By NEMS Daily Journal
WASHINGTON, D.C. – The Securities Investor Protection Corp. told a U.S. judge that federal law prevents it from setting up a claims process for the victims of R. Allen Stanford’s alleged investment fraud, Bloomberg News reports.
SIPC, a nonprofit corporation funded by the brokerage industry, said in a court filing Thursday that there is no basis to require it to guarantee investments with an entity that isn’t a member, in this case Antigua-based Stanford International Bank Ltd.
The Securities Investor Protection Act “does not even permit, much less require, the initiation of a liquidation for purchasers of the offshore bank certificates of deposit at issue here,” Bloomberg reported that SIPC said in the filing in U.S. District Court in Washington.
U.S. District Judge Robert Wilkins last week told SIPC to explain why it shouldn’t be ordered to start a liquidation proceeding in federal court in Texas to handle more than $1 billion in possible claims tied to Stanford’s alleged fraud.
At issue is whether more than 7,000 brokerage customers who invested in the alleged $7.2 billion Ponzi scheme run by Stanford are entitled to have their losses covered by SIPC.
In June, the Securities and Exchange Commission told SIPC 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.