Tuesday, July 3, 2012
Readers may recall that the SEC sued SIPC to force it to pay investors in Allen Stanford's Ponzi scheme. SIPC maintained it could not pay them because the investors did not lose money in a failed brokerage, the purpose of SIPA insurance, but because they purchased CDs from an Antiguan bank. Although initially the SEC agreed with SIPC's position, it subsequently changed its mind and brought this law suit. Today, the WSJ reports, a federal district court in D.C. ruled that the SEC failed to meet its burden in proving that the victims were eligible under the statute. The SIPC CEO, in a statement, emphasized that it felt its hands were tied because of narrow purpose of the statute -- to ensure custody of customer funds.