The world's biggest fraud could have been averted if the Securities and Exchange Commission (SEC) had acted on numerous warnings about Bernard Madoff's financial impropriety years ago, the regulator's chairman admitted last night.

Christopher Cox, the chairman of the SEC, effectively admitted mea culpa over the scandal after conceding that tip-offs were repeatedly made to the investors' watchdog but never resulted in any investigation.

Mr Cox said that in less than a week of checks made into the regulator's oversight of investment businesses run by Bernard Madoff, he had found that "credible and specific allegations" had been "repeatedly" brought to the attention of the SEC but that no recommendations had ever been made to investigate the accusations.

The admission comes a week after Bernard Madoff, a 70 year old financier, admitted to his two sons that he was "finished" and that his investment firm was nothing more than a giant Ponzi scheme.

He also admitted to his sons, who worked for him, that he believed that losses arising from his financial wrong-doing amounted to around $50 billion, representing the biggest fraud in history.

His investment firm, which has since been forced into liquidation, has triggered billions of dollars worth of losses among the world's biggest financial institutions, charities, state pension schemes, and personal savings.

While it emerged last night that some of the allegations about Mr Madoff's wrongdoing had been made as far back as 1999, well before Mr Cox was appointed as head of the SEC in June 2005, the 70 year old investor had only registered as a financial adviser in 2006.

The SEC has separately admitted that no inquiry into Mr Madoff's advisory business was conducted even after he registered the operations just two years ago.

Pressure has been growing on the SEC over the last week to explain how the Wall Street regulator could have missed a collossal scam.

Christopher Dodd, the chairman of the Senate Banking Committee, yesterday demanded information from the SEC to ascertain how such a fraud could have taken place, a scandal which was only discovered because Mr Madoff's sons contacted the Federal Bureau of Investigation.

As a result of the "apparent multiple failures," Mr Cox has asked the agency's inspector general to investigate contacts between SEC staff and Mr Madoff and his family.

The inquiry is expected to include the relationship between Mr Madoff's niece Shana Madoff and a senior inspections and examinations official, Eric Swanson, whom she married in 2007.

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