March 14, 2011, 9:27PM
Agencies failed
It has been more than two years since 1,290 Texans lost their life savings in the R. Allen Stanford debacle. Many of the victims were teachers, nurses and firefighters, and these losses reflect most, if not all, of the retirement funds they accumulated over many years of hard work. These Texans relied on the Securities Exchange Commission (SEC) to uphold its federal mandate to protect investors, and despite numerous warnings about Stanford Financial over several years, the SEC failed to act on behalf of investors.
In 2010, SEC Inspector General David Kotz revealed the SEC was aware as early as 1997 that Stanford investors’ funds were in jeopardy of being stolen. It wasn’t until 2004 — seven years after the SEC first became aware of problems at Stanford — that it opened an official investigation. By the time the SEC took action in this case, it was too late for the Stanford victims who had lost virtually everything.
To make matters worse, the Stanford investors were customers of Stanford Group Co. (SGC), a broker-dealer that was a member of the Securities Investor Protection Corp.(SIPC). SIPC allowed SGC to use its seal for brochures, promotional materials and correspondence to give investors additional confidence. “Member SIPC” was adorned on its correspondences to investors, yet to date SIPC, which is under SEC authority, has refused to provide any remedy for Stanford victims. Customers of the Stanford broker dealer have been denied coverage, despite previous cases where investors in similar situations were covered. Skip Swingle, a victim of SGC, aptly warned, “I don’t think it’s just Stanford victims that should be concerned about what’s going on, but everybody.”
On Monday I sent a letter to SEC Chairman Mary Schapiro asking again for an expedited review of this issue. No one can restore all that these victims lost. We cannot replace the trust that was violated, nor can we say that this fraud won’t happen again. What the SEC and SIPC can and should do is live up to the mandate of encouraging investment by establishing customer confidence. If they do not, brokerage firms across the country might reconsider the placement of the SIPC seal, and investors will see it as a symbol of caution, not protection.
— U.S. REP. JOHN CULBERSON,
7th Congressional District of Texas
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