By Patsy Brumfield/NEMS Daily Journal
WASHINGTON, D.C. – A March 5 hearing may clarify whether some defrauded Stanford investors can be repaid by the Securities Investor Protection Corp.
U.S. District Judge Robert L. Wilkins in Washington set the conference in response to a push by the U.S. Securities and Exchange Commission to help former investors of R. Allen Stanford’s bank in Antigua.
The SEC started the equivalent of a lawsuit in December aimed at forcing SIPC to take over the liquidation of Stanford’s brokerage firm, Stanford Group Co.
SIPC insists its fund can’t be used to pay Stanford’s victims because the fraud involved certificates of deposit not issued by a broker in the U.S. that’s a member of SIPC. SIPC also contended no “customers” exist because no one gave money or securities to the Stanford broker for the purpose of safekeeping or sale.
The SEC claims SIPC coverage should apply for some of the losses because the Stanford brokerage and bank in Antigua “were operated in such a highly interconnected manner that deposits of cash with (the bank) to purchase fraudulent CDs should be deemed deposits of cash” with the brokerage.
The SEC argues that SIPC coverage doesn’t need to be crystal clear. In the commission’s opinion, “probable cause” is enough to believe there are “customers” covered by SIPC protection.
Wilkins previously said that if he decides the SIPC fund might be used to pay victims in part, he will send the case to a Texas district court to preside over what would then be a SIPC liquidation.
Stanford is on trial in Houston, Texas, facing criminal charges in the alleged Ponzi scheme on investors.
In 2009 at the SEC’s request, a Dallas, Texas, federal judge appointed a receiver to oversee liquidation of Stanford assets.