In a major victory for victims of Allen Stanford's alleged Ponzi scheme, U.S. regulators have concluded that they should be compensated by a brokerage industry-backed fund.
The decision announced on Wednesday by the Securities and Exchange Commission comes nearly two years after the Securities Investor Protection Corp, which handles claims for investors if their brokerage firm fails, had issued an opinion saying it did not think the victims were eligible to file claims.
Stanford, who has denied any wrongdoing, is scheduled to go on trial in September.
The SEC filed civil charges against Stanford in February 2009. He was then arrested in June 2009 and criminally charged with fraud in connection with a $7 billion scheme linked to certificates of deposit issued by his Antigua-based banking company.
In its decision, the SEC said on Wednesday that people who invested money through the Stanford Group Co, Stanford's U.S. brokerage arm, are entitled to protection by SIPC. The SEC said it would formally ask SIPC to institute a liquidation proceeding against the brokerage.
SIPC said in a statement that it will analyze the SEC's recommendation and that a decision would be made in the near future.
The SEC's announcement comes just one day after Senator David Vitter called on the SEC to hurry and give victims an answer on the compensation eligibility question, or else he would block the U.S. Senate from voting on two SEC commissioner nominees.
Vitter and some other members of Congress have been critical of how long it has taken the SEC to make a decision.
(Reporting by Sarah N. Lynch; additional reporting by Jon Stempel in New York; Editing by Tim Dobbyn)