While District Judge Robert Wilkins noted that he was "truly sympathetic to the plight" of these victims in the Stanford Ponzi scheme case, he also noted that the plain language of the law does not allow compensation from the Securities Investor Protection Corp. (SIPC), according to a Wall Street Journal commentary today. The SIPC 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 does not 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 cannot help them, according to the commentary, just as it does not refund money to investors who buy shares before a company goes bankrupt. The SEC was seeking to force SIPC to assist thousands of victims defrauded by R. Allen Stanford, but was rejected by Judge Wilkins last week.
