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CAPCO is an
insurance company licensed by the state of Vermont
and has received an A+ financial strength rating
from Standard and Poor's. CAPCO provides to
participating securities broker/dealers "Excess
SIPC" net equity protection for institutional
and individual clients' securities accounts.
This Excess SIPC protection is excess of the
protection provided by the Securities Investor
Protection Act ("SIPA"), which is
administered by the Securities Investor Protection
Corporation ("SIPC"). Other domestic
insurance companies that have provided Excess
SIPC protection announced in 2003 that they
would no longer offer this protection.
The Excess SIPC protection offered by CAPCO
is similar to the Excess SIPC protection that
has previously been available from the domestic
insurance market. It is intended to protect
U.S. client accounts and follows the underlying
terms of SIPA. Similar to the coverage previously
available, each client account, subject to certain
conditions and limitations, will be protected
up to its net equity for securities and cash
held in the account at the brokerage firm.
CAPCO is capitalized by its 15 member firms and has a very strong reinsurance program consisting of two monoline financial guaranty reinsurers one of which is rated AAA and one of which is rated AA by Standard and Poor's. CAPCO's rating has not been affected by the recent events in the financial guaranty insurance industry which led to the reduction in the rating of one of CAPCO's reinsurers.
The securities
broker/dealer referred to as the "Firm"
in the CAPCO Excess SIPC Surety Bond issued
to that Firm (the "Bond") may also
be referred to as "Insured" under
Bond. But it is the "Customers" of
the Firm (as "Customer" is defined
in the Bond), rather than the Firm itself, who
are the beneficiaries of CAPCO's payment obligations
under the Bond. The coverage of the Bond is
described in more detail in the answers below.
Under the
Bond, a Customer is a client of the Firm who satisfies the
definition of "Customer" set forth
in section 78lll(2) of the SIPA. Generally speaking,
this is a client who has a claim for net equity
based on securities held in an account with
the Firm in the ordinary course of the Firm's
broker/dealer business and includes a client of an introducing broker for whom the Firm clears trades on an omnibus basis, to the extent that such client is considered, under SIPA, to be a Customer of the Firm. See www.sipc.org for
more information.
No, all Customers
of the Firm are eligible for coverage under
the Bond, subject to its terms. However, the
protection does not apply to all losses. For
example, it does not apply to any loss that
arises directly or indirectly through fraudulent,
dishonest, or wrongful acts on the part of the
Customer, or through any such act in which the
Customer is implicated.
There is no
specific dollar limit to the protection that
CAPCO offers on Customer accounts. CAPCO's protection
is designed to cover the difference between
a Customer's "net equity" (as defined
by SIPA) and the total of all funds and securities
distributed to the Customer from other resources.
Therefore, you cannot receive more than the
net equity in your account. Other limitations
are contained in exclusions and conditions in
the Bond.
CAPCO has
received an A+ financial strength rating from
Standard and Poor's and is licensed to write
Excess SIPC protection by the state of Vermont.
As noted above, CAPCO is capitalized by its
15 members and has a very strong reinsurance
program (all current reinsurers are rated AAA).
There have
been very few, if any, Excess SIPC claims paid
by any insurance carrier since this type of
protection was first offered in the marketplace.
As a newly formed company, CAPCO has no experience
responding to Excess SIPC protection claims.
Accordingly, CAPCO has retained service providers
with claims experience in many other lines of
insurance to assist in the event a claim is
incurred. In order to facilitate an orderly
and timely claims process in the unlikely event
of a claim, CAPCO and its advisors have designed
a comprehensive claim form which is available
for client review on CAPCO's web site.
The Bond has
a one-year term. It can be canceled by CAPCO
if there is a change in SIPA that would affect
the coverage provided by the Bond. CAPCO must
give the Firm 90 days prior written notice before
any cancellation is effective. Current NYSE
and NASD regulations require the Firm to give
a minimum of 30 days written notice to Customers
in the event that excess SIPC coverage is canceled.
In the event that there is a material misrepresentation
in the information furnished to the Company
by the Firm in applying for the Bond, there
may be no coverage under the Bond.
Yes. Material
changes to SIPA, however, are subject to congressional
approval. If any provision of SIPA is altered
so as to affect the protection afforded by the
Bond, CAPCO has the option of accepting the
alterations, renegotiating the Bond with the
Firm, or canceling the Bond upon 90 days notice
to the Firm. See www.sipc.org
for information regarding SIPA.
Current NYSE
and NASD regulations require a minimum of 30
days written notice from a broker/dealer to
clients in the event that Excess SIPC coverage
is changing. Additionally, the Bond requires
the Firm to notify clients of the discontinuance
of coverage. It is solely the Firm's responsibility
to notify its Customers and other investors
of the cancellation of coverage, and the Firm
is required to do so, unless a succeeding company
provides similar replacement protections without
a lapse in coverage.
Yes, subject
to the terms and conditions generally applicable
to Customers.
Certain types
of assets that are not protected under SIPA,
are also not covered by Excess SIPC protection.
Among the investments that are ineligible for
SIPA protection are commodity futures contracts,
currency, and precious metals, as well as investment
contracts (such as limited partnerships) and
fixed annuity contracts that are not registered
with the U.S. Securities and Exchange Commission
under the Securities Act of 1933.
No. The Customer's
assets must first be protected by SIPA in order
to be eligible for Excess SIPC protection.
The Bond is
issued for a one-year term and requires an annual
underwriting review.
CAPCO provides
coverage for only one line of business so it
is not subject to potential losses in other
lines of insurance like multi-line insurance
companies who also sell Excess SIPC protection.
CAPCO provides net equity protection not subject
to a dollar limitation for any one account or
for liquidation of the firm in total, which
no other insurance provider currently provides.
Claims under the Bond may
be submitted as late as six months after the
underliying SIPC proceeding is closed.
CAPCO will
make payment or deliver replacement securities
promptly after all distributions are made by
the Trustee and by the Firm in connection
with the SIPA proceeding, subject to satisfaction
of all terms and conditions of the Surety Bond.
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What is the Customer Asset Protection Company
("CAPCO")?