When it comes to ensuring customers get their money back when a broker tanks from fraud or a down market, the safety offered by the Securities Investor Protection Corp. (SIPC) may have more holes than cheese, critics told a Senate hearing Wednesday.

Republican Sen. David Vitter of Louisiana charged that most victims who ask SIPC for restitution come away empty-handed with their retirement savings gone.

“When push comes to shove, SIPC will deny their claims for customer protection,” he said. “Only the lucky few who can find their way into a court with the right kind of experience in these complex transactions has any hope of relief.”

By law if a brokerage fails, SIPC is supposed to get investors back up to $500,000 in securities and cash.

Sigmund Wissner-Gross, an attorney who has battled the agency in court (often unsuccessfully) for retail investors, said financial advisors should warn customers they can take little comfort in the SIPC “Good Housekeeping Seal of Approval” logo that appears often on broker letterheads, websites, e-mails and water bottles.

“If I was an advisor, I’d tell clients to be leery of investments where the broker is selling some non-traditional form of investment to the client, since SIPC only covers very specific types of investments,” Wissner-Gross said.

He also said customers should be warned never to loan money to a broker-dealer because SIPC only covers losses from securities clients have bought.

It was SIPC’s successful contention in court that it did not owe any money to the reported 28,000 investors bilked out of more than $7 billion from jailed financier Allen Stanford. That was because the money was technically given to him as loans rather than to purchase securities.

Wissner-Gross noted that he had to fight tooth and nail, several years before Stanford’s downfall in 2009, to get money from SIPC for hundreds of investors defrauded by another Ponzi scheme. That one was operated by a Long Island broker who told investors the money would go into mutual funds or into what turned out to be a nonexistent money market fund. One of the investors was a Holocaust survivor.

“Even after ‘customer’ status was recognized, the SIPC-appointed trustee vigorously fought individual customers on establishing their losses,” said Wissner-Gross. “The defrauded customers were bewildered and frustrated that, at every step of the way, we had to battle the trustee.”

Angela Shaw, director and founder of the Stanford Victims Coalition and the director of the Alliance for Investor Protection, said simply that advisors should warn clients the investor protection from SIPC does not exist.

J.W. Verret, a prominent conservative academic who recently served as chief economist for Jeb Hensarling, chairman of the U.S. House of Representatives’ Financial Services Committee, said a warning label should accompany the ubiquitous SIPC logo everywhere it appears.

“This label would warn customers SIPC coverage only applies under limited circumstances, and SIPC reserves the right to deny claims despite reasonable expectations of coverage,” said Verret, who is also a law professor at George Mason University.

The root of the problem, argue many critics, is that SIPC is beholden to member brokerages that pay into a pool. The more money SIPC pays out, the more the brokers would have to pay in. Brokerages currently pay it one-quarter of 1 percent of net operating revenue.

The alleged greater interest of SIPC to keep assessments low rather than to reimburse harmed investors is a thumb on the scale in favor of the brokers for trustees, argued Vitter.

He added that SIPC trusteeships count for a large portion of the business of some law firms the agency uses multiple times. The trustees know that if they approve generous payouts, SIPC is unlikely to use them again, he said.

At the Senate hearing, Vitter took aim at SIPC President and CEO Stephen Harbeck, who defended the agency’s record by saying all retail customers of Lehman Brothers were paid in full after the 2008 bankruptcy of the company that triggered the financial crisis.

He added that every investor who had $975,000 or less with legendary fraudster Bernard Madoff has received every cent back and those who invested more have recovered 48 cents out of every dollar originally entrusted to him.

When Vitter repeatedly asked Harbeck what the agency could do to prevent brokerage failures from fraud, mismanagement and market declines, the CEO responded that SIPC is not a regulator.