03/27/2009 05:12 am ET Updated May 25, 2011

Crime and Punishment

There are crimes you can spot and those you can't. The latter can really hurt you.

The Madoff and Stanford scams had an eerie similarity about them: The promise of greater returns without additional risk. You have to feel the pain of their victims. Not only were the additional returns illusory, they lost everything.

There is a valuable lesson here for investors looking for an " investment professional" to trust with their nest egg.

History is replete with fraudulent conduct by "trusted advisors" The analyst scandal, the tech bust and now the auction rate securities fraud are three fairly recent examples.

Madoff and Stanford are likely to do serious prison time. The securities industry continues to do business as usual.

Why the difference?

Former New York Attorney General Eliot Spitzer was asked why he didn't indict Merrill Lynch or Salomon Smith Barney for their participation in the analyst fraud scandal in an interview on PBS on November 3 , 2006. Here's his response:

"Had we indicted the companies, it could have been a cataclysm for the capital markets that I think at the end of the day would have been more damaging than fruitful."

Really? If we had put these companies out of business and jailed the executives who participated in this massive fraud would our economy be in better shape today?

When the securities industry is not engaging in criminal fraud, it still serves to grossly mislead investors and cause untold harm.

It does so by perpetuating the myth that it can generate additional returns without additional risk.

Sound familiar?

Same crime. No punishment.

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