Answer:The Securities Investor Protection Corp.’s main purpose is to help investors recover securities and lost funds when those losses occur as the result of an insolvent or bankrupt broker-dealer. SIPC protection also covers investors whom have suffered losses as the result of unauthorized trading. Unfortunately, as many defrauded investors (like those defrauded in the Stanford Ponzi scheme) have come to find out, the Corp. doesn’t protect investors cheated out of their savings via other methods of investment fraud or broker misconduct. Worse, it doesn’t always offer protection against bankruptcy or insolvency either.
Take Peregrine Financial Group Inc. for example. The SIPC recently told the firm’s futures customers that they were ineligible for repayment through the Corp.’s program. The bad news came one day after Peregrine filed for Chapter 7 bankruptcy due to allegations that the firm and its founder misappropriated at least $200 million in investor funds. Despite the fact that SIPC coverage is meant to protect investors from exactly this type of financial failure, the fund’s chief insists that Peregrine’s customers aren’t eligible for coverage because Peregrine’s futures business was separate from the affiliated registered broker-dealer firm.
Regrettably for any investors whose funds were misappropriated by the futures business and/or its founder, there’s little investors can do to challenge the SIPC’s decision.
Depending on the details of the case, a securities arbitration attorney may be able to help investors recover funds lost due to broker misconduct and investment fraud. If you feel you’ve been defrauded by Peregrine Financial Group Inc. or any other financial firm, contact one of our experienced investment fraud lawyers today for your free legal consultation.