Victims OrganizationsLegislative Initiatives

Attempts to Right the Wrong

Initial Shock Bernard Madoff is arrested on one count of securities fraud for

allegedly operating a multi billion dollar Ponzi scheme on December 11, 2008, one day after he confesses to his sons.

Shocked investors starved for information seek answers to questions that will impact the rest of their lives Are there any securities left in their accounts Will SIPC be there to provide immediate funds Are any assets left at Madoff’s firm, if so, how long to accumulate

assets, and who gets compensated What action will the government take assist investors

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Source: www.madofftrustee.com

Grim Reality Shocked investors starved for information seek answers to questions that

will impact the rest of their lives Are there any securities left in their accounts?

No, decades of account statements prove to be fake. Madoff never executed any trades in the investment advisory business.

Will SIPC be there to provide immediate funds? Indirect investors (those invested through feeder funds, funds of funds, and self-

directed retirement vehicles) are determinedby the Trustee not to be “customers.” Some direct investors ultimately receive funds (though hardly immediate) but all

account statements are ignored by the Trustee. Are any assets left at Madoff’s firm, if so, how long to accumulate assets,

and who gets compensated? Any remaining assets – estimated to be work several hundred million dollars, may

become available through litigation, but this could take years. What action will the government to assist investors?

Multiple pieces of legislation have been proposed. None have gotten out of Committee.

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Victims’ GroupsWho are the members

Anyone who invested with Madoff either directly or indirectly through feeder funds

Proof of investment required (to exclude press and attorneys

Purpose of the groupsShare informationSolicit members who are willing to talk to the pressOrganize multiple congressional letter writing campaignsOrganize members when events occur

Public Websites (e.g., www.investoraction.org)Provide information and guidance about legislation and

litigation Serve as a conduit to share media reports

Provide information and guidance about legislation and litigation

Serve as a conduit to share media reports

Madoff Survivors and NIAP Shortly after the fraud’s discovery, the U.S. attorney obtains and

publishes a list of direct investors, including investor names and address, the beginning of a media onslaught.

January of 2009 – “Madoff Survivors” is formed as an on-line forum for Madoff victims, using the Google Groups platform. NIAP (Network for Investor Action and Protection) was formed in late

2009 as a 501 c3 and 501 c4 (which allows for lobby efforts). The book “The Club that No One Wanted to Join” was born of that

group. Both work to educate the investing public about the risks associated with investing in the securities industry, details of the Madoff situation, and to secure legislative action to ensure fairness for all ponzi scheme victims.

NIAP has been working with a DC lobbying firm – working pro-bono to assist in legislative initiative on the hill.

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Madoff Customers MobilizeMassive letter writing campaign aimed at House and

Senate Banking Committee members.

Media forums and information sessions

Frequent electronic and media interviews

Website development to share information with investors, the public and the press

“The Club No One Wanted to Join”

Attend hearings

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Government to the RescueOr

RoadKill in the Rearview Mirror

Many pieces of legislation have been put forward by well-meaning (?) legislators.

Hearings are held, legislators grandstand for cameras, but not one bill has left Committee

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Government Assistance

Madoff fraud victims and other victims of Ponzi schemes enjoyed a rare – but welcomed ruling: In March 2009, the IRS Commissioner approved Rev Proc. 2009

-- a “safe harbor” treatment for investments that were then deemed to be fraudulent

This allows Ponzi crime victims to recover 5 years of back taxes paid on those fact 1099s – but ONLY five years.

Since then there have been many bills introduced in Congress but not one has made it out of Committee.

List of Proposed Legislation

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Bill Number Date of Introduction

Bil l Sponsor Objective or Bil l Name

HR 2798 2/10/2009 Arcuri – NY Increase SIPC Coverage

HR 1159 2/24/2009 Meek – FL Net Operating Loss Carryback – 5 yrs to 10 yrs

HR 3817 10/15/2009 Kanjorski – PA The Investor Protection Act of 2009

S. 3166 3/15/2010 Schumer – NY Ponzi Scheme Victim’s Bill of Rights Act of 2010

HR 5032 4/15/2010 Ackerman – NY Ponzi Scheme Investor Protection Act of 2010

HR 5058 4/15/2010 Pascrell-NJ Ponzi Scheme Victims’ Tax Relief Act of 2010

HR 6531 12/16/2010 Garrett – NJ Equitable Treatment of Investors Act

HR 757 02/17/2011 Garrett – NJ Same as 111-6538, but for new Congress

HR 6659 12/20/2012 Garrett – NJ Equitable Treatment of Investor Act (Marker Legislation for 113rd) Congress – no new bill as yet)

HR 897 02/26/2013 Cassidy - LA Improving Security for Investors and Providing Closure Act of 2013

Equitable Treatment of Investors Act

The Equitable Treatment of Investors Act amends The Securities Investors Protection Act (SIPA) of 1970.

The last significant amendment was in 1980 when the limit of protection was set at $500,000 -- an amount equal to $1.4 million in today’s dollars.

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Key Elements of the Equitable Treatment of Investors Act

NET EQUITY BASED ON LAST STATEMENT What your broker owes you less what your owe your broker, as

per the SIPA.This essential to a system that does not include the possession of

actual security certificates but only a "book entry" system based on the essential trust of account statements

TREATMENT OF CERTAIN COMMODITY FUTURES CONTRACTS Adds claims for commodity futures contracts where now none

existsThere is currently no protection in place as the customers of MF

Global are painfully aware.

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Key Elements of the Equitable Treatment of Investors Act

RELIANCE ON FINAL CUSTOMER STATEMENT Customers of registered brokers are entitled to rely on their

customer statements as evidence of what their broker owes them. SIPA was put in place to insure the reasonable expectations of

investors.In a world where customers no longer hold physical securities, how could it be any other way

COMPENSATION FOR TRUSTEE AND ATTORNEY — Gives the court authority to approve fees and costs as in a regular bankruptcy

TIMING OF SIPC ADVANCES

SIPA calls for “timely” payouts – in fact, “timely” occurs 7 times in the statute.

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Key Elements of the Equitable Treatment of Investors Act

PROHIBITION ON CERTAIN RECOVERIES The trustee may not recover property transferred by the debtor to a

customer

APPOINTMENT OF TRUSTEES Provide a list of qualified candidates to the Court who will make the final

decision. As it stands, SIPC chooses the same trustees over and over.

COMMISSION AUTHORITY TO REQUIRE SIPC ACTION The SEC may require SIPC to discharge its obligations In the event of the

refusal to commit its funds or otherwise to act for the protection of customers of any member of SIPC.

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List of Passed Legislation

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And we all should be very concerned about the safety of our investments

Now and in the future.

LegislationCong Scott Garrett (R-NJ) has been the most active.

Working with NIAP and the lobby firm, he has written letters and demanded answers from the SEC and SIPC and caused the General Accounting Office to undertake an investigation into SIPC.

What’s ahead? NIAP is now partnered with the Stanford Victims Coalitions –

there is strength in numbers.

For status updates, and additional information, visit www.investoraction.org

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