The Securities Investor Protection Corp.’s main purpose is to help
investors recover securities and lost funds when those losses occur as
the result of an insolvent or bankrupt broker-dealer. SIPC protection
also covers investors whom have suffered losses as the result of
unauthorized trading. Unfortunately, as many defrauded investors (like those defrauded in the
Stanford Ponzi scheme) have come to find out, the Corp. doesn’t protect investors cheated
out of their savings via other methods of investment fraud or broker misconduct.
Worse, it doesn’t always offer protection against bankruptcy or
Take Peregrine Financial Group Inc. for example. The SIPC recently told
the firm’s futures customers that they were ineligible for repayment
through the Corp.’s program. The bad news came one day after Peregrine
filed for Chapter 7 bankruptcy due to
allegations that the firm and its founder misappropriated at least $200 million in
investor funds. Despite the fact that SIPC coverage is meant to protect
investors from exactly this type of financial failure,
the fund’s chief insists that Peregrine’s customers aren’t
eligible for coverage because Peregrine’s futures business was separate from the affiliated
registered broker-dealer firm.
Regrettably for any investors whose funds were misappropriated by the futures
business and/or its founder, there’s little investors can do to
challenge the SIPC’s decision.
Thankfully, however, there is another option for investors who wish to
recover losses: securities arbitration.
Depending on the details of the case, a securities arbitration attorney
may be able to help investors recover funds lost due to broker misconduct
and investment fraud. If you feel you’ve been defrauded by Peregrine
Financial Group Inc. or any other financial firm, contact one of our experienced
investment fraud lawyers today for your free legal consultation.