WASHINGTON, D.C. – U.S. Sen. Thad Cochran (R-Miss.) has asked the acting chair of the agency that denied compensation to Stanford ponzi scheme victims to explain those actions.
Cochran, ranking member on the Senate Agriculture Committee, has submitted questions regarding the Stanford case to Sharon Y. Bowen, the acting chair of the Securities Investor Protection Corporation (SIPC). Bowen, nominated for a seat on the Commodity Futures Trading Commission (CFTC), appeared with two other CFTC nominees at a confirmation hearing last week before the Agriculture Committee.
“The Commodity Futures Trading Commission is an important part of the regulatory framework that protects American farmers, ranchers and businesses, which depend on it to ensure sound markets,” Cochran said. “To that end, I want to know how potential members of the Commission view their role in managing abuses that lead to investor losses or dealing with situations like the Stanford ponzi scheme that harmed investors in Mississippi and many other states.”
In questions submitted to Bowen, Cochran asked the nominee to describe her involvement in the decision by SIPC to deny compensation to the more than 7,000 victims from 46 states, including Mississippi, who lost more than $7.0 billion in the Stanford ponzi scheme.
“Despite the fact that the Securities and Exchange Commission concluded that victims of the alleged ponzi scheme are entitled to receive SIPC coverage for their losses, SIPC declined to cover these losses,” Cochran explained. “I’m interested in learning how the nominee’s leadership at SIPC and the board’s decision on Stanford will translate to service on the CFTC.”
In 2012, Cochran was among 14 senators who signed a letter encouraging the SEC to appeal the U.S. district court decision, which determined victims of the Stanford fraud cannot be compensated through the SIPC, despite the fact it was specifically established to recoup losses, within certain limits, from bankrupt or financially-troubled brokerages. The SEC appeal is still pending.
Cochran has also cosponsored the Restoring Main Street Investor Protection and Confidence Act of 2013 (S.1725) to reform how SIPC handles investment fraud victims’ compensation cases. The legislation would amend the Securities Investor Protection Act (SIPA) of 1970 to confirm that a customer’s net equity claim is based on the customer’s last statement and that certain recoveries are prohibited, among other things. It would also allow many individuals to receive greater equity as victims of fraud, economize U.S. securities markets for all classes of investors, and strengthen the oversight and accountability of SIPC. It has been referred to the Senate Committee on Banking, Housing, and Urban Affairs.