SIPC: No Liquidations Of Brokerage Firms Seen As A Result Of Hurricane Sandy

Dec 17, 2012, 10:00 ET from Securities Investor Protection Corporation (SIPC), Washington, D.C.

Lessons Learned from 9/11, 'Y2K' Helped Avert Firm Shutdowns in Latest Crisis

WASHINGTON, Dec. 17, 2012 /PRNewswire-USNewswire/ -- No brokerage firms liquidations have been initiated so far as a result of Hurricane Sandy and none are expected to emerge, the Securities Investor Protection Corporation (SIPC) reported today. SIPC maintains a special reserve fund mandated by Congress to protect the customers of insolvent brokerage firms.

SIPC President Stephen Harbeck said: "Although the New York Stock Exchange was forced to close for 48 hours due to Hurricane Sandy, we have seen no brokerage firm liquidations initiated as a result of the storm.  This is thanks to the extensive preparations the financial services industry has undertaken for any and all contingencies. There are several impending studies of the financial sector's preparedness for extreme events like Hurricane Sandy, particularly those affecting operations on the ground in lower Manhattan."

Harbeck said that SIPC welcomes these studies of the backup computing capability, contingency plans, and other redundant facilities that brokerage firms have developed since  the "Y2K bug" computer issue arose in the late 1990s and the 9/11 attack on New York City.  The analysis of lessons learned in those earlier crises helped prepare the industry for another major disruption, such that resulting from Hurricane Sandy.

Harbeck added: "Even though some SIPC member firm facilities on the ground suffered a great deal of physical damage and individuals working in the brokerage community suffered through storm-battered homes, lack of electricity, transportation issues and, in some cases, injury or death, no brokerage firm was incapable of returning cash or securities as a result of this unprecedented weather event."   

SIPC is a member of the Financial and Banking Information Infrastructure Committee (FBIIC).  FBIIC's emergency protocols were activated prior to Hurricane Sandy making landfall, and continued throughout the assessment of its aftermath.   SIPC remained constantly apprised of the efforts and activities of regulatory and other related agencies to respond to the crisis, including the availability of assistance to member broker-dealers.  SIPC's facilities remained operational throughout the crisis.

On a related note, Harbeck said: "We encourage all investors to review the information made available by FINRA and several government agencies with regards to how best to avoid investment scams related to Sandy and resources available from the financial services industry to help victims, such as hardship withdrawals from retirement accounts and tax filing extensions from the Internal Revenue Service."


The Securities Investor Protection Corporation is the U.S. investor's first line of defense in the event of the failure of a brokerage firm owing customers cash and securities that are missing from customer accounts. SIPC either acts as trustee or works with an independent court-appointed trustee in a brokerage insolvency case to recover funds.

The statute that created SIPC provides that customers of a failed brokerage firm receive all non-negotiable securities - such as stocks or bonds -- that are already registered in their names or in the process of being registered. At the same time, funds from the SIPC reserve are available to satisfy the remaining claims for customer cash and/or securities held in custody with the broker for up to a maximum of $500,000 per customer. This figure includes a maximum of $250,000 on claims for cash. From the time Congress created it in 1970 through December 2010, SIPC has advanced $ 1.6 billion in order to make possible the recovery of $ 109.3 billion in assets for an estimated 739,000 investors.

All non-media/investor inquiries of SIPC should be directed to or (202) 371-8300.

SOURCE Securities Investor Protection Corporation (SIPC), Washington, D.C.