Securities Investor Protection Corporation – Definition

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Securities Investor Protection Corporation (SIPC) Definition

The Securities Investor Protection Corporation (SIPC), is a non-profit organization that protects investors. SIPC was created upon the passage of Securities Investor Protection Act of 1970. The membership of SIPC consists of dealers and brokers under the auspices of the Securities Exchange Act of 1934 and some members of NASD (National Association of Securities Dealers). SIPC after it was created by an act of congress, has been giving protection to clients over 50 years. The Securities Investor Protection Corporation has recovered investment capital if the brokerage firms they invest in go into bankruptcy.

A Little More on What is the Securities Investor Protection Corporation

SIPC manages the liquidation of brokers or dealers who go bankrupt after investors have invested in them, despite the bankruptcy, SIPC provides insurance for their customers or investors. SIPC also intervenes when firms land in financial troubles which can lead to insolvency or when assets are mismanaged by broker-dealers.

The provisions of the Securities Investor Protection Act of 1970 stipulates that member firms of SIPC must have SIPC’s approval before entering into insolvency or bankruptcy proceedings. When this happens, SIPC focuses on retrieving the assets of investors of bankrupt or financially troubled firms. SIPC does not investigate fraud or securities crimes, it only provides coverage for investors funds held by bankrupt or insolvent firms.

References for Securities Investor Protection Corporation

Academic Research on Securities Investor Protection Corporation (SIPC)

Customer Protection from Brokerage Failures: The Securities Investor Protection Corporation and the SEC, Bloomenthal, H. S., & Salcito, D. (1982). U. Colo. L. Rev., 54, 161. Due to a high rate of financial failure and insolvency that has occurred to broker-dealers in the past, a provision was enacted to cater for and protect investors from financial failure and bankruptcy in firms. This paper examines the roles of the Securities Exchange Commission (SEC) and the Securities Investor Protection Corporation (SIPC) in customer protection from brokerage failures.  It examines the ten new liquidations proceedings contained in the Securities Investor Protection Act of 1970 and how these proceedings help in recovering investor assets from firms during brokerage failure. The role of SEC in giving investment advisory service to securities firms is also explored.

Holmes v. Securities Investor Protection Corporation: A Warning to Legitimate Business, Wolfe, W. W. (1993). U. Colo. L. Rev., 65, 659. In the paper, the Holmes versus Securities Investor Protection Corp as established by the United States Supreme Court is discussed. This approach creates a platform whereby plaintiffs of securities fraud are allowed to establish the direct and proximate causation of their injury. This paper investigates the decision of the Supreme Court as regards the Holmes versus Securities Investor Protection Corp. It examines the requirements for sellers and buyers in a Racketeer Influenced Corrupt Organizations Act (RICO) and the treatments of the Supreme Court to certain questions emanating from the requirements.In the paper, the Holmes versus Securities Investor Protection Corp as established by the United States Supreme Court is discussed. This approach creates a platform whereby plaintiffs of securities fraud are allowed to establish the direct and proximate causation of their injury. This paper investigates the decision of the Supreme Court as regards the Holmes versus Securities Investor Protection Corp. It examines the requirements for sellers and buyers in a Racketeer Influenced Corrupt Organizations Act (RICO) and the treatments of the Supreme Court to certain questions emanating from the requirements.

Holmes v. Securities Investor Protection Corporation: Proximate Cause Dims the Bright-Lines of RICO Standing, Shapiro, D. J. (1992). La. L. Rev., 53, 1911. The Racketeering Influenced Corrupt Organization Act is a federal law that was passed in 1970. This act protects investors from damages as result of accounting malpractices and corrupt financial practices in organizations. This act also allows affected persons to recover the damages sustained in any racketeering act performed by corrupt organizations. Although, RICO has a lot of advantages, it also has certain limitations which have been expressed. This paper however seeks to study the bright-lines standing of RICO in relation to Holmes versus Securities investor protection Corporation. The findings of this study are expressly presented in this paper.

The Securities Investor Protection Corporation: Problems and Prognosis, Rappaport, A., & Thompson, A. F. Despite the immense benefits of the Securities Investor Protection Corporation (SIPC) to investors, there are still some problems attributed to it. Owing to the financial failure and bankruptcy encountered by most financial institutions in 1981, SIPC was created to protect investors and help them recover their assets from firms during financial difficulty. This paper presents a projection into some of the problems and failures of SIPC. It also examines the public controversy that has been generated by the practices of the Securities Investor Protection Corporation. The failures and inadequacies of SIPC are largely explored in this paper.

Securities Investor Protection Corporation v. Barbour, Powell Jr, L. F. (1974). This paper conducts a study of the Supreme Court Case Files, it examines a petition by the Securities Investor Protection Corporation against Barbour. Barbour was a receiver for Guaranty Bond and Scurries Corp for SEC. This paper outlines how the petitioner questioned some practices of SEC and asked whether they are part of SEC’s statutory rights.   It also discusses the obligations of SIPC to customer or investors as provided in the Securities Investor Protection Act of 1970.

… INVESTOR PROTECTION ACT OF 1970 Release No. SIPA-168; September 14, 2009. In the Matter of Securities Investor Protection Corporation 805 Fifteenth Street …, Murphy, E. M. (2009). There are certain ways through which SIPC protect investors and recover their assets from firms that have entered bankruptcy or financial crisis. This may include a legal approach against firms that are not compliance to the provisions of SIPC in the protection of investors from brokerage failures. However, brokers and dealers registered under the Securities Exchange Act of 1934, all members of securities exchanges and most NASD members make up the membership of SPIC. This paper examines an order that affirmed the determination of the Securities Investor Protection Corporation (SIPC) that VPEAG is not a member of SIPC. The details of this order are presented in this paper.

The Securities Investor Protection Corporation and Madoff Fraud Litigation: Implications for Financial Institutions., SALAMEH, A. (2014). Journal of Taxation & Regulation of Financial Institutions, 27(6). A fraud litigation was issued against Madoff Ponzi scheme and this is closely monitored by the Securities Investor Protection Corporation (SIPC). In order to protect the customers or investors of the failed Madoff brokerage, SPIC filed a litigation. This article investigates how this litigation can affect financial institutions, it examines the implications of the litigation for banks and other institutions. According to investigation, this paper reveal that there is liability protection for banks or operators of feeder funds that direct client funds to failed brokerages. This paper also examines the allocation of losses among investors in ponzi schemes.

Analysis of the Underwriting, Premiums and Reserving for the Securities Investor Protection Corporation Using a Control Theory Approach, Thompson, A. F., Rappaport, A., & Zaman, M. (2012). GSTF Business Review (GBR), 1(4), 1. This paper examines the Securities Investor protection Corporation, its statutory rules, it regulations of broker-dealers and many other factors. This paper uses a control theory approach to analyse the underwriting, premiums as well as the reserving for SIPC. It also presents a detailed outlook of the underwriting and premiums of SIPC.

The Securities Investor Protection Act of 1970, Sowards, H. L., & Mofsky, J. S. (1970). Bus. Law., 26, 1271. After the Securities Investor Protection Act became a law in 1970, many scholars and financial analyst conducted diverse studies on the act, its provision and its practices. This paper presents a 1971 study of the Securities Investor Protection Act by Hugh L. Sowards and James S. Mofsky. The paper presents a background study which include the history of broker-dealers and the financial collapse in brokerage before the Act was passed into law. The existing rules, statutory regulations that guided the operations of broker-dealers before the creation of SIPC was also discussed. It presents a general study on the Securities Investor Protection Act of 1970.

Stockbroker Liquidations Under the Securities Investor Protection Act and Their Impact on Securities Transfers, Don, M. E., & Wang, J. (1990). Cardozo L. Rev., 12, 509. This paper carries out a study on stockbroker liquidations as provided under the Securities Investor Protection Act. It also investigates the impacts or downsides of stockbroker liquidations on securities transfers. However, before this paper dives into stockbroker liquidations, it discusses the enactment of SIPA in 1970 after the failures and financial crisis of broker-dealer firms and this led to the creation of SPIC. The practices and advances of SPIC that guarantee protection for inventors of bankrupt or financially trouble firms are also investigated. There are some perceived impacts of stockbroker liquidation on securities transfers, these are also discussed in this paper.

An Analysis of the Securities Investor Protection Act of 1970, Greenberg, D. M. (1970). Howard LJ, 16, 907. An analysis of the Securities Investor Protection Act of 1970 carried out by David M. Greenberg is discussed in this paper. Aside from a general discussion of SIPC this paper further discusses SIPC fund. The general assessment authority, assessment basis, ceiling and collection practiced under the Securities Investor Protection are also analysed. This paper further looks into some special problems in SIPC, how SIPC borrows. Commission loans to SIPC as well as some other vital aspects. In addition, this paper analyses customers net equities, how SIPC pay customers’ net equities as well as the liabilities and sanctions on broker-dealer firms.

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