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Kanjorski and Ackerman Undress the SEC and SIPC

Posted by Larry Doyle on December 15, 2009 2:47 PM |

Having written about the massive regulatory failures on Wall Street for the better part of 2009, I am heartened by the House Finance Sub-Committee on Capital Markets hearing last week. The bell that tolled in this hearing deserves to ring loud, long, and clear across our great land. The regulatory and insurance failures on Wall Street deserve to be exposed far beyond Sense on Cents.

Rackets operate best in the dark. Well, let’s get that flashlight out again!

For those unaware, SIPC (the Securities Investor Protection Corporation) is an insurance fund in which member firms pay premiums to cover losses. From SIPC’s own website, we learn:

What SIPC Covers . . . What it Does Not

The cash and securities – such as stocks and bonds – held by a customer at a financially troubled brokerage firm are protected by SIPC.

Among the investments that are ineligible for SIPC protection are commodity futures contracts and currency, as well as investment contracts (such as limited partnerships) and fixed annuity contracts that are not registered with the U.S. Securities and Exchange Commission under the Securities Act of 1933.

It is important to recognize that SIPC does not work the same way as the Federal Deposit Insurance Corporation in terms of blanket protection of losses.

For this insurance coverage, SIPC charged its member firms an annual premium of $150 from 1996 until April 2009. That is no joke. Wall Street firms paid a token $150 a year to promote the idea that your investments were protected. While SIPC did have a $1 billion reserve fund, that was woefully insufficient to cover the losses incurred in the Madoff scam. Make no mistake, though, the SIPC annual premium of $150 should also be looked upon as a scam.

Think of it. Individuals pay far more for auto insurance than Goldman Sachs paid for investor insurance for over 12 years.

Are you getting increasingly pissed off? America should be extremely pissed off. The SIPC coverage has been a critical part of the Wall Street racket.

What follows are two video clips from last week’s Congressional hearing on securities investor protection reform. The first 7-minute video clip highlights Rep. Paul Kanjorski (D-PA) undressing the SEC’s Mike Conley and SIPC’s Stephen Harbeck for the massive failure of the governmental and non-governmental financial regulatory system.

Kanjorski certainly hits on America’s rage at the dysfunctional financial regulatory system. My only concern with Kanjorski’s delivery was his very deferential comments directed toward SEC Chair Mary Schapiro. I can only guess he is not aware of the outstanding lawsuits against FINRA, including the Standard Investment Chartered vs. FINRA which alleges Schapiro and other FINRA executives of lying.

This next video clip is Rep. Gary Ackerman’s (D-NY) undressing of SIPC’s Stephen Harbeck. Ackerman rails on Harbeck and SIPC for the token $150 annual insurance premium paid by SIPC member firms. While we can watch Rep. Ackerman confront SIPC Chief Harbeck, how did we get here in the first place? Why haven’t heads rolled? Who is truly protecting American investors?

America deserves to know the full extent of the Wall Street racket that was and to a large extent still is facilitated by the regulatory incest between Wall Street and Washington. Will this hearing be a start, a finish, or merely a pit stop along the way?

LD

  • Randy Bowman

    If Americans are not yet pissed off.. I have to assume it is either because they are not paying attention, or more likely because they have not personally lost money themselves in any of the recent huge securities frauds that were not only perpetrated right under the noses of the responsible regulators but even worse, those same regulators were tipped off multiple times about what was likely going on and either took no action whatsoever or simply dismissed warnings as little more than competitive angst. Both situations cry out for loudly for immediate reform.

  • fiscalliberal

    The tone of the hearing is that the committee is trying to love the witnesses to action.

    I think the nation is numb to all that is going on and the system has to further collapse to get something fixed.

    Kanjorski and Ackerman should have been pounding the desk. It is like Obama calling in the fat cat bankers and then loving them. It is all a shell game. End result will be no action.

  • Bill

    Larry, as you and I have discussed, I have tried to explain to other investors the ARS scandal and the roles of SEC and FINRA, and invariably their eyes begin to glaze over. As for SIPC I have yet to understand exactly what the coverage provides. Brokerage firms also advertise that they provide X millions per account in coverage above SIPC. But what does that consist of? Nearly as I can tell some shell insurance company with dubious ability to pay.

  • Richard Friedman

    The bottom line is that Wall Street wants Americans to feel protected but does not want to pay for the protection (even $150 was too much). They figured that they would never be called on thier scam that there never was any real protection, but the Madoff situation changed all that. American investors are simply not protected, and as the other contributor said, most people will do nothing about it unless they are affected by it. If this happened in the banking industry, there would be a run on banks that would have closed down the country. SEC, FINRA, SIPC, and certain judges, and most of the securities industry: all crooks, and we have their lobbyists and Congress to thank for keeping things the way they are.






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