Madoff raises investors’ insurance fees
TEXT OF STORY
Steve Chiotakis: With Bernie Madoff headed to prison, attention’s now being focused
on how bilked investors get some of their money back. Yes, brokerage firms do have insurance; it’s required. And each claimant from a failed brokerage house is entitled to up to half a million dollars. But the Securities Investor Protection Corporation, or SIPC as it’s known, is having to raise fees to ensure it has the cash on hand. Amanda Aronczyk reports.
Amanda Aronczyk: SIPC has a special reserve fund for cases like these. Except, not really. If the insurer honors all the Madoff claims, it will effectively go bankrupt. So now it’s asking its members to help out.
Steve Harbeck is president of SIPC:
Steve Harbeck: We don’t arbitrarily just raise money for the sake of raising money. We do it when it’s necessary. It is now necessary.
SIPC sent out letters recently telling members its fee will rise from $150 a year flat, to a quarter of 1 percent of brokerages’ net revenue.
Larry Hicks is president of California-based brokerage firm, Finance 500:
Larry Hicks: We’re going to be going from $150 to somewhere we’re guessing between $50,000 and $100,000. That’s quite a hike.
Every brokerage in the country is in the same position.
Hicks: If you want to be in the business, you have to participate. It’s a non-voluntary choice.
Hicks isn’t happy about paying so much money to pay for someone else’s fraud. But, he says, every brokerage in the country is required to be a member of SIPC. So it’s an unfortunate cost of doing business.
I’m Amanda Aronczyk for Marketplace.
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