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Stanford workers had ties to regulator FINRA
February 24, 2009 / 7:54 PM / 9 years ago

Stanford workers had ties to regulator FINRA

HOUSTON (Reuters) - Two employees of Allen Stanford’s financial business, which U.S. regulators have accused of massive fraud, held advisory roles at a watchdog group overseeing U.S. broker-dealers aimed at preventing abuses.

<p>A man is silhouetted as he walks past the Stanford Group AG building in Zurich, February 18, 2009. REUTERS/Christian Hartmann</p>

Lena Stinson, director of global compliance at Stanford Financial Group, served on the membership committee of the Financial Industry Regulatory Authority, or FINRA, which describes itself as the largest independent regulator of U.S. securities firms.

Frederick Fram, the chief operating officer of Stanford Group Holdings, served on the FINRA continuing education content committee, “where he participates in creating material for the Regulatory Element continuing education program,” according to a biography on Stanford’s website.

The Stanford executives resigned from their posts last week at FINRA’s request, Brendan Intindola, a FINRA spokesman, said.

Stanford Group Co is a member of FINRA. Calls to Stanford’s Houston offices were not answered.

The firm referred all press inquiries to the U.S. Securities and Exchange Commission, which last week accused the Texas billionaire and two of his associates of a “massive ongoing fraud” related to the sale of $8 billion in certificates of deposit.

FINRA, the agency that regulates close to 5,000 brokerages, fined Stanford in 2007 and 2008 for violations that ranged from issuing misleading sales literature to conducting a securities business without maintaining minimum capital levels.

For example in 2007, FINRA levied a $10,000 fine against Stanford Group Co for distributing marketing materials that “failed to present fair and balanced treatment of the risks and potential benefits of a CD investment.”

Stanford and his companies are accused of marketing the CDs as safe investments, all the while placing client funds in illiquid private equity and real estate holdings.

On Tuesday, FINRA named Richard Ketchum as its chief executive officer. He replaced Mary Schapiro, who resigned after she was confirmed as chairman of the U.S. Securities and Exchange Commission.

Reporting by Anna Driver in Houston, editing by Matthew Lewis, Leslie Gevirtz

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