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HR 757: “We the People” for Real Investor Protection

Posted by Larry Doyle on July 31, 2012 10:06 AM |

In the same spirit as that which inspired those who signed our Declaration of Independence, I welcome attaching my name to the following proclamation in support of HR 757 for real investor protection. What makes the proclamation highlighted below so special? It is truly a grass roots effort. As noted attorney Helen Davis Chaitmain asserted:

People are contributing money for these ads in order to educate the electorate that our representatives (and the SEC) have forgotten that they represent the people.  They have allowed Wall Street (“SIPC”) to renege on its statutory obligation to insure each brokerage account up to $500,000.  Why would any honest hard-working American vote for someone who doesn’t support this bill?”

I fully and totally concur and welcome lending my support to this effort while endorsing the passage of HR 757.

(For a larger view of this ad, click on the image)

Please contact those Congressmen on the Subcommittee on Capital Markets TODAY and compel him/her to support HR 757.


Ackerman Gary (202) 225-2601
Biggert Judy (202) 225-3515
Campbell John (202) 225-5611
Carson André (202) 225-4165
Dold Robert (202) 225-4835
Donnelly Joe (202) 225-3915
Ellison Keith (202) 225-4755
Fitzpatrick Michael (202) 225-4276
Garrett Scott (202) 225-4465
Green Al (202) 225-7508
Grimm Michael (202) 225 3371
Hayworth Nan (202) 225-5441
Hensarling Jeb (202) 225-3484
Himes Jim (202) 225-5541
Hinojosa Ruben (202) 225-2531
Hurt Robert (202) 225-4711
King Pete (202) 225-7896
Lucas Frank (202) 225-5565
Lynch Stephen (202) 225-8273
Maloney Carolyn (202) 225-7944
Manzullo Donald (202) 225-5676
McCarthy Kevin (202) 225-2915
McCotter Thaddeus (202) 225-8171
Miller Brad (202) 225-3032
Moore Gwen (202) 225-4572
Neugebauer Randy (202) 225-4005
Pearce Steve (202) 225-2365
Perlmutter Ed (202) 225-2645
Peters Gary (202) 225-5802
Posey Bill (202) 225-3671
Royce Ed (202) 225-4111
Schweikert David (202) 225-2190
Sherman Brad (202) 225-5911
Stivers Steve (202) 225-2015
Waters Maxine (202) 225-2201

I thank you.

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • Bill

    LD, this bill is problematical because it will result in a disparate treatment in persons caught up in a Ponzi scheme, among other issues. That is to say, so called “net winnners” who drew out money before the scheme collapsed will come out ahead of those who didn’t, which is inequitable. I posted a lengthy comment on this some time back in regard to a ruling in the Madoff case.

    • Lissa

      So, what do you do when there is a “joint” madoff account and one side is “net winner” and one side is “net loser”. The “net loser” protected the “net winner” from potential clawback and prevented the “net loser” from collecting SIPC.
      “Net loser” thinks I owe her what she would have collected from SIPC, which is the same amount that my clawback exposure has been reduced by.

  • LD


    I strongly believe they they changed the law in order to fit the crime. That is wrong. The game was rigged when the trustee was granted almost imperial type powers.

    Wall Street ran a scam at SIPC given the $150 premiums and Wall Street should be held to account not those defrauded.

    The idea that the system is beholden to the trustee strikes me as a totally false premise.

    • Bill

      LD, I don’t see where this bill addresses the underfunding problem, i. e. outfits like Goldman paying $150 per year in premiums. Also, it is a misrepresentation to say taxpayer money will not be involved, as SIPC like all these vehicles will be bailed out by the Treasury, i. e. the taxpayer, when it runs short.

    • Bill

      LD, the trustee did not act with fiat but rather took a legal position, with which the bankruptcy court agreed, ruling in favor of that position based on legal precedent.

    • Bill

      LD, I hear reprise a post I made on SOS around March 1, 2010, with some slight editing: I certainly have sympathy for the people who got caught up in the Madoff fraud. But I don’t understand why SIPC can be expected to reimburse Madoff investors for phantom profits that they “lost.” Understanding it gets a bit complicated because they may have paid income tax on those phantom profits. But they can get a refund on at least some of that by amending their returns. To require SIPC to pay the phantom profits would basically be insurance against being defrauded out of your profits in a Ponzi scheme, at least up to $500K, which would be a real case of moral hazard. I read the bankruptcy court opinion sections germane to this dicussion, with which I agree.
      First, the opinion points out that if the last statement method is employed, those who actually profited from the scam through withdrawals funded by the money of later investors would stand to profit even more, again at the expense of later investors. There is a finite pot of money and to allow any recovery based on other than how much you put in, minus how much you took out (the net investment method), would enrich those who already profited at the expense of those with a net loss–an incongruous result.

      The issue extends beyond SIPC’s responsibility, as that is only part of the equation; the other is the pot of money the Trustee recovers through liquidation of Madoff assets and recoupment of preferences, fraudulent transfers, etc. To the extent that is insufficient to satisfy claims, the SIPC coverage comes into play. For the net winners to qualify for SIPC coverage means that they will of necessity recover more from the Madoff pot than net losers. Those are practical effects of utilizing last statement as the basis for claims.

      Beyond that the law as stated in the opinion (and I can only conclude the judge accurately stated same) accords with the court’s decision. The opinion discussed the Securities Investors Protection Act, which established SIPC, in particular the definition of net equity, upon which the case turns. This is defined to include securities, which in the Madoff case there were no securities as such.

      This is also not the first time that the net investment method has been employed to adjudicate claims arising out of a securities Ponzi scheme. The opinion discusses at length In re New Times Secs. Servs., Inc., 371 F.3d 68(2d Cir. 2004) and New Times Secs. Servs., 463 F.3d 125, 130 (2d Cir. 2006)–New Times I and New Times II, in which net investment was employed rather than last statement balance as to one set of investors in a fraud. The last statement balance was employed as to another set in New Times, but the court distinguishes those investors from those in the Madoff case. Another case from Florida is also cited in which the net investment method was employed rather than last statement balance.

      This is of necessity a brief synopsis of the case, which may be found at Click on Judge Lifland, and you will see the link to the decision. It’s about 24 pages; the rest is superfluous matter.

      As to inadequacy of SIPC premiums by investment houses, such as Goldman Sachs, that is truly outrageous.

  • Sheryl

    There are 2 different ‘pots’ of money. One can pay out the minimum amount of ‘insurance’ promised based upon the last statement and the other can be based upon a ‘rateable’ calculation ie. net cash. They do not have to be one and the same.

    • Bill

      The two pots are not independent, but inter related. See my post above. The SIPC funding comes into play to cover a shortfall, but that is after consideration of any other available monies.

  • Neil Friedman

    Are you aware that some net winners have been created by the IRS? Regulation required that upon reaching 70 1/2 you must make withdrawals from qualified plans using the value of your pension fund (in my case Madoff values) and a mortality table.

    • Bill

      I don’t see that as relevant.

  • N. Beaman

    So happy to hear that someone gets it! Don’t ever trust your money is protected regardless SIPC or FDIC stamped. Laws are meant to be broken apparently is the trustee’s method of investor protection.
    Thank you for supporting HR 757. Let’s only hope others will get it too!

  • Rick

    dishonest broker……what’s so bad about that? at least you know it going in…

    an honest broker is worse…one thinks that he’s working for you, but the actual task of a broker is to do the transaction…..a dishonest broker if recognized as such (and you might as well just suspect everyone) is there to screw you and you act accordingly…

    that’s why i left retail…. the conflict of interest between broker, employer, client is not somethin g that can be overcome…that’s why I sold mostly mutual funds…..BUT when no loads started coming into the market I had to get out…cause they were a better deal.

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