mar 3 net equity release ibk
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8/7/2019 Mar 3 Net Equity Release Ibk
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FOR IMMEDIATE RELEASE
Mar. 2, 2010
NIAP TO COURT: TRUSTEE METHODS CONTRADICTING CONGRESSIONAL INTENT
The Network for Investor Action and Protectionfiled an Amicus Brief with the Second Circuit Court ofAppeals telling the court that the methods employed by the Securities Investor Protection Corp. Trusteeon the Madoff liquidation run directly counter to Congressional intent, are devastating to victims, andthreaten investor protections.
The brief was filed ahead of Thursdays appellate court hearing on the Trustees so-called cash-in/cash-out (CICO) method for determining a broker-dealer customers net equity. The brief states that should theruling be upheld following the hearing, it holds dramatic consequences for the investing public, who will nolonger be able to rely on their account statements to determine their net equity with a broker-dealer. TheSIPA law was written to provide confidence in the financial markets, and the Trustees method willthreaten that confidence.
The goal of the Securities Investor Protection Act (SIPA) is to protect investors, especially small ones,and to provide them with insurance, the brief states. Yet the CICO method of determining net equity hasdevastatedinvestors, particularly small ones.
Innocent Madoff victims with a negative net equity, according to the Trustees unprecedented method ofcalculating it, will be afforded no SIPC protection and in many cases are being sued by the Trustee, anaction that has never before been taken in a SIPC bankruptcy against innocent investors. Attorneys forMadoff victims, for SIPC, for the Trustee and for the Securities and Exchange Commission will presentcases at the hearing.
Congress has taken note of the Trustees undermining of SIPA law. Congressman Scott Garrett (R-NJ)introduced a bill last monthHR-757, Equitable Treatment of Investors Actreaffirming key aspects ofSIPA law, including:
That the account statement, the foundation of a brokers relationship to its customers, is anofficial document and the indisputable determinant of a brokerage customers net equity
That clawback of innocent individual investors will be prohibited in SIPC liquidations
That the process of selecting a Trustee will include an additional layer of oversight, so that theSIPC/Trustee conflict of interest is resolved; SIPC will no longer be able to select its own Trusteefor the courts approval
Every investor will face the possibility that the securities and money shown in his account statement donot exist due to secret fraudulent conduct, and that, if he withdraws monies from his account in order tolive, he may be faced with a negative net equity, no payment from the SIPC fund, no share of customerproperty, and clawback, the brief says.
According to SIPCs own disclosures, nearly two-thirds of direct Madoff victims will be denied full SIPCprotection, with over half being denied any protection at all due to the Trustees arbitrary method ofcalculating net equity. In addition, over 1000 innocent victims are being sued, an action that has neverbefore been taken in a SIPC bankruptcy against innocent investors, in this case whose investmentsstatements showed they owned a basket of conservative stocks traded on the New York Stock Exchange.
The brief also addresses that the Trustees methods will reward larger, institutional investors who neverhad to redeem funds from Madoff for living purposes. Innocent individuals who pulled out money for livingexpenses are mostly ineligible for SIPC compensation.
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About NIAP (www.investoraction,org)
The Network for Investor Action and Protection (NIAP) is a not-for-profit organization with over 1000
members. NIAP seeks to enhance protections for all investors, while pressing for relief for innocentvictims of securities frauds.
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For further information contact:
Ilene KentNetwork for Investor Action and [email protected]
mailto:[email protected]:[email protected]