WASHINGTON (Reuters) - Securities regulators said on Friday they would appeal a federal judge's ruling rejecting their request for an industry-backed fund to start a court proceeding that could help compensate the victims of Allen Stanford's $7 billion Ponzi scheme.
The Securities and Exchange Commission announced its decision in a filing in federal district court in Washington, D.C., on Friday.
"We believe investors who bought Stanford CDs through the Stanford broker-dealer are protected under the law and therefore should at least be able to present their claims for relief in a court of law," SEC spokesman John Nester said.
"That is why we are appealing the lower court ruling and seeking an order compelling SIPC to begin a proceeding."
The SEC is trying to force the Securities Investor Protection Corp to start liquidation proceedings for the victims, some of whom lost millions of dollars in the fraud.
In July, a federal judge rejected the plea, saying the agency had not met its legal burden to show why SIPC should be compelled to act.
SIPC, which has handled high-profile liquidations such as Bernard Madoff's Ponzi scheme, contended that Stanford's offshore bank fell outside the scope of its authority.
It argued that the law limits it to protecting customers against the loss of missing cash or securities in the custody of failing or insolvent SIPC-member brokerages.
Allen Stanford was sentenced in June to 110 years in prison for bilking investors with fraudulent certificates of deposit issued by Stanford International Bank, his bank in Antigua.
"We will defend our position and the court's opinion," said Stephen Harbeck, the president and CEO of SIPC. "We just think that the SEC is attempting to require us to provide a guarantee of the value of a certificate of deposit issued by an off-shore bank, and that is not what our statutory mission is."
"Our mission is to protect the custody function that brokerage firms perform," he added.
The decision to appeal the judge's ruling will tee up a precedent-setting case for the SEC, which until now has never taken legal action against the industry-backed fund in its 42-year history.
Since 2009, when Stanford was first arrested and charged, victims of the fraud have been fighting for SIPC to start a liquidation proceeding in the hope of getting back at least some of the funds they lost.
In a brokerage liquidation, a trustee winds down the business, returns securities and other assets to customers and creditors, and often tries to recover additional assets. The goal is to maximize what customers and creditors recover, and distribute assets fairly.
(Reporting by Sarah N. Lynch; Editing by Gary Hill)
No comments:
Post a Comment