SIPC to Review SEC Direction on Stanford Liquidation
WASHINGTON, June 15, 2011 /PRNewswire/ -- The Securities Investor Protection Corporation ("SIPC"), which maintains a special reserve fund mandated by Congress to protect the customers of insolvent brokerage firms, said that it will analyze the referral provided today by the U.S. Securities and Exchange Commission ("SEC") with respect to the Stanford Group Company, operated by Robert Allen Stanford.
On February 17, 2009, the SEC filed an action in the U.S. District Court for the Northern District of Texas alleging that Stanford orchestrated an $8 billion fraud based on false promises of guaranteed returns related to certificates of deposit ("CDs") issued by the Antiguan-based Stanford International Bank ("SIB"). The SEC's Complaint alleged that SIB sold approximately $7.2 billion of CDs to investors by promising returns that were "improbable, if not impossible." Complaint, SEC v. Stanford International Bank, Ltd., et al., Case No. 3-09CV0298-L (N.D. Tex. filed February 17, 2009).
In response to the SEC's request for emergency relief, the Court immediately issued a temporary restraining order, froze the defendants' assets, and appointed a receiver to marshal those assets. The SEC filed a second amended complaint on June 19, 2009, alleging that Stanford conducted a Ponzi scheme.
SIPC President and CEO Stephen Harbeck said that SIPC would take the SEC's referral in the Stanford case under advisement before deciding how to proceed. He indicated that a decision would be forthcoming in the near future.
Harbeck said: "SIPC's Board will review the referral, and analyze the SEC's underlying documentation as quickly as possible."
The SEC's referral of this matter this week is the first time the SEC has informed SIPC of the possibility that the Stanford matter is appropriate for a proceeding under the Securities Investor Protection Act ("SIPA").
The Securities Investor Protection Corporation is the U.S. investor's first line of defense in the event a brokerage firm fails, owing customers cash and securities that are missing from customer accounts. SIPC either acts as trustee or works with an independent court-appointed trustee in a brokerage insolvency case to recover funds.
The statute that created SIPC provides that customers of a failed brokerage firm receive all non-negotiable securities -- such as stocks or bonds -- that are already registered in their names or in the process of being registered. At the same time, funds from the SIPC reserve are available to satisfy the remaining claims for customer cash and/or securities custodied with the broker for up to a maximum of $500,000 per customer. This figure includes a maximum of $250,000 on claims for cash. From the time Congress created it in 1970 through December 2010, SIPC has advanced $ 1.6 billion in order to make possible the recovery of $109.3 billion in assets for an estimated 739,000 investors.
MEDIA CONTACT: Ailis Aaron Wolf, (703) 276-3265 or email@example.com.
All investor inquiries of SIPC should be directed to firstname.lastname@example.org or (202) 371-8300.
SOURCE Securities Investor Protection Corporation, Washington, D.C.