The Financial Industry Regulatory Authority did not fully probe transactions at Bernard Madoff's firm and repeatedly failed to investigate tips about R. Allen Stanford's alleged $7 billion fraud, an internal report found.

The staff of the U.S. brokerage industry's main regulator is "not adequately trained" on its investigative authority, and the Washington watchdog lacks procedures to escalate matters to senior management or special investigators "based on the gravity and substance of the fraud allegations," according to a report posted on Finra's Web site Friday.

The report shows that regulatory lapses linked to Madoff's record Ponzi scheme were not confined to the Securities and Exchange Commission, which has been faulted by its own internal watchdog for inadequately pursuing tips over 16 years. Finra said it will create a new Office of Fraud Detection and Market Intelligence to ensure that staff with expertise in fraud detection respond rapidly to suspected scams.

"As regulators, we owe it to investors — especially those harmed by recent scandals — to develop a better, more comprehensive, response to fraud," Finra Chief Executive Richard Ketchum said in a statement. "I am committed to taking the lessons from the report's findings to make Finra even stronger."

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