The Securities Investor Protection Corporation (SIPC) had its origins in the difficult years of 1968-70, when the paperwork crunch, brought on by unexpectedly high trading volume, was followed by a very severe decline in stock prices. Hundreds of broker-dealers were merged, acquired or simply went out of business. Some were unable to meet their obligations to customers and went bankrupt. Public confidence in the U.S. securities markets was in jeopardy.
Congress acted swiftly, passing the Securities Investor Protection Act of 1970, 15 U.S.C. § 78aaa et seq. (SIPA). SIPA's purpose is to protect customers against certain types of loss resulting from broker-dealer failure and, thereby, to promote investor confidence in the nation’s securities markets.
Present DayWithout SIPC, investors at financially troubled brokerage firms might lose their securities or money forever. Although not every investor or transaction is protected by SIPC, no fewer than 99 percent of persons who are eligible get their investments back with the help of SIPC. From its creation by Congress in 1970, SIPC advanced $3.6 billion in order to make possible the recovery of $143.8 billion in assets for an estimated 773,000 investors.
The Trustee for the Bernard L. Madoff Investment Securities LLC liquidation had recovered $14.556 billion, and distributed nearly $14.33 billion. Any customer with a net asset value of up to approximately $1.705 million was made whole. Customers with larger claims have received over 70.704% of the net amount entrusted to the Madoff firm.
By the closing of Lehman Brothers, Inc., the Trustee achieved a 100% distribution to LBI’s customers consisting of $105.7 billion distributed to more than 111,000 customers through the account transfer and customer claims processes. The Trustee also recovered and distributed $9.7 billion to general unsecured claimants representing a recovery rate of approximately 41% on general unsecured claims.
