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Thursday, July 5, 2012
SEC Loses Bid to Force SIPC Coverage for Stanford Investors
By Carla Main - Jul 5, 2012
The Securities Investor Protection Corp. isn’t required to begin a claims process in Texas for the victims of R. Allen Stanford’s $7 billion investment fraud, a federal judge ruled.
U.S. District Judge Robert Wilkins in Washington July 3 said that regulators failed to show that the 7,000 brokerage clients who invested in the Ponzi scheme are entitled to have their losses covered by SIPC, a nonprofit corporation funded by the brokerage industry.
Wilkins, while expressing sympathy for the victims, declined to order the relief.
The Securities and Exchange Commission told SIPC on June 15, 2001, to start a process that could grant as much as $500,000 for each Stanford client -- the same maximum amount it offers in any case. After SIPC balked, the SEC for the first time sued the congressionally chartered group.
SIPC argued in court there’s no basis to require it to guarantee investments with an entity that isn’t a member, such as Antigua-based Stanford International Bank Ltd.
A federal jury in Houston convicted Stanford on March 8 on 13 of 14 charges brought in connection with the Ponzi scheme. He was sentenced on June 14 to 110 years in prison.
John Nester, an SEC spokesman, didn’t immediately respond to a telephone message seeking comment on the ruling.
The case is Securities and Exchange Commission v. Securities Investor Protection Corp., 11-mc-00678, U.S. District Court, District of Columbia (Washington).