SEC chief wants to know why agency missed Madoff fraud

— -- Securities and Exchange Commission Chairman Christopher Cox on Tuesday said he has asked for an investigation into how Bernard Madoff's alleged $50 billion Ponzi scheme went undetected despite repeated "credible and specific allegations" made to SEC staff since at least 1999.

Cox said SEC attorneys never bothered to seek a formal commission-approved investigation that would have forced Madoff to surrender vital information under subpoena. Instead, the staff relied on information voluntarily produced by Madoff and his firm.

In a statement, Cox said he is "gravely concerned by the apparent multiple failures over at least a decade to thoroughly investigate these allegations."

Madoff, 70, was charged last week with operating what authorities allege is a massive fraud that wiped out billions of dollars and whose victims range from major banks to individual investors. Critics have questioned how the SEC missed red flags about Madoff's firm.

Cox said relationships between the Madoff family and the SEC will be studied, as will the SEC's internal policies.

The SEC chairman said Madoff kept several sets of books and false documents, and provided false information involving his investment advisory activities to investors and to regulators.

Separately, Stephen Harbeck, chief executive of the Securities Investor Protection Corporation (SIPC), said one set of Madoff's books kept track of the losses at his investment advisory arm, while the other is what investors were shown.

SIPC, created by Congress and funded by the securities industry, can give customers up to $500,000 if it is determined their money was stolen. SIPC has about $1.6 billion to make payouts, which means that amount could quickly be depleted in the Madoff case, where losses could reach $50 billion. That figure comes from the SEC's court complaint, which quotes Madoff admitting to losses in that amount to two senior employees of his firm before his arrest last Thursday.

Tuesday, investigators said inconsistencies they have found in Madoff's books could delay for months the unwinding of the alleged scam.