Stanford Victims might get SIPC
April 27, 2011
The Securities Investor Protection Corp. (SIPC) - touted as a backstop against brokerage losses - can not longer refuse to cover losses
by investors in financier Allen Stanford's alleged $7 billion fraud.
People believe their money is protected by SIPC - and they are right!
SIPC is a non-profit corporation funded by its members -- securities broker-dealers -- whose clients get some insurance against loss.
SIPC makes good when a brokerage fails.
Literature for the Antigua-based Stanford International Bank, through which Stanford is accused of selling billions of dollars worth of
bogus, high-yielding certificates of deposit, bore the SIPC logo, generally regarded as a seal of approval for financial institutions.
Under U.S. law, SIPC repays up to $500,000 in custodial losses to investors whose securities are missing from accounts at member firms.
The protection doesn’t extend to investors who’ve got their certificates, even if the securities have been rendered worthless by
fraudulent conduct. However the declaration
of the forensic accountant Karyl Van Tassel, found that money that was supposed to buy certificates of deposit at Stanford's Antiguan
bank was diverted for other purposes.
The 50+ members of Congress who signed the letter to the SEC
We are aware of several issues the SEC staff has raised with respect to whether Stanford Victims qualify for SIPC coverage. It is our
understanding that SEC counsel has informally stated that SGC customers are not eligible for SIPC coverage at this time because (1) SGC
was merely an introducing broker-dealer, and (2) SIPC is not meant to compensate customers of worthless securities. Before making a
formal decision, we request the SEC consider the facts set forth in the Declaration of Karyl Van Tassel (attached hereto as
"Exhibit A"),
which illustrates how the funds for SGC were generally routed to continue Stanford’s fraudulent business practices, rather then
purchasing securities. Read the complete letter here!
Mary L. Schapiro’s response
I assure you that the SEC is taking the situation of the Stanford Victims Coalition ("SVC") members, and all other Stanford victims,
very seriously, and is investigating closely their status under SIPA. Commission staff, which has already devoted substantial time and
effort on this issue, is striving to complete, as soon as possible, its investigation and review of the relevant facts relating to the
Stanford case with a view to determining whether a legal basis exists for a SIPA liquidation of SGC.
Read the complete letter here!
Missing or Worthless
Some investors’ lawyers complain SIPC is splitting hairs by limiting coverage to securities that are "missing" instead of rendered
worthless by fraud.
"The Madoff clients’ securities were never there, so SIPC covers that loss and has been paying like slot machines," Stanley, who
represents Stanford investors, said in an interview. Based on the declaration of the forensic accountant Karyl Van Tassel, Stanford
investors should also be covered by SIPC.
Both Ways
"The SEC can’t have it both ways," Malouf said (who represents mostly Latin American investors). "They’re taking my clients’ money and
using it to pay non-bank debts. If it is all one company, then there couldn’t have been any CDs purchased from a separate independent
bank."
If the SEC believes that "all the Stanford universe is one consolidated entity," Malouf said, then Stanford’s Antiguan certificates of
deposit "are exactly what SIPC covers, fraud." In previous
similar cases, non-member affiliate companies were also granted with SIPC cover.
SEC spokesman Kevin Callahan declined to comment when asked to clarify the agency’s position on whether Stanford’s businesses should be
treated as a consolidated entity.
READER DISCUSSION
SIVG reserves the right to delete comments that are off-topic or offensive. Excessively long comments may be moderated as well. SIVG cannot facilitate requests to remove comments or explain individual moderation decisions. The comments posted here, express only the views of their authors and not the administrators/moderators from SIVG; for that reason SIVG won't be held responsible for those contents
Showing 0 comments...