More On Legal & Compliancefrom The Advisor's Professional Library
- Differences Between State and SEC Regulation of Investment Advisors States may impose licensing or registration requirements on IARs doing business in their jurisdiction, even if the IAR works for an SEC-registered firm. States may investigate and prosecute fraud by any IAR in their jurisdiction, even if the individual works for an SEC-registered firm.
- Conducting Due Diligence of Sub-Advisors and Third-Party Advisors Engaging in due-diligence of sub-advisors isnt just a recommended best practice it is part of the fiduciary obligation to a client. An RIA should be extremely reluctant to enter a relationship with a sub-advisor who claims the firms strategy is proprietary.
The Securities Investor Protection Corp. (SIPC) said it expects its Board of Directors to announce in mid-September, its decision concerning the referral provided by the Securities and Exchange Commission (SEC) with respect to the liquidation of the Stanford Group Co., operated by Robert Allen Stanford.
SIPC, which maintains a special reserve fund mandated by Congress to protect the customers of insolvent brokerage firms, filed an action on Feb. 17, 2009, in the U.S. District Court for the Northern District of Texas alleging that Stanford orchestrated an $8 billion fraud based on false promises of guaranteed returns related to certificates of deposit (CDs) issued by the Antigua-based Stanford International Bank (SIB).
SIPC says the SEC’s Complaint alleged that SIB sold approximately $7.2 billion of CDs to investors by promising returns that were “improbable, if not impossible.” SIPC explained in a release that in response to the SEC’s request for emergency relief, “the Court immediately issued a temporary restraining order, froze the defendants’ assets, and appointed a receiver to marshal those assets.” The SEC filed an amended complaint on June 19, 2009, alleging that Stanford conducted a Ponzi scheme.
SIPC President and CEO Stephen Harbeck said in the release that SIPC “has already started conferring with the SEC and the Stanford receiver regarding the SEC’s referral in the Stanford matter.”
The SEC’s referral on June 15 was the first time the SEC had informed SIPC of the possibility that the Stanford matter was appropriate for a proceeding under the Securities Investor Protection Act (SIPA).