Despite this array of achievements, Rep. Kanjorski said that more needs to be done to accomplish complete SIPA reform. For example, SIPC has denied the claims of customers based on the seemingly legitimate paperwork provided to them by their brokers, yet SIPC expects customers to use those very same statements to report unauthorized trading in their accounts. This inconsistency is unacceptable, emphasized the Chair, and Congress must work to resolve it. More difficult will be legislation to address the tone at SIPC. In Rep. Kanjorski's view, investor trust, for which SIPA was designed to preserve, has been seriously eroded by SIPC’s narrow interpretations of its statutory mandate. While SIPC’s actions may follow the letter of the law, he said, many would argue that SIPC has ignored the spirit of the law. Thus, Congress must consider the best way to change the tone at SIPC and refocus this body on maintaining confidence in the financial system and promoting investor protection. To the extent possible, Congress should also explore how SIPC could learn from the success of the Federal Deposit Insurance Corporation in maintaining the public’s trust.
To address these questions and many others, SIPC has formed a modernization task force to provide Congress a comprehensive reform plan. Chairman Kanjorski expects the task force to complete its work with great transparency, considerable and to view its mission as broadly as possible.
The Chair of the SIPC Modernization Task Force is Orlon Johnson, who is also the current SIPC Chair. Convened on June 17, 2010, the Task Force consists of a wide range of experts and is in the midst of its review and consideration of possible statutory, procedural and other reforms to SIPA and SIPC. The Task Force draws its members from the ranks of state regulators, attorneys who represent investors, academia, the securities industry, a trustee in the largest insolvency in history, the Chairman of SIPC’s Chinese counterpart, and an observer from the SEC. This diversity of viewpoints is expected to result in a rigorous analysis of the issues that concern investors. According to Chairman Johnson the task force has begun its work in earnest by examining the extent of SIPA protection, the problem of “indirect” investors, the use of bankruptcy avoidance powers, and other fundamental issues of concern to investors and Congress. The task force expects to make a full set of recommendations to the 112th Congress in the first quarter of 2011.