Vitter has Bipartisan Bill to Reform Compensation Method For Investment Fraud like Stanford Ponzi Scheme Victims

Press Release

Date: Nov. 20, 2013
Location: Washington, DC

U.S. Sen. David Vitter today introduced legislation that could provide relief to the victims of the Stanford Ponzi scheme. The "Restoring Main Street Investor Protection and Confidence Act of 2013" would reform how the Securities and Exchange Commission (SEC) and the Securities Investor Protection Corporation (SIPC) go about compensation recommendations for investment fraud victims. The legislation would give more authority and flexibility to the regulators who are tasked with protecting victims of investment fraud and more authority to retrieve appropriate compensation.

"The Stanford Ponzi scheme devastated many Louisiana families who invested their hard-earned savings in good faith that it would be there for them when they retire," Vitter said. "People who invest their money with a protected investment firm need to have the confidence that our financial system won't allow for this type of fraud. Our bill will fix a key problem we've seen with the system which currently allows SIPC's Wall Street members to benefit economically from the SIPC guarantee while denying the claims of legitimate victims by ensuring SIPC is accountable to the SEC rather than its members."

For years, the SEC has concluded that victims of the alleged Stanford Group Co. Ponzi scheme are entitled to receive SIPC coverage for their losses. The SEC ruling was appealed and the SIPC board refused to compensate. In 2011, Vitter had placed a hold on the nominations of two Securities and Exchange Commissioners until the SEC made a decision, and released the hold once the SEC ruled in favor of the victims receiving SIPC coverage.

The Vitter bill would give the SEC more authority and greater flexibility to refer cases to SIPC, meaning neither a court nor any other arbiter could intervene in the referral. The bill will clarify the definition of "customer" under the Securities Investor Protection Act (SIPA) of 1970 to ensure that investors are not denied protection due to loopholes about where they initially deposited their money. SIPC has used these loopholes to prevent victims in the Stanford case from receiving protection. The definition will be expanded to include protections for investors who deposited cash with a broker-dealer for the purpose of purchasing securities, even if the investor initially deposited those funds with an entity other than the broker-dealer.

Sen. Chuck Schumer (D-N.Y.) is the lead cosponsor of Vitter's legislation. The House of Representatives have a similar bill introduced by Reps. Scott Garrett (R-N.J.) and Carolyn Maloney (D-N.Y.).