Washington, D.C., August 10, 2000 - The Securities Investor Protection Corporation (SIPC), which maintains a special reserve fund authorized by Congress to help investors at bankrupt brokerage firms, announced today that it is acting as trustee on behalf of individual investors and pension funds hit by the theft of at least $1 million at the Tallahassee-brokerage firm Meridian Asset Management, Inc.

The SIPC action was part of the late July filing by the U.S. Securities and Exchange Commission (SEC) of a complaint and consent to permanent injunction against Meridian and its president. Under the terms, the firm and its top officer consented to the appointment of SIPC as a trustee in the case, an asset freeze, disgorgement of ill-gotten gains, civil money penalty and other relief.

Based on an investigation by the SEC and the Florida Office of the Comptroller, Meridian's president was found to have misappropriated at least $1 million and created fictitious accounts to cover up the theft. Two firms doing business with Meridian were found to have improperly received at least $120,000 in stolen customer funds.

"This is a classic illustration of why Congress created SIPC in order to protect investors at bankrupt brokerage firms," said SIPC President Michael Don. "While this type of fraud is relatively rare, it is important for investors to know that SIPC is here as a safety net when they need us."

On June 20, 2000, SIPC announced a record payment of $31 million to restore stocks and cash that 9,738 investors lost due to theft at Sunpoint Securities, a Longview, Texas-based firm. Investors in all of the 50 states received SIPC reserve funds in the Sunpoint case.

Since 1970, SIPC has advanced $354 million in order to make possible the recovery of $3.3 billion in assets for an estimated 440,000 investors. SIPC estimates that more than 99 percent of eligible investors have been made whole in the failed brokerage firm cases that it has handled to date. In the Sunpoint case, only two individuals out of the 9,738 affected accounts expressed any objections to the manner in which their accounts were transferred.

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. The Securities Investor Protection Corporation was not chartered by Congress to combat fraud.

SIPC either acts as trustee or works with an independent court-appointed trustee in a fraud case to recover funds. The statute that created SIPC rules 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.

Recovered funds are used to pay investors whose claims exceed SIPC's protection limit of $500,000. SIPC often draws down its reserve to aid investors. Recovered funds also are used to replenish SIPC's reserve in the event that the reserve is tapped in the early stages of a liquidation proceeding.