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FOR IMMEDIATE RELEASE

Mar. 2, 2010

NIAP TO COURT: TRUSTEE METHODS CONTRADICTING CONGRESSIONAL INTENT

The Network for Investor Action and Protection filed an Amicus Brief with the Second Circuit Court of
Appeals telling the court that the methods employed by the Securities Investor Protection Corp. Trustee
on the Madoff liquidation run directly counter to Congressional intent, are devastating to victims, and
threaten investor protections.

The brief was filed ahead of Thursday’s appellate court hearing on the Trustee’s so-called cash-in/cash-
out (CICO) method for determining a broker-dealer customer’s net equity. The brief states that should the
ruling be upheld following the hearing, it holds dramatic consequences for the investing public, who will no
longer be able to rely on their account statements to determine their net equity with a broker-dealer. The
SIPA law was written to provide confidence in the financial markets, and the Trustee’s method will
threaten that confidence.

“The goal of the Securities Investor Protection Act (SIPA) is to protect investors, especially small ones,
and to provide them with insurance,” the brief states. “Yet the CICO method of determining net equity has
devastated investors, particularly small ones.”

Innocent Madoff victims with a negative net equity, according to the Trustee’s unprecedented method of
calculating it, will be afforded no SIPC protection and in many cases are being sued by the Trustee, an
action that has never before been taken in a SIPC bankruptcy against innocent investors. Attorneys for
Madoff victims, for SIPC, for the Trustee and for the Securities and Exchange Commission will present
cases at the hearing.

Congress has taken note of the Trustee’s undermining of SIPA law. Congressman Scott Garrett (R-NJ)
introduced a bill last month—HR-757, Equitable Treatment of Investors Act—reaffirming key aspects of
SIPA law, including:

• That the account statement, the foundation of a broker’s relationship to its customers, is an
official document and the indisputable determinant of a brokerage customer’s net equity
• That clawback of innocent individual investors will be prohibited in SIPC liquidations
• That the process of selecting a Trustee will include an additional layer of oversight, so that the
SIPC/Trustee conflict of interest is resolved; SIPC will no longer be able to select its own Trustee
for the court’s approval

“Every investor will face the possibility that the securities and money shown in his account statement do
not exist due to secret fraudulent conduct, and that, if he withdraws monies from his account in order to
live, he may be faced with a negative net equity, no payment from the SIPC fund, no share of customer
property, and clawback,” the brief says.

According to SIPC’s own disclosures, nearly two-thirds of direct Madoff victims will be denied full SIPC
protection, with over half being denied any protection at all due to the Trustee’s arbitrary method of
calculating net equity. In addition, over 1000 innocent victims are being sued, an action that has never
before been taken in a SIPC bankruptcy against innocent investors, in this case whose investments
statements showed they owned a basket of conservative stocks traded on the New York Stock Exchange.

The brief also addresses that the Trustee’s methods will reward larger, institutional investors who never
had to redeem funds from Madoff for living purposes. Innocent individuals who pulled out money for living
expenses are mostly ineligible for SIPC compensation.
About NIAP (www.investoraction,org)
The Network for Investor Action and Protection (NIAP) is a not-for-profit organization with over 1000
members. NIAP seeks to enhance protections for all investors, while pressing for relief for innocent
victims of securities frauds.

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For further information contact:

Ilene Kent
Network for Investor Action and Protection
212-787-9826
917-584-9474
ibkent@gmail.com

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