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NIAP Press Release - 9/17/10

LONG Overdue Review of the Securities Investor Protection Corporation TO FINALLY GET HEARING NEXT WEEK

With Congress poised to examine how the Securities Investor Protection Corporation (SIPC) can better protect investors, the Network for Investor Action and Protection (NIAP) urged the House Financial Services Committee to closely scrutinize the agency at a hearing it is holding on the issue next week, in addition to following up on other breakdowns in the investor protection system.

“The recent ponzi schemes that caused the retirement savings of thousands of Americans to vanish exposed serious flaws in the nation’s investor protection laws,” said NIAP President Ron Stein, “and demonstrates how dangerous weak our investor protection system really is. “In these times of economic uncertainty, it is important that individuals invest with confidence. Congress has the opportunity the restore that confidence and start protecting investors by making reforms that will strengthen the Securities Investor Protection Corporation, followed by the other regulatory entities.

The House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises will hold a hearing on Thursday, Sept. 23 at 10 a.m. to explore strengthening the SIPC, which was created as part of the Securities Investor Protection Act (SIPA) in 1970.

The SIPC was founded on the same principles as the Federal Deposit Insurance Corporation (FDIC), but for broker-dealers. The law that created SIPC intended to give investors a portion of their money and holdings back if their broker-dealer goes bankrupt or steals cash and securities.

SIPC has not operated the way Congress intended, leaving American investors with vague protections of their investment accounts and little understanding of the considerable limitations of those protections. The public unraveling of several major broker dealers and investment theft losses exceeding $75 billion during the recent financial crisis have exposed the need to bolster the SIPC.

Most investors believe that they will be eligible for SIPC protections should they lose cash and securities to broker bankruptcy, theft or malfeasance. While the FDIC has moved quickly to restore investor’s assets in bank failures, the SIPC has, in many cases, refused to protect investors and often taken aggressive actions against them.

Prior to the Bernard L. Madoff Investment Securities and Stanford bankruptcy cases, the SIPC paid more money in fees to Trustee attorneys to oversee brokerage liquidations and to litigate victim claims than it had paid in actual claims to the investors it was supposed to protect.

The Network for Investor Action and Protection (NIAP) is a not-for-profit organization founded by former investors of Bernard L Madoff Investment Securities Inc. An advocacy group for all victims of Ponzi frauds, NIAP supports regulatory reform to enforce effective policing for the prevention of future investment and securities fraud, and improved and proper support for all victims currently suffering from the unfortunate and potentially devastating fallout from this type of crime.

Hearing Details

 

WHO:             House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises

WHAT:           Hearing Entitled “Assessing the Limitations of the Securities Investor Protection Act”

WHEN:           Thursday, September 23, 2010

                        10:00 a.m.

WHERE:         2128 Rayburn House Office Building

 

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