WASHINGTON (Reuters) - A senator is calling on federal securities regulators to take legal action against a brokerage industry-backed fund for failing to cover claims for the victims of Allen Stanford's alleged Ponzi scheme.
Republican Senator David Vitter, a Senate Banking Committee member, said that the Securities and Exchange Commission needs to compel the Securities Investor Protection Corp to take action because victims have now been waiting since Stanford's arrest in 2009 for a resolution.
"Sue SIPC on behalf of the Stanford victims now," the Louisiana lawmaker said in a statement after discussing his concerns publicly during a congressional hearing.
Stanford, 61, was arrested in 2009 and faces a 14-count criminal indictment over an alleged $7 billion scheme linked to certificates of deposit issued by his Antigua-based bank. The SEC has also filed civil charges against him.
Investigators accused the one-time billionaire of using Ponzi scheme proceeds to fund other ventures and a lavish lifestyle that included several yachts, private jets, and homes around the world. Stanford has denied wrongdoing.
SIPC, which handles claims for investors if their brokerage fails, had previously said in 2009 that it did not believe Stanford victims who bought certificates of deposit through the U.S. brokerage arm of Stanford's company were eligible to receive compensation because the customers, rather than the brokerage, held custody of the CDs.
After two years of mulling it over, however the SEC rejected SIPC's argument in June and issued a statement that called on SIPC to institute a liquidation proceeding.
In that statement, the SEC said it would be forced to file a court action if SIPC did not comply.
SIPC's board met on September 15 to review the matter, but has still not taken any action and remains in talks with the SEC.
Spokespeople for the SEC and SIPC both declined to comment on Vitter's statement.
(Reporting by Sarah N. Lynch, editing by Dave Zimmerman)