SIPC now covers ponzi schemes?

[Pa(b)st Prime]

To the best of my knowledge this wasn't a hedge fund. These were managed accounts-in fact Madoff's agreement didn't even involve incentive fees-it was all commission based.

FYI: The SIPC isn't taxpayer funded.

Quote from swtrader:

under existing regs, i dont see how SIPC can cover this

hedge funds have high entry requirements for investors, and low requirements for the funds themselves

kind of 'you're all rich folks, gambling money you can afford to lose, and it's all between yourselves'

but then again, they're pretty much making it up as they go along this year, no reg said AIG gets 150 bill either

so the taxpayer is probably fucked, sending a welfare check to palm beach

 

[Anaconda]

Quote from Pa(b)st Prime:


FYI: The SIPC isn't taxpayer funded.

At the end of the day, it is. They don't have the money to cover this, never have and never will. Hence, more treasuries issued to cover their obligations, more dollars printed. The taxpayer and then some are footing the bill, via inflation tax. You included.

 

[AAA30]

I have no idea about the SIPC rules but what about the fund of funds and institutional accounts since these are not technically private individuals they would not be covered by SIPC. right? If it is true I would think that the Liability for SPIC would be a very small portion of the total.

 

[swtrader]

Quote from Pa(b)st Prime:

To the best of my knowledge this wasn't a hedge fund. These were managed accounts-in fact Madoff's agreement didn't even involve incentive fees-it was all commission based.

FYI: The SIPC isn't taxpayer funded.

ooooooh, that's right

no taxpayer money ever bails out wall street

 

[michaelfmorgan]

SIPC covers losses due to fraud by the broker. Of course, 100K/500k limits apply. SIPC comes into picture only when a brokerage enters liquidation. Lets say someone hacks into your account & committs fraud. There is no SIPC involvment in that case.

From SIPC's website :


How claims are valued. Typically, when SIPC asks a court to put a troubled brokerage firm in liquidation, the financial worth of a customer’s account is calculated as of the “filing date.” Wherever possible, the actual stocks and other securities owned by a customer are returned to him or her. To accomplish this, SIPC’s reserve funds will be used, if necessary, to purchase replacement securities (such as stocks) in the open market. It is always possible that market changes or fraud at the failed brokerage firm (or elsewhere) will result in the returned securities having lost some – or even all – of their value. In other cases, the securities may have increased in value.

 

[Landis82]

Fraud or "theft" is covered by the SIPC as long as it is in a brokerage account, like one at Madoff Securities, LLC.

I'm not so sure about the people who invested their money in Madoff's Investment Advisory Service. I believe that they are up the "creek" without a "paddle".

Also, the "Clawback" provision states that anyone who liquidated their funds out of Madoff's Investment Advisory Service in the last 6 years, and one day, will have to return the funds due to the fact that the NAV was fictitious.

It's a lose, lose, all the way around.

 

[Angrycat]

Quote from Anaconda:

At the end of the day, it is. They don't have the money to cover this, never have and never will. Hence, more treasuries issued to cover their obligations, more dollars printed. The taxpayer and then some are footing the bill, via inflation tax. You included.

And if that's not enough, just wait until foreign governments refuse to buy more treasuries for bailouts or demand a higher interest rate as government spending crowds out private investment and the GDP continues to fall. Then, we'll be facing a currency crisis and dreaming of getting our inflation rate down as low as it was in the 70's.

 

[Pa(b)st Prime]

Quote from Anaconda:

At the end of the day, it is. They don't have the money to cover this, never have and never will. Hence, more treasuries issued to cover their obligations, more dollars printed. The taxpayer and then some are footing the bill, via inflation tax. You included.

This is a minor, minor hit to the SIPC if they get involved.

It's not like Madoff had thousands of insured accounts. Even if he had 200 accounts that each get back 100k that's only 20mil.

 

[IanMacQuaide]

Quote from Landis82:

Fraud or "theft" is covered by the SIPC as long as it is in a brokerage account, like one at Madoff Securities, LLC.

I'm not so sure about the people who invested their money in Madoff's Investment Advisory Service. I believe that they are up the "creek" without a "paddle".

Also, the "Clawback" provision states that anyone who liquidated their funds out of Madoff's Investment Advisory Service in the last 6 years, and one day, will have to return the funds due to the fact that the NAV was fictitious.

It's a lose, lose, all the way around.

This "Clawback" provision....just doesn't look right.
Those invested with MIAS could sure make a "Good Faith" argument, especially the charities.
I've never heard or read of this "Clawback" being enforced on innocent parties, and 6 yrs back?

If a Fed. district judge could really enforce this "Clawback" proviso with teeth in it and threw innocent parties in the pokie till they paid up, what happens to those who spent it?
I've never heard or read of a man in a Federal Penitentiary for having spent investment profits in an investment scheme that went bad w/out his complicity or knowledge.
Have you?