Judge Protects Taxpayers From Incompetent SEC
This story must have slipped through the crack in Jon Corzine's prison-soap nightmare.
The porn-addled SEC blew the Stanford case in the face of multiple internal warnings, and typically, they respond in face-saving fashion by trying to steal billions from taxpayers to cover losses for Stanford investors, who do not qualify for reimbursement under government guidelines. Countdown for the SEC to petition the White House to circumvent the ruling starts now...
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The SEC loses its attempt to raid Securities Investor Protection Corporation (SIPC) funds in the Stanford case.
Before Americans lose too much respect for the federal judiciary, they might consider Judge Robert Wilkins, who last week affirmed that the taxpayer safety net around financial services still has limits. Judge Wilkins is a 2010 Obama appointee to the U.S. District Court for the District of Columbia. He rejected an effort by the Securities and Exchange Commission to turn a modest federal insurance program into a boundless compensation scheme for defrauded and disappointed investors.
The SEC was seeking to force the government-created Securities Investor Protection Corporation (SIPC) to assist thousands of victims defrauded by R. Allen Stanford. Stanford was recently sentenced to 110 years in prison for operating a $7 billion Ponzi scheme.
While Judge Wilkins noted that he was "truly sympathetic to the plight" of these victims, he also noted that the plain language of the law does not allow compensation from SIPC. This program, which collects insurance premiums from the securities industry, only covers investors in cases when assets disappear from their accounts at participating U.S. brokerages. If assets are still in the accounts but turn out to be worth nothing, SIPC doesn't cover the loss. If customers decide to take a flier on certificates of deposit issued by a bank in Antigua, as the Stanford victims tragically did, SIPC can't help them, just as it doesn't refund money to investors who buy shares before a company goes bankrupt.
The SEC, as SIPC's overseer, must know all this. But the SEC wants to deflect attention from its own failure to stop Stanford, even after the agency's examiners had raised red flags since the 1990s.
SIPC is an insurance program funded by industry premiums, but everyone knows where SIPC would look for help if it is forced to make payouts beyond its resources. Judge Wilkins has done a service to investors by reminding them that they cannot count on government to protect them all or even most of the time.
Jul 9, 2012 at 2:44 PM
Reader Comments (6)
http://www.businessweek.com/ap/2012-07-03/judge-rejects-sec-in-suit-for-stanford-investors
more on the judge...
http://cryptome.org/2012/08/sec083012.htm
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67725; File No. 4-652]
Technology and Trading Roundtable
AGENCY: Securities and Exchange Commission.
ACTION: Notice of roundtable discussion; request for comment.
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SUMMARY: The Securities and Exchange Commission will host a one day
roundtable entitled ``Technology and Trading: Promoting Stability in
Today's Markets'' to discuss ways to promote stability in markets that
rely on highly automated systems. The roundtable will focus on the
relationship between the operational stability and integrity of our
securities market and the ways in which market participants design,
implement, and manage complex and inter-connected trading technologies.
The roundtable discussion will be held in the multi-purpose room of
the Securities and Exchange Commission headquarters at 100 F Street
NE., in Washington, DC on September 14, 2012 from 10 a.m. to
approximately 4 p.m. The public is invited to observe the roundtable
discussion. Seating will be available on a first-come, first-served
basis. The roundtable discussion also will be available via webcast on
the Commission's Web site at www.sec.gov.
The roundtable will consist of two panels. The morning panel will
focus on error prevention--where technology experts will discuss
current best practices and practical constraints for creating,
deploying, and operating mission-critical systems, including those that
are used to automatically generate and route orders, match trades,
confirm transactions, and disseminate data. The afternoon panel will
focus on error response--where panelists will discuss how the market
might employ independent filters, objective tests, and other real-time
processes or crisis-management procedures to detect, limit, and
possibly terminate erroneous market activities when they do occur,
thereby limiting the impact of such errors.
DATES: The roundtable discussion will take place on September 14, 2012.
The Commission will accept comments