WASHINGTON, July 11 (Reuters) - A bipartisan group of U.S. lawmakers is urging President Barack Obama to nominate directors to an industry-backed organization who will help the victims in Allen Stanford’s $7 billion scheme try to recover some of their losses.
In a letter from 10 members in the House of Representatives and a separate letter from a Republican senator, the lawmakers said they believe the Securities Investor Protection Corp (SIPC) needs a cultural overhaul that will put investors’ interests first.
“We encourage you to take this opportunity to advance nominees that prioritize protecting investors over the bottom line of Wall Street,” wrote 10 Republican and Democratic House lawmakers.
“The victims of the Stanford Ponzi scheme cannot afford to continue with the status quo. New perspectives are required in the SIPC to protect the interests of these victims moving forward.”
SIPC President Stephen Harbeck said his organization will determine what response it will make early next week.
The SIPC is a corporate non-profit that administers a fund paid for by Wall Street to compensate investors if a brokerage firm collapses.
It is currently locked in a legal battle with the U.S. Securities and Exchange Commission over whether Stanford’s investors are eligible under federal law to file claims for compensation.
In an unprecedented case, the SEC decided to take legal action against the fund and force SIPC to start court proceedings for victims to file claims.
The SEC lost the battle in 2012, when a U.S. district court agreed with SIPC that Stanford’s investors did not meet the legal definition of “customer” and were not entitled to seek compensation.
The SEC appealed and made its case before the U.S. Court of Appeals for the District of Columbia in October last year. A ruling has not been issued.
Stanford is serving a 110-year prison after being convicted in 2012 of bilking investors with fraudulent certificates of deposit issued by his Antiguan-based Stanford International Bank.
Although the case dates back to 2009, the plight of investors is still reverberating on Capitol Hill.
Many of the lawmakers who are upset about the issue have victims who reside in their state or district.
Moreover, five directors on SIPC’s seven-member board must be appointed by the president and confirmed by the U.S. Senate.
Currently there are four open SIPC positions, including one that became vacant after the recent departure of SIPC Acting Chair Sharon Bowen. She left to become a commissioner at the Commodity Futures Trading Commission.
Bowen was confirmed in a narrow 48-46 vote, with many lawmakers voting against her because of concerns over how SIPC has handled the Stanford matter.
Louisiana Republican Senator David Vitter, who also sent a letter to Obama on Friday, said the new head of SIPC must not come from the industry and should be pro-investor.
He also chastised SIPC, saying it has spent $3.3 million to fight the SEC. (Reporting by Sarah N. Lynch; Editing by Jonathan Oatis)