Pointing to recent Congressional testimony by SEC Chairman Mary Schapiro on July 14th, a Madoff victim group called the BernardMadoffVictims.org says that it is now clear that SIPC is a "mere façade" and is underfunded because SIPC and the SEC failed to charge the securities industry a realistic price for SIPC insurance.

In her testimony before the House of Representatives Committee on Financial Services, Subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises, Schapiro was asked by Congressman Gary Ackerman of New York, "[w]hich investors are eligible for their SIPC insurance?" Schapiro responded that "[i]t shouldn't be such a difficult issue but it is. The tragic truth is there is not enough money available to pay off all the customer claims."

Ronnie Sue Ambrosino, the Coordinator of

BernardMadoffVictims.org, says that Schapiro's testimony finally explains why former Madoff investors have not received up to $500,000 from SIPC based upon their November 30, 2008 statements, as required, the group argues, under the Securities Investor Protection Act ("SIPA"). She says it also explains why the SEC and SIPC have

invent[ed] a totally new definition of "net equity" which limits investors to recovering their net investment, rather than the balance on their last statement. Thus, an investor who invested $100,000 in 1996 and had a last account statement (dated November 30, 2008) showing a value of $800,000 would only get $100,000 from SIPC. Under SIPA's clear language, and under 38 years of SIPC's compliance with SIPA, that investor is entitled to a claim of $800,000 and to $500,000 in SIPC insurance.

The BernardMadoffVictims.org Coalition argues that they received trade confirmations (albeit false ones) for every security they believed was bought and sold by the Madoff's broker/dealer, and each such document confirmed that Madoff was a member of SIPC. Thus investors were entitled to believe that their accounts were protected up to $500,000.

Ambrosino further argues that this admitted lack of funding is not the investors' responsibility, and that under the SIPA, the SEC has a statutory obligation to assure that SIPC borrows sufficient funds to pay off the obligations to all Madoff investors immediately. She says that as of July 9, however, SIPC has paid only 561 out of more than 15,000 clams. The Trustee's website indicates that number has since risen to 747.