(1888PressRelease) May 03, 2009 - The Securities Investor Protection Corporation ("SIPC") was formed in 1970 pursuant to the Securities Investor Protection Act ("SIPA"), a federal statute intended to protect customers of SEC-regulated broker/dealers. SIPC is not a government agency, but rather an industry funded organization that charges annual dues from its members. Up until now, SIPC has charged its members a mere $150 a year for SIPC insurance.
Bernard L. Madoff Investment Securities LLC was a member of SIPC. Thus, Madoff investors are entitled to $500,000 of insurance on the securities in their accounts as reflected in their November 30, 2008 account statements. Unfortunately, the Trustee in the Madoff case, Irving Picard, who was appointed by SIPC, does not agree. In order to save SIPC money, Picard has invented his own definition of "net equity" as it applies to Madoff investors. The SIPA contains a definition of "net equity" which simply means what the broker owes the customer less any sums the customer owes the broker. For Madoff investors, this information would be taken from the November 30, 2008 statements. Instead, Picard is defining "net equity" to mean the total investment made less all withdrawals, without regard to the appreciation in the account over a course of what may have been 20-30 years. Picard's conduct is particularly punishing to elderly people who invested with Madoff in the 1960's - 1980's because they are left now without any assets other than their houses and, when they sell their houses to provide a fund of money to cover their support, they are facing losing this fund of money to Picard in a clawback suit.
SIPA specifically provides that the "legitimate expectations" of the customer are to be honored. Picard is ignoring the customer's "legitimate expectations" as well as the SIPA's definition of "net equity". It is the SEC's responsibility under SIPA to assure that SIPC fulfills its statutory obligations. The SEC has the power and the obligation to go into court to force SIPA to abide by the law. To date, the SEC has done nothing.
Madoff victims have joined together and formed a proactive online support group that is united in their efforts to thwart this injustice. The group took action and brought documentation to their congressmen in an effort to show the fallacy in Mr. Picard's definition. On May 1, 2009, two Florida Congressmen, Ron Klein and Robert Wexler, wrote to Mary Schapiro, Chairman of the SEC, and Stephen Harbeck President of SIPC, asking for an explanation of why Mr. Picard is ignoring the statutory definition of "net equity" and threatening to claw back from customers who received distributions of income from their accounts over the past six years.
The victims are encouraged by the support they received on this issue from Congressmen Klein and Wexler. They are hopeful that this first letter of support will help other legislators understand the critical injustice being perpetrated on Madoff investors by Mr. Picard, SIPC, and the SEC.
All former Madoff investors are invited to join the support group at http://BernardMadoffVictims.org