H. David Kotz – The SEC’s Revolving Door Problem


Loopholes and corruption are two negative aspects that surround the investment industry. One of the agencies put in place to regulate and conduct oversight in that industry is the Securities and Exchange Commission, commonly referred to as the SEC.

Unfortunately, corruption and deceit have found their way into these regulating bodies. H. David Kotz, former Inspector General for the SEC was aware of these issues and led many investigations that benefited the securities industry as well as the general public. Kotz served as Inspector General from 2007 until he resigned in 2012. 

Most notably, Kotz led the investigation into Bernie Madoff who was alleged and since been sentenced to 150 years in prison for his role in stock and securities fraud. In 2009, Madoff pleaded guilty to charges of running an investment ponzi scheme which was the largest in the history of the United States. As Inspector General of the SEC, Kotz played a major role in leading this investigation and bringing Madoff to justice. 

In 2010, Kotz led another investigation into Robert Allen Stanford and the Stanford Group for violating securities laws by operating a ponzi scheme. In his report, he highlighted multiple areas in the securities community where individuals allowed the events to take place, despite warnings from other officials. His report also ousted individuals in the securities administration who rejected the allegations against the Stanford Financial Group and then attempted to represent the group when they no longer worked for the securities commission. This case could have been resolved nearly a decade prior to its official end, but due to corruption within the securities industry, the case was neglected.

During his time as Inspector General, Kotz sat down with Retirement Media, Inc Founder Phil Cannella to discuss the deception that takes place within the securities industry and issues with information sharing outside of the commission. In his response, Kotz illustrated the fraudulent practices in the financial industry and highlighted significant concerns for regulators and the protections that they put in place for the investment community.