The proposals from SEC Inspector General David Kotz for the agency's enforcement and inspections operations also include making it easier for junior-level enforcement attorneys to bring their concerns to top managers.

In a report in late August, Kotz detailed how the SEC bungled five investigations of Madoff's business between June 1992 and last December, when the financier confessed. Top SEC officials have pledged to fix the problems and say they already have made major changes.

The SEC receives an estimated 700,000 tips and outside complaints a year.

Kotz recommended that the SEC:

-Establish formal guidance for evaluating various types of complaints and train staff on using the new guidelines.

-Require tips and complaints to be reviewed by at least two people familiar with the subject matter before deciding not to take further action.

-Assign investigations to teams with at least one member who has specific knowledge of Ponzi schemes. In Ponzi, or pyramid, schemes, new investors' money is used to pay earlier investors, creating a high rate of return that cannot be sustained.

-Require planning memos to be prepared during investigations that include details of the type of expertise that is needed from other people not involved in the investigation, both inside and outside the SEC.