The Stanford Victims Coalition, a loose coalition of aggrieved investors in the Stanford Financial Group and Stanford International Bank (SIB), has petitioned the US Congress for investor protection under the SIPC insurance program.
More than $1.5bn of cash held in so-called certificate of deposit accounts at SIB remain frozen as receivers Ralph Janvey (in the US corner) and Nigel Hamilton-Smith (on the Antiguan end), work through the process of identifying assets held by the fractal web of companies. This has not gone down well with the holders of the accounts, which have been frozen since February.
Ordinarily, depositors at offshore banks (like SIB) do not qualify for any kind of US-driven protection in the event of failure or fraud. The argument of the Stanford investors, however, is that since US regulators were to blame for failing to heed numerous red-flags, Stanford account holders should be compensated. (The coalition also hold the Antiguan government and the island’s financial regulators “partly responsible for any investment losses.”)
- From the petition:
Despite regulatory negligence and inadequate inter-government communications, SIPC insurance has thus far been denied to Stanford victims. Stanford Group was an active SIPC member and the CDs were sold as SIPC insured. The SIPC logo was on Stanford Group broker business cards, marketing materials and other documents the SEC and FINRA monitored.The Stanford Victims Coalition requests SIPC insurance be extended to the cover the CD losses. Barring this, the victims request the creation of a federal investment fraud insurance program to restitute the losses that were incurred under the SEC and FINRA’s jurisdiction. Hundreds of billions of dollars are being allocated to financial institutions affected by the crisis in financial markets – a situation that will not be resolved until investors are confident in the markets again. The losses incurred by investment fraud like Madoff and Stanford are a significant contributor to the fear that is paralyzing the global financial markets. A very small number in comparison to the other TARP fund allocations could go a lot further to restore confidence not only in our government, but in our financial markets.
Not sure the losses attributable to Madoff and potentially to Sir Allen’s companies are quite so “significant” a contributor to the global financial crisis as the coalition maintains, but we see their point.
The counterpoint to which, of course, is caveat emptor – especially when goods for sale are market-busting accounts located at a bank in Antigua, where a banking license only costs $15,000 a year.
Source: http://ftalphaville.ft.com/blog/2009/04/27/55199/frozen-out-stanford-investors-petition-congress/
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