A group of investors sued the Security and Exchanges Commission for failing to supervise Madoff and investigate complaints it received before the Madoff scandal unfolded. Despite finding that the SEC had dropped the ball, both before and during the investigation, the Second Circuit found the SEC, as an arm of the United States Government, immune from liability.
In discussing the laws covering this immunity, the court, citing others, stated that the immunity is not “about fairness, it ‘is about power. . . [where] the sovereign ‘reserves to itself the right to act without liability for misjudgment and carelessness in the formulation of policy.'” Therefore, despite the court’s “sympathy for Plaintiffs’ predicament (and our antipathy for the SEC’s conduct)” the immunity provided by Congress defeats plaintiffs’ claims.
Isn’t it nice to be king?