On May 13, SEC Enforcement Director Robert Khuzami stated during his testimony before the House Committee on Financial Services's Subcommittee on Oversight and Investigations that while the Securities Investor Protection Corporation (“SIPC”) has indicated that there is no basis for SIPC to initiate a proceeding to protect customer property under the Securities Investor Protection Act (“SIPA”), the SEC was examining the matter. Khuzami stated that

Commission staff has devoted substantial time and effort to analyzing the issues surrounding a potential SIPA liquidation of SGC. As part of this review, the staff has met with representatives of the [Stanford Victim Coalition] and other Stanford victims on multiple occasions to discuss this matter. The staff also has been reviewing documents relevant to the investigation, including account information received from the SVC. The staff is finalizing its investigation and review of the relevant facts relating to the Stanford case, and we anticipate that the Commission will make a determination regarding these issues in the near future. 

This was very welcome news to members of the SVC, who have been arguing for some time that SIPC insurance should be extended to cover their losses. However, as of yesterday, over a month had passed with no word from the SEC.

In an effort to spur the SEC into announcing its determination, Senator David Vitter announced Tuesday that he would block the confirmation of President Obama's two new nominees to serve on the Commission until the agency gave an "up or down" answer on whether Stanford's alleged victims will get compensation under SIPC. Vitter's announcement came following the Senate's confirmation hearing on the two nominees--current SEC commissioner Luis Aguilar who has been renominated, and Daniel Gallagher.

Well, call it a coincidence but today the SEC released its findings, stating that certain individuals who invested money through the Stanford Group Company are, in fact, entitled to the protections of SIPC. Accordingly, the agency has asked SIPC to initiate a court proceeding under SIPA to liquidate the broker-dealer. The SEC added that "a SIPA liquidation proceeding would allow investors with accounts at SGC to file claims with a trustee selected by SIPC. The trustee would decide whether the investors have 'customer' claims that are protected by the statute. An investor who disagreed with the trustee's determination could seek court review."