SEC sues insurance group over Stanford investors

AP News
Posted: Dec 12, 2011 9:46 PM
SEC sues insurance group over Stanford investors

The federal government has sued the organization that insures brokerage accounts to compel it to compensate many investors who lost money in the $7.2 billion Ponzi scheme allegedly run by Texas financier R. Allen Stanford.

The Securities and Exchange Commission filed the lawsuit in federal court Monday against the Securities Investor Protection Corp., which runs an industry-funded reserve fund that protects customers of failed brokerage firms. It was the first time the federal agency has sued SIPC.

SIPC has maintained that Stanford investors weren't eligible for such compensation because they bought certificates of deposit issued by a bank.

The bank was owned by Stanford, who was indicted by a federal grand jury in 2009. He disputes the charges and is scheduled for trial in January. SIPC spokesmen couldn't be reached.