Friday 13 May 2011

SEC to Release Findings on Stanford Investors SIPC Eligibility

The U.S. Securities and Exchange Commission, criticized for missing R. Allen Stanford's alleged $7 billion fraud, said it will decide "in the near future" whether victims should collect federal brokerage insurance.

The SEC has devoted "substantial time and effort" to determine whether the Securities Investor Protection Corp. erred in denying investors coverage, Robert Khuzami, the enforcement director, and Carlo di Florio, chief of inspections, said in prepared remarks for a hearing today of the House Financial Services Committee.

Investors, lawmakers and the SEC's inspector general have faulted the agency for ignoring warnings from its own examiners as far back as 1997. Stanford, 61, was indicted in June 2009 on 21 criminal charges as he was accused of misleading investors about the safety and oversight of certificates of deposit issued by his Antigua-based Stanford International Bank Ltd. Stanford denies the allegations.

Julie Preuitt, an SEC employee who worked on an examination of Stanford's business in 1997, said she was reprimanded after alerting supervisors to possible fraud and pushing for a more thorough investigation.

"I paid a heavy price for complaining," Preuitt said in prepared testimony. "At times I was not only ignored, but was actively rebuffed in my attempts to perform at a fully functioning level."

Inspector General H. David Kotz recommended in a report last year that the SEC consider taking disciplinary action against two managers in the Fort Worth, Texas, office who punished Preuitt.

According to Preuitt, that hasn't happened.

"The commission has failed to discipline anyone, at least not visibly, nor has there been any effort made to restore me to a position with similar duties and responsibilities to the one held before," Preuitt said.

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