The private agency that regulates the broker-dealer industry -- which during the period in question was known as National Association of Securities Dealers (NASD) and now is the Financial Industry Regulatory Authority (FINRA) -- did likewise, according to an internal review conducted last year.
The review found that from 2003 to 2005, NASD received "credible" information from five different sources alleging that Stanford's certificates of deposit were fraudulent. But the agency's Dallas office decided that the offshore CDs did not qualify as "securities" regulated under US law, and therefore were outside NASD's purview.
Separately, an NASD examiner misinterpreted a referral letter sent by the SEC in 2005, and therefore did not forward it to NASD's DC headquarters for another three years!
Of course, none of this gets the SEC off the hook. And that's especially true because NASD's vice chair during the period in question was none other than Mary Schapiro -- who today chairs the SEC.