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Ms. ROS-LEHTINEN. Mr. Speaker, It is a great tragedy that the final version of the financial services bill which was approved by a House-Senate conference, contained little or no help for the hundreds of victims of Ponzi schemes, many of whom reside in my Congressional district.
This bill fell far short of doing everything or even anything, to assure the average American investor in the stock market that we want to protect their interests.
I proposed to the conferees certain amendments to the Securities Investor Protection Act (SIPA) in order to protect victims of Ponzi schemes. Unfortunately, these reforms which were designed after extensive discussions with many of the victims, were totally ignored.
My amendments included an ``anti-clawback'' provision, designed to end the terror of thousands of Ponzi victims, who face years of prolonged litigation against the government, unless these proposals are enacted.
Under no circumstances, except complicity with a crooked broker--should these investors be subject to clawback litigation.
The opposition to this amendment has mainly come from the SEC/SIPC and Wall Street which seek to protect SIPC's right of subrogation, therefore taking money again from the victims and giving it back to SIPC. Not only is this disingenuous, but it shifts the burden of the financial loss to every taxpayer in America.
The importance of this amendment is that SIPA was intended to instill confidence in the capital markets and impose upon the SEC the responsibility to monitor and supervise those markets.
The idea that SIPC or the courts would hold innocent investors, who relied upon the SEC's endorsement of Madoff, to suffer judgments for amounts they took out of their accounts in good faith, is upsetting.
One proposal suggests that clawbacks be allowed against so-called ``negligent'' investors. How could they be negligent if the SEC and FINRA never spotted the fraud over a 20 year period? In fact, in 1992, the SEC endorsed Madoff as safe.
Shouldn't that affirmative statement be enough to shield investors from being accused of ``negligence?''
At a minimum, a defense against ``negligence'' requires innocent investors to spend vast amounts of money defending their conduct against a SIPC-funded trustee, who while making $1.4 million in fees per week, has every incentive to prolong litigation against them.
As a practical matter, the court could say that every Madoff investor was negligent because they never uncovered the crime.
We should be protecting innocent victims of the SEC's negligence, not protecting Wall Street and its stepchild, SIPC.
Another amendment I proposed would have provided for immediate payment to all Ponzi scheme victims of up to $500,000 in SIPC insurance. That payment should be based upon the last statement the victims' received from their broker. This amendment also clarifies that any person who invested in an ERISA-approved retirement plan is a ``customer'' under SIPA.
Americans have a right to rely upon the statements they receive from SEC-regulated broker/dealers. This was the Congressional purpose of SIPA in 1970 and it remains so today.
Tens of thousands of Americans have lost their life savings because of the inaction of the SEC and its failure to close down the operations of Bernard Madoff, Allen Stanford, and others. Let's do the right thing for these people.
The President said he does not want BP to nickel and dime the oil spill victims, why is it OK to nickel and dime victims of the SEC? These people lost their life savings because of the greed of Wall Street and the inaction of the SEC.
We should have added these much needed amendments in order to ensure innocent investors that the American financial system is not rigged against them.
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