The internal watchdog at the United States Securities and Exchange Commission said yesterday that an investigation of the agency's failure to uncover the alleged $50-billion fraud involving Wall Street figure Bernard Madoff will extend broadly to the agency's enforcement operations.

Inspector General H. David Kotz is testifying before a House panel examining the Madoff affair and the agency's failure to act despite receiving complaints over a decade.

TO Examine operations

In prepared testimony for the afternoon hearing yesterday, Kotz said his office's probe will go beyond specific issues that SEC Chairman Christopher Cox asked him to investigate. He said it also would examine the operations of the SEC's enforcement and inspection divisions and would make recommendations.

At the start of the hearing, Democrat Paul Kanjorski ques-tioned whether congressional appropriations had given the agency sufficient resources to do the job. From 1995 to 2007, Congress was under Republican control.

"Clearly, our regulatory system ... failed miserably and we must rebuild it now," said Kanjorski.

Representative Spencer Bachus, a Republican, pointed to regulatory gaps rather than the level of congressional appropriations as the reason for the Madoff scandal.

Bachus called for Congress to create a regulatory structure "for the 21st century".