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10 years after Madoff fraud exposed, problems and risks remain

Bernie Madoff pleaded guilty to securities fraud in 2008 and is serving a 150-year prison sentence.

Later this month, investors will get a popular culture reminder about the ongoing need for transparency in financial markets.

On May 20, HBO will present “The Wizard of Lies,” starring Robert De Niro as Ponzi schemer Bernie Madoff.

You remember Mr. Madoff. He was charged with securities fraud by the Securities and Exchange Commission in late 2008, and pleaded guilty less than a year later, to defrauding clients in hedge funds managed by his eponymous firm.

The movie's debut provides a good opportunity to reflect on the efforts made over the almost 10 years since Mr. Madoff confessed his fraud to improve disclosure and transparency in order to ensure that investors — institutional and retail — are protected. And to recognize that problems remain.

Reporting by Pensions & Investments and other outlets in recent years has found public pension fund executives unaware of what they are really paying managers of private equity assets. And reporting by Christine Williamson in April found that “few public pension funds report all the fees they pay for their hedge fund portfolios.”

Regulators, as well as the industry itself, have taken steps in recent years to improve transparency and safeguards in all markets, including a standardized template introduced last year by the Institutional Limited Partners Association that details fees, expenses and carried interest. States also stepped up, with at least eight states considering fee disclosure for alternative investments, as a P&I story noted last year. Post-Madoff, the SEC itself undertook moves to strengthen enforcement efforts and protect investors.

Some might argue the steps have imposed needless regulation, while others say more needs to be done.

One thing all can agree on: It is important not to forget, after a decade of stock market gains, that bad things can happen to investors in the blink of an eye.

The story of Mr. Madoff's escapades likely will provide a potent reminder of the need for transparency and vigilance.

So grab your popcorn ... and bring a notebook.

This article originally appeared in the May 15, 2017 print issue as, "Increase transparency and remain vigilant".