Source: Loren Steffy (Chron.com)
MF Global, the international commodities trading firm run by former Goldman Sachs executive and New Jersey Gov. Jon Corzine, filed for bankruptcy Monday after a series of bad bets on European bonds. Within hours, the Securities Investor Protection Corp. swooped in, filing an application in federal court to appoint a trustee and calling for the firm to be liquidated to protect investors.
In making the filing, SIPC chairman Orlan Johnson said:
When the customers of a failed SIPC member brokerage firm have left their securities in the custody of that firm, SIPC acts as quickly as possible to protect those customers. In this case, SIPC initiated the liquidation proceeding within hours of being notified by the [Securities and Exchange Commission] that a SIPC case was necessary to protect the investing public.
Which all sounds very speedy and efficient, and which is no doubt welcomed by MF Global’s customers. But the speed and efficiency with which SIPC responded to MF Global’s demise stands in stark contrast to its handling of the Stanford Financial case.
As I’ve written before, customers of Stanford’s SIPC-insured brokerage waited more than two years for the SEC to notify SIPC of the need to protect investors, and since that notification this summer, SIPC’s board has been dragging its feet. While it considered the issue at a September board meeting, there’s been no word since then, and Stanford’s U.S. brokerage customers remain in the dark.
The Stanford case was, of course, more difficult. The money investors lost was in the form of certificates of deposit backed by Stanford’s offshore bank that the brokerage peddled to its customers. But neither the SEC nor SIPC has acted “as quickly as possible.” As we approach the third anniversary of Stanford’s demise, it’s way past time for SIPC to make good on its obligations to Stanford’s victims.
Showing posts with label Daniel Sibears. Show all posts
Showing posts with label Daniel Sibears. Show all posts
Wednesday, 2 November 2011
Monday, 17 August 2009
Stanford Regulators Admit Not Pursuing '03 Fraud Claim
The industry self-regulatory organization that was supposed to police the brokers at the Stanford Financial Group acknowledges that a Stanford employee alleged in 2003 that the company was running a Ponzi scheme, but the organization did not follow up on the claim based of its own policy, which has since been changed.
The disclosure comes in testimony from Daniel Sibears, Executive Vice President of the Financial Industry Regulatory Authority, FINRA, prepared for a Senate Banking Committee hearing on Monday.
In 2003, Stanford advisor Leyla Wydler alleged in an arbitration case that the company was "engaged in a Ponzi scheme to defraud its clients."
Wydler lost the arbitration case, and FINRA is now acknowledging that her allegations of fraud were never passed on to investigators by the FINRA arbitration panel. Sibears' testimony said that prior to this year, FINRA procedure was to review fraud claims in arbitrations involving customers, but not those that involved employment disputes like Leyla Wydler's.
"This was based on an assessment that customer claims were most likely to evidence misconduct leading to investor harm," the testimony says.
Sibears insists in the testimony that "FINRA reviews every customer complaint and regulatory tip it receives." Nontheless, he acknowledged, the procedure involving employment disputes was changed in March of this year. The change came less than a month after the Securities and Exchange Commission sued Stanford, alleging an $8 billion Ponzi scheme.
Sibears' testimony claimed that even if the agency had followed up on Wydler's allegations, it likely would have run into barriers from regulators in Antigua, home of Stanford's offshore bank, where he says officials were less than cooperative in investigating subsequent tips.
After she lost the arbitration in 2004, Wydler brought her concerns to the Securities and Exchange Commission, which launched a formal investigation the following year. But the SEC did not sue Stanford until this year. The agency says it, too, was thwarted by Antiguan regulators, and added the nation's chief financial regulator to its complaint in June.
Hundreds of people attended the Banking Committee hearing, which was held in Baton Rouge, LA, home to a large concentration of Stanford investors. They have complained that regulators were slow to catch the alleged fraud, which affected some 28,000 investors.
The disclosure comes in testimony from Daniel Sibears, Executive Vice President of the Financial Industry Regulatory Authority, FINRA, prepared for a Senate Banking Committee hearing on Monday.
In 2003, Stanford advisor Leyla Wydler alleged in an arbitration case that the company was "engaged in a Ponzi scheme to defraud its clients."
Wydler lost the arbitration case, and FINRA is now acknowledging that her allegations of fraud were never passed on to investigators by the FINRA arbitration panel. Sibears' testimony said that prior to this year, FINRA procedure was to review fraud claims in arbitrations involving customers, but not those that involved employment disputes like Leyla Wydler's.
"This was based on an assessment that customer claims were most likely to evidence misconduct leading to investor harm," the testimony says.
Sibears insists in the testimony that "FINRA reviews every customer complaint and regulatory tip it receives." Nontheless, he acknowledged, the procedure involving employment disputes was changed in March of this year. The change came less than a month after the Securities and Exchange Commission sued Stanford, alleging an $8 billion Ponzi scheme.
Sibears' testimony claimed that even if the agency had followed up on Wydler's allegations, it likely would have run into barriers from regulators in Antigua, home of Stanford's offshore bank, where he says officials were less than cooperative in investigating subsequent tips.
After she lost the arbitration in 2004, Wydler brought her concerns to the Securities and Exchange Commission, which launched a formal investigation the following year. But the SEC did not sue Stanford until this year. The agency says it, too, was thwarted by Antiguan regulators, and added the nation's chief financial regulator to its complaint in June.
Hundreds of people attended the Banking Committee hearing, which was held in Baton Rouge, LA, home to a large concentration of Stanford investors. They have complained that regulators were slow to catch the alleged fraud, which affected some 28,000 investors.