Columnist: SIPC is ‘essentially a sham’

In response to Tuesday’s ruling by U.S. District Judge Robert Wilkins that victims of R. Allen Stanford’s $7 billion Ponzi scheme aren’t eligible for reimbursement of their losses by the Securities Investor Protection Corporation, Houston Chronicle columnist Loren Steffy says, “The message to all investors is clear: SIPC is essentially a sham.” In his ruling, Wilkins says Stanford investors actually deposited money in the bank, where the CDs they purchased were held. While Stanford’s brokerage firm was an SIPC member, the bank wasn’t, and therefore investors aren’t entitled to any coverage. The Securities and Exchange Commission triggered the legal battle about a year ago when it ordered the SIPC to cover Stanford victims and pay clients—as they did the victims of the Ponzi scheme perpetuated by Bernie Madoff. In other words, Steffy says, Wilkins’ ruling means the SIPC “may pay in some cases, if you are fleeced in just the right way, as Bernie Madoff’s clients were, but not if you’re ripped off in others.” That makes the SIPC little more than “a cover for crooked brokers,” Steffy says. “Sadly, for Stanford’s victims, this is just more of the same. Every protection and safety net has failed them—regulators, the brokerage industry, banking commissions and even the bankruptcy process. Any recovery they receive will be pennies on the dollar.” Read the full column and see the judge’s complete ruling here.