Close
ThinkAdvisor

Regulation and Compliance > Federal Regulation > FINRA

Pershing Ordered to Pay $648.5K to More Stanford Victims

X
Your article was successfully shared with the contacts you provided.

What You Need to Know

  • This is the latest group of investors to allege they lost money in the Ponzi scheme run by financier R. Allen Stanford.
  • The claimants alleged Pershing was liable because it acted as custodian and clearing firm for Stanford and gave material assistance to the scheme.
  • The three-person FINRA arb panel agreed but awarded less money in damages than requested to fewer claimants.

A Financial Industry Regulatory Authority arbitration panel has ordered Pershing to pay a total of $648,543 to another group of investors who alleged they lost money in the Ponzi scheme run by financier R. Allen Stanford, who is serving a 110-year prison sentence.

Pershing did not immediately respond to a request for comment Friday, one day after the three-person FINRA arbitration panel made its decision and posted the award on the regulator’s website.

In February 2020, a FINRA arb panel ordered Pershing to pay $5.6 million in damages to a group of 23 investors who claimed they lost money in the same Ponzi scheme. A three-person FINRA arbitration panel previously ordered Pershing to pay $1.4 million to another group of victims.

In the statement of claim in the most recent dispute, a group of investors asserted the following causes of action: aiding and abetting common law fraud, aiding and abetting breach of fiduciary duty, gross negligence, breach of contract, violation of FINRA conduct rules, and civil conspiracy to defraud.

The claimants alleged that Pershing, “acting as custodian and clearing firm for Stanford Group Company … gave material assistance to a Ponzi scheme, involving certificates of deposit” (CDs) issued by Stanford International Bank and recommended by SGC financial advisors. “Despite having concerns about the CDs and SGC,” Pershing “continued to provide assistance” in the scheme, the claimants alleged.

The claim was corrected multiple times, with more investors joining it and the damages requested changing multiple times, although millions of dollars was requested each time.

The FINRA arb panel instead opted to award much less than what was requested. The panel determined that Pershing was “liable for and shall pay” $436,000 in compensatory damages to Charles A. Pope; $124,593 in compensatory damages to Dudley Devore IRA; $87,200 in compensatory damages to Joyce E. Cagle; and $750 to the other, “corrected” claimants in costs as reimbursement for the non-refundable portion of the filing fee previously paid to FINRA Dispute Resolution Services.

Explaining the decision, the panel wrote: “Based on all of the evidence and testimony presented, by the beginning of 2008, Respondent had the requisite level of knowledge, as to SGC’s wrongful conduct in connection with the CD scheme.”

Pershing also “knew or should have known that it was providing meaningful/substantial assistance to that wrongful scheme by remaining the clearing firm for SGC in the United States and, more particularly, by facilitating wire transfers for the purchase of CDs issued by SIBL on behalf of Charles A. Pope, Dudley Devore IRA, and Joyce E. Cagle during 2008,” the panel said.

(Photo: Adobe Stock)