WASHINGTON, March 28 A U.S. senator questioned a candidate for the Commodity Futures Trading Commission over a decision that left victims of the Allen Stanford fraud out of pocket, raising a hurdle she must jump to get the job.
In a letter on Friday, Louisiana Republican David Vitter asked Sharon Bowen - who has been nominated by President Barack Obama to join the derivatives regulator - a series of 10 questions about her role in the decision.
Bowen is the acting head of the Securities Investor Protection Corporation (SIPC), the body that seeks to recoup money for investors if their broker goes under.
SIPC holds there is no basis in law to refund people who lost money in the $7 billion Ponzi scheme set up by Allen Stanford, who is serving a 110-year jail sentence.
The Securities and Exchange Commission (SEC) lost a court case in which it contested that decision, though an appeal in the case is still pending. A group of 14 senators and fraud victims are supporting the SEC's legal fight.
"It seems that SIPC continues to prioritize protecting its Wall Street members by hiring lawyers to fight the SEC in court rather than protect investors," Vitter said in his letter.
SIPC, created under the Securities Investor Protection Act (SIPA), is funded by Wall Street firms.
Vitter also asked whether SIPC had received any outside funding for its legal defense, whether its decision had been influenced by the banks, and wanted to know whether Bowen had received any gifts while at SIPC.
Bowen and two other nominees to the five-strong CFTC met little pushback in a Senate committee at a confirmation hearing on March 6, but it is no surprise that the Stanford scandal is coming to haunt Bowen. Thad Cochran, the highest-ranking Republican on the Committee, mentioned the scandal during the meeting, though he did not pursue the issue.
The agency - down to just two Commissioners, one Democrat and one Republican - is facing a leadership vacuum just as it is implementing some of the most fundamental reforms of financial markets after the 2007-09 credit meltdown.
Once a little-watched agency policing agricultural and other futures, it has now taken on the $690 trillion global swaps market, dominated by Wall Street's biggest banks. (Reporting by Douwe Miedema; Editing by Andrea Ricci)