A picture of Representative Scott Garrett
Scott G.
Republican NJ 5

About Rep. Scott
  • Financial Victimization

    by Representative Scott Garrett

    Posted on 2014-12-11

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    GARRETT of new jersey in the house of representatives Thursday, December 11, 2014 Mr. GARRETT. Mr. Speaker, for approximately the past six years, innocent customers of three failed broker-dealers--the securities firms of Bernie Madoff, Allan Stanford, and McGill, Smith, have been unfairly victimized time and time again despite the existence of remedial legislation enacted by Congress for the specific purpose of protecting such customers.

    Initially these customers were victimized by the nefarious fraudsters, whose Ponzi schemes caused the failure of several securities firms and resulted in financial devastation for so many. Next, these customers were victimized by the Securities Investor Protection [[Page E1828]] Corporation (SIPC) and their henchmen, whose antics, behavior, and positions were the antithesis of investor protection--financial self interest and preservation clearly appeared to be their guiding mantra. Finally, when SIPC sought the Court's blessing for its wrongful conduct and breach of trust, the court's bizarre deference to SIPC and their blatant misapplication of the Securities Investor Protection Act (SIPA) resulted in a perverted process and erroneous interpretations of SIPA, which, further victimized these customers by depriving them of the financial protections and benefits mandated by SIPA and exposed them to draconian claw-back lawsuits seeking to strip them of what few remaining assets they might still possess.

    Examples abound supporting these conclusions. If someone walked into a securities firm and purchased a stock or a bond, who would believe that such a person would not be considered a ``customer'' and would be denied basic Congressionally created customer protections? Why would a customer of a failed securities house, one who had no knowledge of a Ponzi scheme operated by the broker-dealer, be subjected to costly litigation to defend the returns their account statements told them they had earned from their investments? Why would a customer of a broker-dealer receive a monthly ``account statement'', purporting to evidence their financial position at the firm, and later the parties charged with protecting the rights of those customers be allowed to disregard those statements and eliminate all stated returns in the account? And who could have ever anticipated that this same entity would elect to adopt a ``valuation'' methodology patently designed to provide the lowest values to the customers in order to maximize its own bank accounts and resources? While these results seem fanciful and far fetched, they are the realities that innocent customers of these three broker dealers have had to endure.

    While the courts are charged with the responsibility of interpreting statutes, that function properly involves determining Congressional intent. If, as here, the Courts have misinterpreted that intent, it is then the role of Congress to reaffirm what it actually meant and to clarify how Congress meant to achieve the desired results. Thus the Garrett-Maloney bill is not an attempt to rewrite SIPA retroactively. Rather it is intended to reaffirm what Congress meant all along--the protection of innocent customers who have been defrauded by a dishonest broker-dealer.

    When Congress reconvenes in January, we will expeditiously address these important issues--victims have been victimized for too long. Victims will receive what they are due. Victims who had no actual knowledge of the frauds will be extricated from the harassing ``claw back'' lawsuits. Much progress was made on these issues during the past two years--numerous hearings were held and support for the Garrett- Maloney bill is now robust and bipartisan. Addressing these issues, and providing appropriate remedies for the victims, will be a top priority in January, indeed an urgent one.


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