Let’s talk about our find yours topic for today: how to recover unclaimed money from a brokerage firm that went out of business.
It turns out there is a little-known agency that handles these cases called the SIPC or Securities Investor Protection Corporation. It’s kind of like the FDIC of brokerage firms, insuring customers’ accounts in the event the firm goes out of business.
The SIPC was established specifically to deal with cases where brokerage firms go under after a rash of bankruptcies in the 1960s. The SIPC liquidates and distributes failed firms’ assets, returning them to customers. The SIPC can’t protect you if your portfolio lost value, but it does protect you if the company went out of business and never gave you back your portfolio.
First the SIPC uses the brokerage firms own assets to return customers’ money. If that’s not enough, the SIPC taps into its own reserves to repay investors. In fact, the SIPC provides something similar to an insurance policy of up to $500,000 for securities held for customers by a failed brokerage firm.
Little known fact: Even victims of the Bernie Madoff Ponzi scheme got much of their money back through the SIPC… 11 billion of the 17 billion lost.
Other brokerage firms the SIPC has taken over to get money back to customers include:
•Lehman brothers, which famously went out of business during the 2008 financial meltdown.
•MF Global Inc, which went under in 2011and was the 8th largest insolvency in brokerage firm history.
•Westor Capital Group declared bankruptcy in 2013 and those proceedings are still ongoing.
•In 2016, Global Arena Capital Corp went out of business but claimed not to owe any customers money. The SIPC took Global Arena to court, victims testified, and the SIPC won the case and took over the firm’s assets.
•In 2017, there was Legend Securities.
Normally the SIPC takes over a failed brokerage firm’s paperwork, including lists of customers and mails out claim forms, but the system isn’t perfect and THIS is where I can help with some info: If your brokerage firm went bankrupt and was insured by the SIPC, you can be proactive and REQUEST a claim form. Here is the page for all open SIPC cases, which is where you need to go to start the process.
