The Securities Investor Protection Corp. is asking the U.S. District Court for the District of Columbia to reject the SEC’s request for an order that would make it pay back the victim of Texas financier R. Allen Stanford’s $7 Billion Ponzi scam. The brokerage industry-funded nonprofit claims that the Commission has not demonstrated that these investors are eligible to receive this type of coverage from SIPC.
Standing by SIPC is the National Association of Independent Broker/Dealers. The group wrote a letter to SEC Chairman Mary Schapiro contending that forcing the nonprofit to pay back Stanford’s victims is not only a “misfit solution,” but also, it will establish an “unsustainable precedent.”
The SEC’s securities lawsuit against SIPC is an attempt to force a brokerage’s liquidation, which is the first step that SIPC must take under the Securities Investor Protection Act to pay back the clients of its member firms. SIPC, however, has refused to do so on the grounds that Stanford International Bank, which is based in Antigua, is not one if its member firms. Stanford International Bank is the financial firm that issued the more than $7.2 billion CDs that were sold to investors. (It is Stanford Group Co. that belongs to SIPC.) The CDs now have no value.
SIPC possesses a reserve fund that it uses to pay back investors for losses sustained from brokerage firm failure. Clients that are covered can get up to $500,000 back. Earlier last month, the SEC scored a partial victory when a district court judge ruled that the federal agency doesn’t have to go to trial to compel SIPC to begin liquidation proceedings.
Meantime, the Stanford International Victims Group is also seeking recovery under SIPA. This coalition is made up of non-US citizens that also suffered losses because of the Stanford Ponzi scam. In a victim statement made to the DC district court, the group noted that many of Stanford’s victims placed their life savings with the Stanford entities because they had faith in US legal regulations.
Should the SEC win its securities lawsuit against SIPC, a Texas court would be responsible for ruling on claims submitted by the ex-Stanford clients. Some 21,000 individual claims are likely.
Please contact our Texas securities fraud law firm if you suffered losses because of the Ponzi scam. Shepherd Smith Edwards and Kantas, LTD, LLP represents investors throughout the state, the US, as well as clients abroad with claims against US-based financial firms.
In the criminal trial against Stanford, a federal judge has told the jurors to keep deliberating after they were unable to arrive at a unanimous verdict on all 14 criminal counts that were filed against the former billionaire. Some of the charges against Stanford include obstructing an SEC investigation, money laundering, bribing a bank regulator in Antigua, wire fraud, mail fraud, and conspiracy to commit a number of the crimes.
Judge to Divided Stanford Jury: Keep Deliberating, Wall Street Journal, March 5, 2012
More Blog Posts:
SEC Sues SIPC Over R. Allen Stanford Ponzi Payouts, Stockbroker Fraud Blog, December 20, 2011
SEC and SIPC Go to Court to Over Whether SIPA Protects Stanford Ponzi Fraud Investors, Stockbroker Fraud Blog, February 6, 2012