UPDATE 2-U.S. Senator Vitter to block SEC nominees

Tue Jun 14, 2011 5:05pm EDT

* Sen. Vitter to block SEC nominees Aguilar, Gallagher

* Vitter frustrated with SEC over Stanford investor claims

* SEC has yet to take a position on SIPC coverage

* Vitter announcement comes after SEC confirmation hearing (Adds comment from Johnson, Shelby and background)

By Dave Clarke and Sarah N. Lynch

WASHINGTON, June 14 (Reuters) - A U.S. senator plans to temporarily block the confirmation of two Securities and Exchange Commission nominees until the agency gives clarity on whether Allen Stanford's alleged victims will get compensation.

David Vitter, a Republican, said victims of the Texas financier's alleged $7 billion Ponzi scheme deserve a direct answer on their request for coverage from an industry-backed fund.

The SEC has said publicly it plans to issue a decision soon but has not announced the exact timing.

Vitter's announcement came after the conclusion on Tuesday of the Senate Banking Committee's confirmation hearing on SEC commissioner nominees Luis Aguilar and Daniel Gallagher.

At the hearing, there were no indications of major resistance to the nominees themselves. Both Senate Banking Chairman Tim Johnson and Ranking Republican Richard Shelby said they are hoping for a speedy confirmation.

Johnson said a committee vote was expected in the coming weeks to send the nominations to the full U.S. Senate.

Vitter was not present at the confirmation hearing.

Aguilar, a Democrat, has been serving as a commissioner at the SEC since 2008, filling a partial term. Daniel Gallagher, a Republican, is currently a partner at law firm Wilmer Cutler Pickering Hale and Dorr, and previously worked at the SEC in different capacities from 2006 through 2010.

If confirmed, Gallagher would replace Republican SEC Commissioner Kathleen Casey, whose 5-year term expires this year.

Their nominations come at a crucial time for the agency, which is still working to rebuild public trust after missing Bernard Madoff's massive fraud and working to implement nearly 100 new rules under the Dodd-Frank Wall Street overhaul law.

Vitter has been vocal about his concerns the SEC also missed the alleged Stanford fraud and about delays in whether victims should have their claims covered by the Securities Investor Protection Corp, or SIPC.

The SIPC has said the investors in this case are not eligible for coverage, but the investors have taken their concerns to the SEC and asked the agency to weigh in.

"We've known for some time that the SEC waited far too long to take action against Allen Stanford, and now they're dragging their feet in responding to the victims," Vitter said in a statement. "I will continue to hold them accountable -- including holding these nominations -- until these fraud victims get an up-or-down answer from the SEC on SIPC."

Senator Shelby also said on Tuesday he was concerned about the delay by the SEC, but did not go so far as to join in the call for a hold against the nominees.

"The SEC's delay in making a decision is harming investors who were already harmed by the SEC's failure to prevent the Stanford fraud," he said in his opening remarks. "It is my hope that the SEC will stop delaying and make a final decision as quickly as possible."

In addition to the SEC nominees, the Senate Banking Committee also considered two board nominees to SIPC on Tuesday as well. A spokesman for Vitter said he has no plans to hold up those nominations. (Reporting by Dave Clarke and Sarah N. Lynch; editing by Maureen Bavdek, Andre Grenon, Gary Hill)

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