[Congressional Record (Bound Edition), Volume 156 (2010), Part 5]
[House]
[Pages 7173-7174]
[From the U.S. Government Publishing Office, www.gpo.gov]




    PROTECTING CONSUMERS THROUGH REFORMING THE SECURITIES INVESTOR 
                             PROTECTION ACT

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentlewoman from Florida (Ms. Ros-Lehtinen) is recognized for 5 
minutes.
  Ms. ROS-LEHTINEN. Mr. Speaker, during the past few years, the 
financial service industry has endangered the American Dream of 
capitalism. Each day, we learn more about those who are responsible.
  It wasn't small business, the owners of these businesses or the 
entrepreneurs who harmed us but, rather, the Wall Street firms that 
manipulated the system and the Securities and Exchange Commission, SEC, 
that allowed greed to destroy the economy.
  SEC Inspector General David Kotz, in his recent report, said that the 
SEC bears total responsibility for nearly $70 billion of investor 
losses due to the Stanford and Madoff Ponzi schemes. Thousands of 
additional innocent victims were allowed to lose their life savings 
while they mistakenly believed that the SEC was actually regulating the 
securities market.
  What is worse is that, even today, Wall Street is attempting to 
manipulate the laws to avoid their responsibilities under the 1970 
Securities Investor Protection Act, SIPA, and the corporation created 
to carry it out, the SIPC, the Securities Investor Protection 
Corporation.
  SIPA provides $500,000 of insurance to investors against the fraud or 
the dishonesty of an SEC-regulated broker. Wall Street supported SIPA 
because it wanted to encourage investors to allow brokers to hold their 
securities in their street name.

[[Page 7174]]

  For example, if you bought securities through Merrill Lynch, instead 
of your name appearing on the stock certificate, it was held in Merrill 
Lynch's name. This allowed the brokerage firms to enjoy an enormous 
amount of additional revenue because they could treat those securities 
as their own.
  The quid pro quo for giving up the protection of having securities in 
your own name was SIPC insurance. SIPC insurance was created to protect 
against the dishonest broker who either steals the customer's security 
or who steals the customer's money and never actually purchases the 
securities.
  Today, 40 years later, Wall Street controls SIPC because the broker-
dealers are members of SIPC. As a result, SIPC has spent more money 
fighting investor claims than it has paid out to investors--therefore, 
persecuting rather than protecting investors.
  SIPC has the power to assess each member firm one-quarter of 1 
percent of operating revenues, but instead, it has charged its 
members--many of whom were large firms--only $150 per year for the 
privilege of promising millions of customers that they were insured. 
Thus, Wall Street figured out a way to have its cake and eat it, too. 
It advertised insurance, but in reality, never funded it; therefore, it 
could not provide enough funds to cover the victims' claims when Madoff 
collapsed.
  Today, SIPC is paying the trustee and his law firm $1.5 million each 
week to persecute investors by depriving them of insurance and by 
threatening to sue those who took mandatory withdrawals from their IRA 
accounts. I am referring to the clawbacks that Irving Picard, the SIPC 
trustee, has threatened against thousands of innocent investors, whose 
only mistakes were to rely upon their SEC broker-dealer confirmations 
and monthly statements.
  SIPC refuses to honor the law's mandate to honor the legitimate 
expectations of customers who relied upon their confirmations and 
statements. If investors can't rely upon those documents, the entire 
stock market could collapse because no customer would ever have proof 
that he owned any securities.
  I am asking that we hold Wall Street responsible for SIPC insurance. 
Every dollar that SIPC doesn't pay and every dollar that the SIPC 
trustee claws back increases the IRS theft loss to which an investor is 
entitled. Thus, after not only paying SIPC premiums for 19 years, Wall 
Street is cleverly attempting to pass their financial obligation back 
to the government.
  We cannot let this happen.
  I am aware that the bankruptcy court has ruled in SIPC's favor on 
this issue, but as we all know, the court sometimes gets things wrong. 
Madoff investors are entitled to an immediate amendment to SIPA to 
clarify that it was never congressional intent that a customer of an 
SEC-regulated broker-dealer would be subject to a clawback suit.
  Under no circumstances, except complicity with a crooked broker, 
should these investors be subject to clawback litigation. If necessary, 
I am prepared to propose such legislation. Instead of representing the 
best interest of the victims, the Madoff trustee is representing SIPC 
against the victims.
  Let's do the right thing for the average American--who works hard, 
who saves money, and who invests in the stock market with the hope of 
ultimately retiring on his savings.
  Mr. Speaker, I will have further remarks on this important topic, 
which is of great importance to my constituents, later on next week.

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