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

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

WASHINGTON, DC – December 17, 2012 – 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.”