Dear Friend -
Welcome to our new NIAP Update format. Along with other helpful changes, look for regular bi-weekly updates as part of our efforts to streamline communications to our membership. We hope you appreciate the new look and value the information. It is especially important that you pass it along to friends and family, as most of this information is important for all investors.
As many know, it’s been a busy few weeks on both legislative and legal fronts. Despite the recent Appellate Court decision on “net equity,” we are finally seeing the tide turn in Congress, courts and the media in favor of investors and against entrenched government agency, financial industry, and legal interests.
Washington, DC Update
NIAP has worked hard to spotlight the failures of the SEC, SIPC, and the SIPC Trustee in the Madoff liquidation as these failures threaten all investors. Many contend SIPC has acted with impunity to protect the SIPC fund, minimize fees to the brokerage industry, invalidate investment statements, and eliminate the SEC’s accountability as the overseer of the financial industry. As a result, two major Congressional legislative initiatives spearheaded by Chairman Scott Garrett, with bi-partisan support, are under way to counter these dangerous behaviors.
At Chairman Garrett’s request, the powerful GAO has agreed to a thorough study and evaluation of the SEC, SIPC and the Madoff Trustee, which includes examining the exorbitant fees charged the Trustee, the basis for clawback actions against innocent investors, and justifications for ignoring account statements.
“The public deserves to understand the trustee’s motivations for excluding so many innocent investors from SIPC protection and questions need to be answered regarding the SEC’s role in this affair,” said Garrett. “The trustee’s approach flies in the face of the SEC’s investor protection mandate….”
Meanwhile, HR 757 – The Equitable Treatment of Investors Act of 2011 – will be taken up in earnest by Congress after the August recess. We are told hearings will be held on the legislation in early October. This essential legislation reaffirms the sanctity of investment statements for all investors of regulated brokers, as they are for bank customers. Account statements are the only proof brokerage customers have to verify ownership of their investments, and this legislation rebuts the Trustee’s claim that brokerage financial statements, whether for regular or retirement accounts, can be deemed worthless.
Legal Update
Giving clear indication that the Madoff Trustee has exceeded his authority, District Court Judge Rakoff has dismissed much of the Trustee’s case against the bank, HSBC (ruled on in bankruptcy court), challenging the right (“standing”) of the Trustee to pursue those actions. JP Morgan Chase is similarly filing for dismissal.
Judge Rakoff has also removed the case against the Mets owners (being sued for $1 billion by the Trustee) from bankruptcy court. Rakoff will also decide on whether regular investors should be protected from clawback lawsuits by the Trustee (in a case led by attorney Helen Chaitman).
Less promising was the recent Appellate Court decision on Net Equity, which upheld the Trustee’s and SIPC’s contention that final account statements should be invalid for Madoff investors. (NIAP has taken a position that all investors of brokers are entitled to the expectations of the values on their statements). Attorneys are currently planning an appeal of this ruling.
Look for Attorney David Bernfeld’s upcoming blog in our action center which discusses recent legal issues in greater depth!
NIAP In the News
1.) The Wall Street Journal: Madoff Trustee Wins Ruling on ‘Net Winners’
2.) CNBC: Madoff Victims to Appeal Ruling on Ponzi Claims
3.) CNN Money: Judge to Madoff investors: You’re not worth that much
4.) Bloomberg: Madoff Trustee Wins Appeals Court Ruling on Calculating Investors’ Losses
5.) Fox Business: Appeals Court Ruling Favors Madoff Trustee on Net Equity
6.) USA Today: Court ruling angers some Madoff investors
Upcoming Activity & Help Needed
There is much for investors to expect in the coming months:
In Washington: initial findings from the GAO are forthcoming and critical Congressional hearings on HR757 and SIPC Modernization Task Force will be held in October.
In the Courts: expect decisions on JP Morgan Chase, Chaitman’s clients and others in the District Court, and a request for a rehearing in the US Appellate Court on Net Equity. In the meantime, we continue to fight for tax legislation relief and other improvements in investor protections.
Final Weeks of $20,000 Matching Grant Fundraising Campaign! If you value all of our accomplishments and the critical importance of continuing and even stepping up our legislative and media efforts, please help us and contribute to our campaign. NIAP urgently needs funds to cover costs. Only you can help us make this fundraising drive a success. Click here for more information…In the meantime, please check out our new Investor Action Center.
In Peace,
Ron Stein
