Rep. Paul Kanjorski, D-Pa., chairman of the House Financial Services Subcommittee on Capital Markets said Thursday that Congress should consider expanding the Securities Investor Protection Act's coverage to investment advisors' clients, as investment advisors "may also commit fraud."
Kanjorski made his comments as the subcommittee explored SIPA's limitations, a law designed to return money and securities to the customers of failed brokerages. The Securities Investor Protection Corp. (SIPC) is the entity charged with implementing SIPA.
To better protect the customers of failed brokerages going forward, Kanjorski said in his opening remarks that the Dodd-Frank Act increases cash protection limits and bolsters the resources of the reserve fund used to replace customers' missing cash and securities. Dodd-Frank also "quintuples penalties for misrepresentations of membership in or protections offered by the Securities Investor Protection Corp. Moreover, the statute makes important changes to prevent, rather than simply replace, the loss of customer property, including new custody safeguards for customer assets held by certain financial professionals."
The victims of the Bernie Madoff and Robert Stanford Ponzi schemes, Kanjorski said, believed that "SIPC has fallen short in meeting its responsibilities, and they want more change. I do, too."
Rep. Scott Garrett, R-N.J., ranking GOP member on the subcommittee agreed that SIPC had "lost the trust of many investors, and members of Congress." Garrett said one measure that would help provide relief to Ponzi scheme victims is H.R. 5058, the Ponzi Scheme Victims Tax Relief Act, a bill that he introduced in April along with William Pascrell, D-N.J.; the bill aims to provide special rules for investments lost in a fraudulent Ponzi-type scheme.