UPDATE 3-Obama takes aim at brokers’ fees on U.S. retirement accounts

U.S. brokers and financial advisers would face new constraints under a plan President Barack Obama put forward on Monday to reduce conflicts of interest and “hidden fees” that cost Americans billions of dollars in retirement savings every year. In proposing the rules, Obama said he sought to protect Americans from being steered into costly retirement investments that produced high commissions for brokers but low returns for investors preparing for retirement. Democrats and Republicans are trying to position themselves as champions of the middle class in the run-up to the November 2016 presidential election. Retired seniors are an important voting bloc. More on Reuters here.

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Appeals court decision may speed new payout to Madoff victims

Victims of Bernard Madoff’s massive fraud are not entitled to inflation or interest adjustments on their claims, a federal appeals court ruled on Friday, in a decision that could speed the return of more than $1 billion to the swindler’s former customers. Irving Picard, the trustee liquidating Bernard L. Madoff Investment Securities LLC, said he will seek permission from a federal bankruptcy judge to distribute that sum, on top of $7.2 billion paid out so far, as soon as possible. Picard has kept the additional money in reserve because of litigation over whether former customers deserved “time-based” damages on claims arising from Madoff’s Ponzi scheme that was uncovered in 2008. More on Reuters here.

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NIAP Update - February 20th, 2015

A joint statement by Angela Shaw Kogutt (Stanford Victims Coalition) and Ron Stein (NIAP), and Co-Directors of the Investor Protection Alliance regarding Letter of Commitment and Support from Scott Garrett, Chairman and Carolyn Maloney

Dear Madoff, McGinn-Smith, and Stanford Investors,

As we approach the 6th anniversary of the Stanford and Madoff insolvencies (and 5th year of the McGinn-Smith), we want to provide you with an important update on the legislative relief we’ve jointly spearheaded in the House and the Senate since the Investor Protection Alliance kicked off in November 2013.

We are very pleased to share with you the letter of support from Congressmen Garrett and Maloney (Click here for letter), who will shortly be reintroducing The Restoring Main Street Investor Protection and Confidence Act in the House of Representatives. (A companion bill has already been reintroduced by Senator Vitter in the Senate.)

As many of you already know, despite considerable efforts by numerous Congressional members, we were unable to push The Restoring Main Street Investor Protection and Confidence Act (House Bill H.R.3482 and Senate Bill S. 1725) across the finish line in the last Congress, largely because of resistance of House Financial Services Committee Chairman Jeb Hensarling (R-TX). That said, we have each received personal commitments from the lead sponsors of the legislation in the House that lead us to believe the prospects for passage of newly introduced bills in early 2015 are much more favorable than in the previous Congressional session. We believe, therefore, that it is crucial for the victims of each of these frauds to stay involved in our joint grassroots efforts over these next few months.

The following recent developments are reasons to remain engaged:

• As the 113th Congressional Session came to a close, House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises Chairman Scott Garrett (R-NJ), who led the House bill along with the bipartisan support of the Subcommittee’s Ranking Minority Leader Rep. Carolyn Maloney (D-NY), approached the House of Representatives with a floor statement for the official Congressional Record expressing his unbridled intention to press forward with the legislation in the 114th Congress, which is strongly reiterated in the attached letter to the various victims’ groups.

• In the frenzy of the close of the 113th Session, House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises Chairman Scott Garrett made a powerful statement on the House floor, which a core group of key Congressional members representing thousands of Stanford victims, including House Rules Committee Chairman Pete Sessions (R-TX), Rep. John Culberson (R-TX), Rep. Michael McCaul (R-TX),, Rep. Charles Boustany (R-LA), Rep. Blaine Leuktemeyer (R-MO), and Majority Whip Rep. Steve Scalise (R-LA) made clear their intention of seeing this bill through to passage. Importantly, since the new session began, Congressman Garrett has worked feverishly to assemble a strong core group among the above who have agreed to work closely with him to help pass the bill. This unity is a marked change.

• We have strong reason to believe that unlike 2014, this bill will go to the House floor early in 2015 for a vote. Financial Services Committee hearings in early 2015 have been promised by Chairman Hensarling, and could begin as early as March. It is our belief and hope that things will move quickly thereafter and we have reason to believe that Mr. Hensarling will not present strong opposition or obstruction to the legislation either in the hearings or thereafter.

• With Republicans taking control of the Senate in 2015, our prospects for passage of the companion bill have improved substantially. Senate Banking Committee Member Sen. David Vitter (R-LA), who led the Senate version of the bill (S. 1725) (cosponsored by NY Senator Schumer) has already reintroduced the bill. Sen. Vitter will be joined in this effort by newly elected Sen. Bill Cassidy (R-LA), who showed unwavering support as he led the House’s efforts on behalf of Stanford victims over the past almost 6 years. These committed leaders, along with the strong support of Senate Banking Committee Chairman Richard Shelby (R-AL), have given us renewed faith regarding the prospects of the Senate passing a legislative remedy in 2015. Efforts will now turn to re-energizing Senator Schumer and the Democrats to support the legislation as well.

We understand your patience has been tested and has worn thin, and that you rightfully ask, “What makes this time different?”

First, we have been advised by key Members that both the House and Senate are more likely to work far more collaboratively and efficiently in the 114th Session now that we no longer have a divided Congress. You also may not be aware of just how strongly support has been expressed for this legislation by key House and Senate members over the last few weeks of the 113th Session. Moving the bills came down to the wire, with Members on both sides working up until the last hour to find a creative way to move the bill by working around Chairman Hensarling’s insistence the House bill be delayed for a full House Financial Services Committee hearing in 2015.

After six long years of relationship-building in Washington, we truly believe we are close to achieving our goal. We each remain as committed as ever to this cause–if not more so after coming so close these last few weeks. These next few months will demand a tremendous amount of the energy of our team, however.

As both Stanford and Madoff victims have seen their legal opportunities increasingly whittled away, we need your support over the coming months to help push this legislation over the finish line.

The leaders of both of our organizations, as well as the lobby firms working on a largely pro-bono basis on our behalf would not remain committed if we did not feel we had a significant prospect of crossing the finish line. We feel quite strongly that we must remain united in our efforts to see these bills finally signed into law in the upcoming months. We also know that we cannot achieve success in this endeavor without your continued participation to engage your Congressional leaders to “fix SIPC,” and we look forward to continuing the teamwork it has taken to get us this far.

Our best wishes for a successful 2015!

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Court: No Inflation Pay on Recovered Funds of Madoff Victims

A federal appeals court says thousands of victims of Bernard Madoff’s multibillion-dollar fraud are not entitled to interest or inflation when they get a share of recovered funds. The Securities and Exchange Commission said publicly in 2009 and again before a bankruptcy judge that Madoff’s victims should get an inflation adjustment. On Friday, the 2nd U.S. Circuit Court of Appeals in Manhattan said that was inconsistent with the SEC’s position in other cases. More on ABC News here.

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Mixed ruling for fraud victims

A federal judge this week granted a request by the U.S. Securities and Exchange Commission to use the seized assets of imprisoned former Albany brokers David L. Smith and Timothy M. McGinn to repay victims in what the government said was a years-long fraud scheme. But in his decision, U.S. District Chief Judge Gary L. Sharpe rejected the SEC’s request for $124 million, saying that the agency did not adequately document that amount as the total investors lost. Sharpe criticized the SEC for its “haphazard filing” in which he said it gave inconsistent estimates for the losses of hundreds of former investors at the brokerage. In the SEC’s legal brief, which the judge said contained typographical errors, the agency put investor losses at more than $80 million, but then said the losses were “approximately $100 million.” More in the Times Union here.

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The Media Is the Message, When the Subject Is Investor Protection

In my last blog, Wall Street Finally Blinks in Fiduciary Standoff, I suggested that “Until now the securities industry has done a masterful job of deflecting initiatives to force its member firms to act in the best interests of their clients. It’s just possible that this time—ironically, due to its own efforts—it really might be different.” Teresa Vollenweider responded with the following post: “I certainly hope so, and I am willing to fight tooth and nail to make it so. Finally, yes, finally, the fact that Wall Street and its so-called advisers/advisors (who are nothing more than product peddlers) have been ripping off the retail investors and small [retirement] plans (business owners and employees) for years is finally seeing the light of day via the mainstream media…” More on ThinkAdvisor here.

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$355.8M more going to Madoff scam victims

NEW YORK – A new distribution of funds recovered from Bernard Madoff’s business interests is sending $355.8 million more to victims of the Ponzi scheme mastermind’s investment fraud. The latest repayment flow began Friday, and marked the fifth distribution by Irving Picard, the court trustee appointed to search for assets tied to the scam and use the funds to reimburse thousands of average investors, charities, celebrities and others who lost as much as $20 billion in the fraud. More on USA Today here.

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Payout to Madoff victims tops $7.2B

The trustee liquidating Bernard Madoff’s firm on Monday said he is distributing another $355.8 million to the swindler’s victims, bringing the total payout to more than $7.2 billion. Irving Picard, the trustee, said the payout began on Feb. 6, and covers claims by fraud victims with 1,077 accounts at the former Bernard L. Madoff Investment Securities. Claimants will receive between $431 to $67.1 million. More on CNBC here.

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DOL fiduciary rule stalls again as brokerage industry makes last-minute push against it

A Department of Labor proposal that would impose a fiduciary standard on retirement advisers appears to have stalled yet again as the financial industry makes one more, eleventh-hour bid to try to change it before it is released publicly. For a couple of weeks, participants in the hotly contested debate over the rule have been waiting for the DOL to send it to the Office of Management and Budget for analysis. On its regulatory agenda, DOL had indicated that it would act on the rule last month. More on Investment News here.

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Chamber Cautions DOL Fiduciary Rule May Not Promote Investor Protection, Choice

The U.S. Chamber of Commerce said Thursday it is concerned a fiduciary rule being developed for advisors to retirement plans such as 401(k)s and IRAs may not promote the twin objectives of investor protection and investor choice. “We are troubled by the possibility of a rule with an overly broad application … a rigid one-size-fits-all regulatory approach that will make it harder to serve current investors, particularly in small accounts,” Chamber Center for Capital Markets Competitiveness President David Hirschmann said in a letter to Labor Department Secretary Thomas Perez. More in Financial Advisor here.

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