A new report that calls for the U.S. securities industry contingency fund to more than double its limit on claims, and help form an international association of protection funds, along with a series of other proposed changes.
The report of the SIPC Modernization Task Force was released today, outlining 15 recommendations for the U.S. industry contingency fund, the Securities Investor Protection Corp. Among other things, the report indicates that the task force considered whether the current level of protection (US$500,000), which has not been increased since 1980, is sufficient to protect customers and instill investor confidence in the securities markets.
It concludes that the maximum claim should be increased to US$1.3 million, and that the amount should be indexed to inflation. “Increasing the level of protection while continuing to index the amount to inflation furthers the important objective of modernizing SIPA,” it says.
The report also recommends the creation of a new international association of investor protection funds. It notes that the China Securities Investor Protection Fund has been leading international cooperation between contingency funds, and that it has urged SIPC and the Canadian Investor Protection Fund to join with it “to create a new entity to deal exclusively with investor protection in the context of financial intermediary failure.”
It says that an international association could help to forge relationships between protection funds, and could facilitate the exchange of information, allowing closer collaboration, and could be helpful in cross-border liquidations. It suggests that such an association may be affiliated with an existing international securities or insolvency association (such as IOSCO) or be a completely stand-alone entity.
The SIPC Modernization Task Force was created in June 2010 to review the operations of SIPC and to recommend changes. Its recommendations are now in the hands of the SIPC board.
SIPC chairman, Orlan Johnson, who served as chairman of the task force, said that the board will consider the recommendations after reviewing all appropriate materials and commissioning any further empirical analysis it deems necessary. Johnson added that some of the recommendations would require Congressional action, some could be implemented by rulemaking, and some of them don’t need legislation or rulemaking.