A day after U.S. Sen. David Vitter put a hold on President Obama's nomination of two new Securities and Exchange Commission members, victims of Allen Stanford's alleged Ponzi scheme scored a major victory.
The Securities and Exchange Commission Wednesday concluded that Stanford victims, like those of Bernie Madoff, should be compensated by the Securities Investor Protection Corp., which handles claims for investors if their brokerage firm fails. The long-awaited decision came after a two-year battle that started with an SIPC opinion that Stanford victims were not eligible to file claims. It also came a day afer U.S. Sen. David Vitter put a hold on two SEC member nominations.
In its decision, the SEC said people who bought so-called certificates of deposit through the Stanford Group Co., Stanford's U.S. brokerage arm, are entitled to protection by SIPC. The SEC said it would formally ask SIPC to institute a liquidation proceeding that would allow claims to be filed.
Allen Stanford is awaiting trial on charges he defrauded $7 billion from investors, about $1 billion of which came from investors in South Louisiana (there are 1,800 Stanford victims in the state), including a significant number from the Lafayette area.
Though its Wednesday recommendation is a major victory for Stanford's victims, the SEC's Stanford problems are far from over, as local investors have sued the regulatory agency, alleging negligence and misconduct.
In announcing his intentions to block the SEC nominations Tuesday, Vitter said: "Unfortunately, the SEC has not yet given the Stanford victims an answer despite my repeated conversations with Chairwoman Mary Schapiro. Many of these folks in Louisiana and along the Gulf region lost their life savings, and they at least deserve a direct answer on their request for coverage. After months of delay the commission has now met a number of times to consider SIPC coverage for Stanford's victims. It would be salt in the wound of these victims for Congress to force those discussions to start over by approving new commissioners.
"We've known for some time that the SEC waited far too long to take action against Allen Stanford, and now they're dragging their feet in responding to the victims," Vitter continued. "I will continue to hold them accountable including holding these nominations until these fraud victims get an up-or-down answer from the SEC on SIPC so they can move forward in the process, and if necessary, file a judicial appeal."
SIPC said it is analyzing the SEC's recommendation and indicated it would make a decision soon.