David Becker ought to resign his post as SEC General Counsel before you even have the chance to read this.

Both SIPC and Mr. Picard, the trustee for the Madoff estate, have proposed that the customers who withdrew funds before the fraud was uncovered should be allowed to keep only as much money as they put in. Initially, the full commission agreed and approved that approach in early 2009, according to the two people briefed on the discussions.

Mr. Becker joined the commission in February that year. By spring, he began meeting with lawyers for Madoff customers seeking a different formula. They wanted to let longer-term investors keep more money than those who had money with Mr. Madoff for shorter periods. Mr. Becker apparently dismissed arguments that investors were entitled to the amounts Mr. Madoff had listed on their final statements.

In the summer of 2009, Mr. Becker did reverse the commission’s earlier decision, however. His legal staff came up with a new proposal to reflect the length of time the money was invested, and the commissioners approved it at the end of the year. Some at the agency who worked with SIPC expressed dissent about the change, according to the people briefed on the deliberations.

Stephen P. Harbeck, the chief executive of SIPC, confirmed that his investor protection unit and the S.E.C. had initially agreed that victims should be able to keep only the money they had originally put into the Madoff firm. “Then they refined their opinion,” he said on Monday, referring to the S.E.C. He said that he did not know who had pushed for the change.

The S.E.C.’s definition, Mr. Harbeck said, would benefit anyone who withdrew more money from their Madoff accounts than they had put in. Mr. Becker’s family would be among them.

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This entry was posted on Wednesday, March 9th, 2011 at 10:47 am.