WASHINGTON--Insurance should be federally regulated and Congress should create a common database of all financially related fraud enforcement actions, a private fraud investigator who attempted to reveal the Madoff pyramid scheme told a House committee.

Boston-based Harry Markopolos made his comments Wednesday during testimony before the Capital Markets Subcommittee of the House Financial Services Committee in which he scored the Securities and Exchange Commission for ignoring his repeated warnings the Madoff fund operation was a fraud.

In response to questions by committee members, Mr. Markopolos suggested that there should be a "super financial organization with the departments underneath."

Mr. Markopolos said departments underneath, "like the Securities and Exchange Commission," should include a "national insurance regulator, some bank regulator" and probably the Federal Reserve Board "to handle all these market functions."

And, he said, they should "have one super regulator above them, so that there's no drop in coordination."

Mr. Markopolos made that comment in response to a question by the panel's chairman, Rep. Paul Kanjorski, D-Pa.

"If you had your way, what would be your highest recommended action by this Congress to take in regard to the regulatory scheme in the country right now?" Rep. Kanjorski asked Mr. Markopolos.

A day earlier, Rep. Barney Frank, D-Mass., chairman of the full committee, had designated Rep. Kanjorski to coordinate all activity the Financial Services Committee undertakes in this Congress in relation to future regulation of insurance.

Later, in response to a question from Rep. Scott Garrett, R-N.J., ranking minority member of the panel, Mr. Markopolos said future federal regulatory schemes for financial services companies require "a super regulator to supervise all the different [agencies]--and I would minimize the number of subregulators they had underneath there."

Mr. Markopolos said, "I want one centralized database of all enforcement actions, so that the banking regulators know what the capital markets regulators are doing, and also know what the insurance regulators are doing, because right now, you have these conglomerate firms that deal with all aspects of finance.

"They have insurance. They do banking. They do securities," he continued. "And you need to combine the regulations database, so that people are aware of all the infractions."

Specifically, Mr. Markopolos said, "You can't afford to be split into an army of ants. You need to be as giant as the conglomerates that you are regulating."

Special Reports /

Madoff Prober Says Insurance Needs Federal Regulation

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