The Securities Investor Protection Corp., an industry fund that covers losses from brokerage firm failures, must compensate victims of Allen Stanford’s $7 billion Ponzi scheme because they were customers of a U.S.-based brokerage, a government lawyer told an appeals court, Bloomberg News reported yesterday. “We’re not claiming that anyone is covered who did not have a brokerage account” with Houston-based Stanford Group Co., U.S. Securities and Exchange Commission attorney John Avery told a panel of the U.S. Court of Appeals yesterday. “That’s how they got sucked into this scheme.” The SEC is seeking to overturn a lower court ruling that blocked the agency from ordering SIPC to cover the Stanford victims, who invested in phony certificates of deposit. U.S. District Judge Robert Wilkins in July 2012 ruled the SEC had failed to show the 7,000 investors in the scheme met the definition of “customer” under the Securities Investor Protection Act, which set up the nonprofit fund run by the brokerage industry.
