More On Legal & Compliancefrom The Advisor's Professional Library
- Nothing but the Best Execution Along with the many other fiduciary obligations owed by RIAs, firms owe a duty to seek best execution of clients transactions. If they fail to do, RIAs violate Section 206 of the Investment Advisers Act.
- Agency and Principal Transactions In passing Section 206(3) of the Investment Advisers Act, Congress recognized that principal and agency transactions can be harmful to clients. Such transactions create the opportunity for RIAs to engage in self-dealing.
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).