SEC rejects Madoff claim; investor may sue

Phyllis Molchatsky, who asked the Securities and Exchange Commission to pay $1.7 million in damages resulting from the Madoff fraud, was turned down, according to a report by Reuters today. She had filed the administrative claim soon after Madoff was arrested.

Her attorney, Howard Elisofon, confirmed that her claim was rejected and said he would hold a news conference today to announce future plans. He said that since her claim has been rejected, she now has six months to decide whether or not to sue for damages in federal court. Legal experts called the claim novel because the doctrine of sovereign immunity historically has limited the type of cases that could be brought against the SEC and other federal agencies.