SEC Chairman Mary Schapiro announced the release today of the Office of the Inspector General’s report on the Bernard Madoff fraud. In short, the SEC screwed up in every way possible. Along with the announcement, Schapiro outlined how the agency is reforming itself.

“Since Bernard Madoff’s fraud came to light last year, the Securities and Exchange Commission’s Inspector General has been investigating why the agency failed to detect it,” said Schapiro in her statement today. “His report makes clear that the agency missed numerous opportunities to discover the fraud. It is a failure that we continue to regret, and one that has led us to reform in many ways how we regulate markets and protect investors.”

Schapiro said the SEC is a new place since the fraud pulled the curtain back on its inadequacies. She said more experienced staff, “streamlined” enforcement procedures, a “bolstered” inspection program, a new process for handling tips, and more training were just some examples of the many “post-Madoff reforms” taking place at the regulator.

The Inspector General’s 22-page report—an executive summary of the 450-page full report on its way in the next several days—rehashes most of what we already learned about the SEC’s failures regarding Madoff from Harry Markopolos, the man who blew the whistle on the fraud several times—but the SEC didn’t listen. It’s a comprehensive and embarrassing accounting of how the agency bungled the world’s largest fraud.

Markopolos, the accountant-turned forensic fraud investigator, ripped both the SEC and FINRA’s regulatory abilities during his testimony in front of the House Financial Services Committee in February of this year. He called the SEC “3,500 chickens” and that even if all 3,500 of the staff spent the day at Fenway Park they wouldn’t find first base. But he said he didn’t think the SEC was corrupt or in bed with the likes of Madoff. The Inspector General affirms this in the first paragraph of the report, putting to bed theories that Madoff’s niece—who married an SEC official—perhaps aided his scheme.

Markopolos was less kind to FINRA, saying they “are definitely in bed with the industry” and saying he would give the regulators “an A+ for corruption.” And while the SEC has taken most of the blame for Madoff, others say FINRA has gotten off lightly.

Indeed, this report and the news of other failures at the SEC has some RIAs asking, “Where is similar criticism of FINRA?” Spokesmen for FINRA have repeatedly said Madoff didn’t fall under FINRA jurisdiction, which industry lawyers have publicly disputed. Madoff was not registered as an RIA until 2006—two years before he was caught—but was operating a broker/dealer for the decades he was committing his crimes. At the very least, they might have caught him when he registered.

“I find it unconscionable that after Madoff registered and $17 billion showed up on his ADV that FINRA never bothered to ask where those assets were custodied,” says Mercer Bullard, an associate professor of law at the University of Mississippi and a well-known mutual fund industry gadfly. Bullard testified before the Senate Banking Committee in March, giving his thoughts on a broad range of regulatory reforms. Bullard, who had not seen the Inspector General’s report at press time, roundly criticized the SEC in his comments before the Senate but says FINRA blew it, too.

RIAs, of course, are worried that their businesses are going to suffer under new regulations, and perhaps undeservedly. One particularly unpopular result of the Madoff investigation is a recent SEC proposal that would make RIA firms that custody client assets subject to surprise audits by accountants approved by the Public Company Accounting Oversight Board (PCAOB). According to an analysis by SIFMA, the cost of such audits could be as much as $200,000 per firm.