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In This Issue
Cover Story
Mending the Seams:
Financial Crisis Points to Need for
International Regulatory Reform

Features
Independent Research:
Salvation in the Middle Market

A Watershed Moment:
Calculating the Risks of
Impending Water Shortages

Investing in Troubled Times:
Entrepreneurs Are Your Safest Bet

Team of Rivals:
Can Corporate America and Academia Reconcile Their Worldviews and Work Together?

Departments
From the
Executive Director
Providing Continuity and Diversity

Letters to the Editor

Hot Zones
Ignorance Is Not Bliss:
The Dangers of Taking a
Set-It-and-Forget-It Approach
to Target-Date Funds

Hot Zones
The Seat Belt Problem:
A New Approach to Calculating
Risk-Adjusted Returns

Hot Zones
Advance Your Advisory Practice:
Steps for Implementing the RIA Business Model

Worldview
Shifting Sands:
Egypt Delivers Impressive
Results—But With Risks

Education for Practice
The Problem of Loss:
A Primer on Value at Risk

Education for Practice
Calculating Solvency:
Creating a Z-Score Calculator
on Your PDA

Education for Practice
Sounder Grounds for Prediction:
Deriving a Forward-Looking
Equity Market Risk Premium

Careers
The Sustainability Education Gap:
How Business Programs Fail (and Succeed) at Integrating Sustainability

Careers
Landing a Government Job:
Public-Sector Careers Offer
Security in Tough Times

Case Study
Revisiting StoneRidge:
Congress Could Restore
Aiders’ and Abettors’ Liability

Interview
Picking Up the Pieces:
Stephen Harbeck and Irving Picard
on the Lehman and Madoff Cases

Book Reviews
Extending the Canon:
New Titles

Final Analysis
Two Cartoons

Interview

Picking Up the Pieces
Stephen Harbeck and Irving Picard On The Lehman and Madoff Cases
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A Peek Inside the SIPC (Securities Investor Protection Corporation)

Founded on December 30, 1970, through the passage of the Securities Investor Protection Act, the SIPC is not a governmental agency but rather a nonprofit membership organization of broker-dealers and members of national exchanges.

• Scope of Services: To afford certain protections against losses to customers resulting from failures of broker-dealers.
• Board of Directors: A seven-member board of directors governs SIPC policies and operations. Five members are appointed by the president and approved by the Senate; three of those five represent the securities industry, and two are from the general public. For the other two directors, one is appointed by the Treasury secretary, and another by the Federal Reserve Board of Governors.
• Interactions with Regulators: The SEC and FINRA report broker-dealers in or approaching financial challenges to the SIPC. The SIPC, in turn, forwards the names of principals and associated persons for whom proceedings have been issued to the SEC and self-regulatory organizations to review for potential violations of the law.
• Coverage Limits: Current limits are set at $500,000 per customer, with cash claims limited to $100,000. Of the 625,100 claims that were fully or substantially satisfied as of December 31, 2008, only 350 (less than 0.06%) were for cash/securities with values over the SIPC limits.
• The SIPC’s Fund: The fund is maintained through fluctuating annual membership assessments plus interest on government securities. If the SIPC fund runs short of money, the SEC is authorized to loan the SIPC up to $1 billion (borrowed from the US Treasury).
• Membership: US law mandates that all broker-dealers join and pay annual assessments. As of April 1, 2009, the assessment level is one-fourth of 1% of annual operating revenue. Before that it was $150 per broker-dealer.
• Settling Claims: Once a broker-dealer fails and the SIPC institutes a customer-protection proceeding, the organization can pay claims directly or apply to a federal district court to appoint a trustee to conduct a liquidation.