Kanjorski: SIPA Coverage Should Be Extended to Investment Advisors’ Clients

Rep. Paul Kanjorski, D-Pa., chairman of the House Financial Services Subcommittee on Capital Markets said Thursday that Congress should consider expanding the Securities Investor Protection Act’s coverage to investment advisors’ clients, as investment advisors “may also commit fraud.”

Kanjorski made his comments as the subcommittee explored SIPA’s limitations, a law designed to return money and securities to the customers of failed brokerages. The Securities Investor Protection Corp. (SIPC) is the entity charged with implementing SIPA.

To better protect the customers of failed brokerages going forward, Kanjorski said in his opening remarks that the Dodd-Frank Act increases cash protection limits and bolsters the resources of the reserve fund used to replace customers’ missing cash and securities. Dodd-Frank also “quintuples penalties for misrepresentations of membership in or protections offered by the Securities Investor Protection Corp. Moreover, the statute makes important changes to prevent, rather than simply replace, the loss of customer property, including new custody safeguards for customer assets held by certain financial professionals.”