SIPC: NO LIQUIDATIONS OF BROKERAGE FIRMS SEEN AS A RESULT OF HURRICANES
Industry Planning Works As It Did on 9/11 in Preventing Firm Shutdowns
WASHINGTON, D.C. – October 3, 2005 – No brokerage firms liquidations have been initiated as a result of hurricanes Katrina and Rita and none are expected to emerge at this point, the Securities Investor Protection Corporation (SIPC) reported today. SIPC maintains a special reserve fund mandated by Congress to protect the customers of insolvent brokerage firms.
SIPC President Stephen Harbeck said: "What we are seeing here are the benefits of the extensive preparations the financial services industry has undertaken for any and all contingencies, including terrorist attacks and even large-scale natural disasters. Indeed, since the ‘Y2K bug’ computer issue arose in the late 1990s, brokerage firms have developed robust backup computing capability, contingency plans, and other redundant facilities to assure investors that assets are both secure and accessible in times of crisis."
He added: "Even though the brokerage community suffered great losses in human terms as a result of the 9/11 attack on the World Trade Center, no brokerage firm was incapable of returning cash or securities as a result of that tragedy. The same appears to be true today with respect to the Gulf Coast area affected by the hurricanes. While there is enormous physical damage and human tragedy, financial assets held at brokerage firms do not appear to be at risk."
Harbeck said that SIPC has been in communication with the U.S. Securities and Exchange Commission, the National Association of Securities Dealers and the New York Stock Exchange to determine if there will be any need to initiate a customer protection proceeding as a result of the hurricanes.
Harbeck said: "To date, SIPC has no indication that any brokerage firm has failed as a result of the storms. Of course, if circumstances change, we will be ready to take the necessary steps."
SIPC recommends that Gulf Coast area investors who are unable to communicate with their individual financial professionals at any particular brokerage firm branch office should contact the headquarters office of the firm in question.
From the time Congress created it in 1970 through December 2004, the Securities Investor Protection Corporation (http://www.sipc.org) has advanced $570 million in order to make possible the recovery of $14.2 billion in assets for an estimated 624,000 investors. Although not every investor is protected by SIPC, SIPC estimates that no fewer than 99 percent of persons who are eligible have been made whole in the failed brokerage firm cases that it has handled to date.
SIPC is an important part of the overall system of investor protection in the United States. While a number of federal, self-regulatory and state securities agencies deal with cases of investment fraud, SIPC's focus is both different and narrow: Restoring funds to investors with assets in the hands of bankrupt and otherwise financially troubled brokerage firms. SIPC was not chartered by Congress to combat fraud. To read about SIPC's limited role in investor protection, go to "How SIPC Protects Investors" at http://www.sipc.org/How.aspx.
SIPC either acts as trustee or works with an independent court-appointed trustee to recover funds. The statute that created SIPC provides that customers of a failed brokerage firm receive all non-negotiable securities that are already registered in their names or in the process of being registered. At the same time, funds from the SIPC reserve are available to satisfy the remaining claims of each customer up to a maximum of $500,000. This figure includes a maximum of $100,000 on claims for cash.
CONTACT: Ailis Aaron, The Hastings Group, (703) 276-3265 or firstname.lastname@example.org.
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