from financial fraud investigator Harry Markopolos in 2000 and 2001 and never "truly analyzed" his suspicion, made in a 2005 complaint, that it was "highly likely" Madoff was running a Ponzi scheme.
• Investigators were discouraged by their bosses from expanding their probe beyond allegations of "front-running" — using advance information about clients' orders to profit in the market. "Keep your eyes on the prize," they were told.
SEC Chairwoman Mary Schapiro, who took office after Madoff's scams were exposed, expressed "regret" for the agency's performance and said the SEC has undertaken reforms — beefing up the enforcement division and improving the way it handles investor complaints and tips.
The inspector general's full 450-page report is expected to be released within days, Schapiro said.
Rep. Paul Kanjorsky, D-Pa., chairman of the House subcommittee on capital markets, called the SEC's performance "a colossal blunder" but "Chairman Schapiro has moved swiftly and vigorously to propose and adopt new safeguards. We must, however, still do more." He is pushing new investor protections.
"There were clearly human failures on the part of some at the SEC," says former SEC Chairman Harvey Pitt, who led the agency from 2001 until 2003. But he says the SEC was "righting the ship dramatically … investors should understand there is renewed vigor and competence at the SEC."
Neil Chelo, a member of the team assembled by Markopolos to probe Madoff and press for SEC action, said the team would not comment on the report because they are preparing a book about their Madoff investigation.
But some of Madoff's victims were not appeased.
"We can't just accept that the SEC messed up and say, 'Let's all move forward,' " says Ronnie Sue Ambrosino, coordinator of a support group for Madoff victims. "It was consistent negligence." She wants to see further investigation into the Financial Industry Regulatory Authority, the securities industry's self-regulatory body commonly known as FINRA, and how it treated Madoff.
Contributing: Kevin McCoy