SIPC's announcement of the online forum, released on September 7, comes on the heels of criticism made on July 30 by Rep. Paul Kanjorski (D-Pennsylvania). Kanjorski asserted that the SIPC, which maintains a reserve fund mandated by Congress to protect the customers of insolvent brokerage firms, as well as the Securities Investor Protection Act (SIPA) are outdated and due for an overhaul.
"The many complaints of investors after the failure of Lehman Brothers and the Madoff Ponzi scheme, along with a number of court rulings, make it clear that Congress needs to explore a comprehensive overhaul of SIPA," said Kanjorski, who is chairman of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises.
"As part of these efforts, we must also ensure that the SIPC, the entity charged with implementing SIPA, follows the spirit of the existing law and works to protect the best interests of investors," Kanjorski said in his July 30 statement. "Unfortunately, SIPC has denied the claims of customers based on statement balances provided to them by their brokers, yet SIPC expects customers to use those very same statements to report unauthorized trading in their accounts. This paradox results in a customer's statement being meaningless whenever it could harm SIPC, but not when it harms the customer."
The September 14 "listening post" session will be the first of two major national public forums focused on soliciting input about the modernization of SIPC, according to the SIPC release. The effort is part of the SIPC modernization initiative and full-scale review launched on June 17. The SIPC has not been the focus of major new legislation in 30 years.
A 13-member SIPC modernization task force will present its findings in writing to the SIPC board, which will review them with a view to legislative changes. "It is anticipated that written task force reports and related documents will be public, in light of investor interest and a stated interest in the project by Congressman Paul Kanjorski," according to the SIPC release.
"We are hearing from the securities industry, lawyers, and members of Congress, but we also want to be sure to get the views of U.S. investors with no filters and no restrictions on what is said," SIPC Board Chairman Orlan Johnson said in a statement.
To keep abreast of planned SIPC modernization events, go to http://www.SIPCModernization.org.
Read about the House's SIPC hearings in September from the archives of InvestmentAdvisor.com.