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Investor Protection Act to Set New Limitations on Internet Service Providers
On November 4, 2009, the U.S. House Financial Services Committee approved the Investor Protection Act (U.S. House of Representatives Bill) by a vote of 41-28 in an attempt to prevent Internet scam artists from posing as legitimate brokerage firms and falsely claiming that they are members of the Securities Investor Protection Corporation (“SIPC”). The SIPC is a government-linked corporation that restores funds to investors with assets in the accounts of bankrupt or otherwise financially troubled brokerage firms. Only investor accounts opened with members of the SIPC qualify for protection. The Bill proposes to create a positive duty on Internet Service Providers (“ISPs”) to block Internet access to websites that contain such misrepresentations and to further hold ISPs liable for not taking appropriate measures to block such websites.
Critics of the Bill question its efficacy as “most Internet providers simply don’t have a good way to block access to any electronic ‘material’ containing fake SIPC data.” ISPs run the risk of facing civil penalties and injunctions notwithstanding the fact that blocking access to such websites may not be technically feasible. The Representative who introduced the Bill, Rep. Paul Kanjorski, declared that he was open to modifying the language of the Bill to reflect industry concerns.
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