Securities Regulators Questioned about Dropping the Ball


The Financial Industry Regulatory Authority (“FINRA”), the regulator of broker-dealers and protector of investors, allegedly failed to investigate the sworn testimony of a former Stanford broker, in 2003, that the Stanford Financial Group, a FINRA broker-dealer, was “engaged in a Ponzi scheme to defraud its clients,” according to recent articles by Reuters, published by the New York Times, and Scott Cohn, posted on Had FINRA investigated back in 2003, the financial disaster inflicted on Stanford investors might have been avoided.

Did FINRA drop the ball ? or, more accurately, did it just stand there and refuse to catch the pass? In prepared testimony before the Senate Banking Committee on Monday, Daniel Sibears, Executive Vice President of FINRA, seemed to be less than completely forthcoming, based on the brief excerpts of his testimony in the article. At first, Sibears insisted (misleadingly) that “FINRA reviews every customer complaint and regulatory tip it receives.” But he also acknowledged that FINRA did not start reviewing every regulatory tip it receives until after the Securities and Exchange Commission had sued Stanford, alleging an $8 billion Ponzi scheme. Finally, Sibears said that FINRA would have been thwarted by Antiguan regulators anyway, referring to the fact that the fake Certificates of Deposit were issued by Antiguan-based Stanford International Group, Ltd. But if FINRA had really wanted to investigate, could it have demanded documents and cooperation from its member, Stanford Financial Group, the Antiguan bank’s affiliate?

“The system absolutely failed us, and now we are left destitute, defrauded and dependent on others,” said a refinery worker, one of approximately 28,000 affected investors. Unfortunately, investors need to realize that FINRA and the SEC often do not root out financial fraud until the damage has been done. Investors who believe they have been damaged should consult with experienced counsel to evaluate their circumstances and determine their options.

Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions. Page Perry’s attorneys are actively involved in representing institutional and corporate investors in securities cases. For further information, please contact us.