Stanford Lawsuit Against SEC Junked

Aug 14 2013 | 8:56am ET

The Securities and Exchange Commission cannot be sued for failing to alert R. Allen Stanford's clients that it suspected—rightly, it turned out—that he was a fraud.

A federal judge in Miami this week tossed a would-be class-action lawsuit against the regulator, ruling that the SEC was protected by an exception to the Federal Tort Claims Act forbidding suits arising from deceit.

According to the plaintiffs, who say they lost $1.65 million investing with Stanford, who was convicted of running a Ponzi scheme last year, the SEC found Stanford's business a fraud in four separate examinations between 1997 and 2004, but failed to let the Securities Investor Protection Corp. know. The SEC eventually sued Stanford in 2009.

"The plaintiffs claim that they were induced into entering disadvantageous business transactions because of the SEC's misrepresentation," U.S. District Judge Robert Scola wrote. "The plaintiff's cause of action is a classic claim for misrepresentation."

The plaintiffs plan to appeal the decision.

"We believe that the judge did not draw the appropriate distinction between a claim based on misrepresentation and our claim based on failure to warn in line with the SEC's mandatory duty to notify the SIPC," Gaytri Kachroo, their lawyer, said.


In Depth

Will Liquid Alts’ Performance Sustain Future Asset Flows?

Aug 25 2014 | 10:34am ET

Liquid alternative investment funds saw the highest percentage of capital inflows...

Lifestyle

Och Funds Women In Finance Initiative At U-M

Aug 28 2014 | 3:01pm ET

Och-Ziff Capital founder Daniel Och and his wife have made a "generous donation"...

Guest Contributor

Looking Ahead: What’s In Store For Managed Futures?

Aug 22 2014 | 12:52pm ET

The last five years were phenomenal for investors in equity indices. Will the next...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

July/August 2014 Cover

The time was right

Commodities/Futures magazine launched at the precipice of a revolution in the futures industry—really a revolution in the idea of risk management—that would move it from a small niche industry to ...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.