7/29/2019 Richard Nixon: Statement on Signing the Securities Investor Protection Act of 1970.

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3/28/13 7:ichard Nixon: Statement on Signing the Securities Investor Protection Act of 1970.

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Tweet 574481 - Statement on Signing the Securities InvestorProtection Act of 1970.December 30, 1970

I AM SIGNING today the Securities Investor Protection Act of 1970. This

legislation establishes the Securities Investor Protection Corporation (SIPC),

a private nonprofit corporation, whichwill insure the securities and cash left

with brokerage firms by investors against loss from financial difficulties or

failure of such firms. Protection is provided up to an aggregate of $50,000

per account, with a limit on coverage of cash of $50,000.

In my message on economic policy and productivity on June 17, 1970, I urged

the formation of a corporation to afford protection to small investors, backed

first by industry payments and then by funds from the U.S. Treasury. The

bipartisan efforts of the Congress, the administration, and the industry have

now resulted in this legislation--a vitally important advance in the consumer-

protection field.

Just as the Federal Deposit Insurance Corporation protects the user of

banking services from the danger of bank failure, so will the SecuritiesInvestor Protection Corporation protect the user of investment services from

the danger of brokerage firm failure.

This act protects the customer, not the broker, since only the customer is paid

in the event of firm failure. It does not cover the equity risk that is always

present in stock market investment, but it will assure the investor that the

solvency of the individual firm with which he deals will not be cause for

concern. It protects the small investor, not the large investor, since there is a

limit on reimbursable losses. And it assures that the widow, the retired

couple, the small investor who have invested their life savings in securitieswill not suffer loss because of an operating failure in the mechanisms of the

marketplace.

Virtually all brokers and dealers in the securities industry will be members of

SIPC. These members will provide $75 million from assessments, trust fund

transfers, and lines of credit from commercial banks within 120 days. The

industry will continue to pay assessments based on a percentage of their gross

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7/29/2019 Richard Nixon: Statement on Signing the Securities Investor Protection Act of 1970.

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revenues unt t e un reac es 150 m on. I , contrary to expectat ons, t s un at any t m

should prove inadequate, SIPC may also call upon a $1 billion line of credit from the U.S.

Treasury. Any funds provided by the Treasury will be recovered from subsequent assessment

This legislation contains a specific statutory mandate to the Securities and Exchange

Commission to promulgate rules and regulations with respect to the financial responsibility

and related practices of brokers and dealers. The SEC is given flexibility in establishing those

rules and regulations.

The functioning of the securities industry is a key element in providing the means for

continued growth of American business and the economy of this country. Protection for the

customer is essential, and has been provided here, as in the mutual fund bill [Public Law 91-

547] which I recently signed. The Government and the industry must work together on seekin

prompt solutions to the problems of the securities business. While those problems are being

defined and resolved, the user of investment services, the small investor, will be protected.

Note: As enacted, the bill (H.R. 19333) is Public Law 91-598 (134 Stat. 1636).

Citation: Richard Nixon: "Statement on Signing the Securities Investor Protectio

Act of 1970.," December 30, 1970. Online by Gerhard Peters and John T. Woolley

The American Presidency Project. http://www.presidency.ucsb.edu/ws/?pid=287

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