After Congress, the Federal Reserve, the Federal Housing Federal Agency and, last but not least, the Securities and Exchange Commission all failed to recognize the hazardous levels that mortgage-backed securities were reaching in 2008, regulators realized something was seriously wrong.

When Bernie Madoff's $17.3 billion Ponzi scheme finally caught up with him after three decades of false returns and botched SEC exams, the Commission knew it had to do more than require independent audits. That prompted the SEC to step up to the plate with a new, risk-based approach with the aim of seeing the bigger picture-anomalies in prices, sales practices, profits, performance, audits and custody, not to mention financial innovations-all to avoid another financial Armageddon-or crook.

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