Federal judge dismisses suit against SEC over Stanford Ponzi scheme Theresa Donovan at 2:04 PM ET
[JURIST] A judge for the US District Court for the Southern District of Florida [official website] on Monday dismissed a lawsuit against the Securities Exchange Commission (SEC) [official website] regarding the agency's failure to report Allen Stanford [JURIST news archive] and his Ponzi scheme. Judge Robert Scola stated that the SEC market regulator was shielded [Reuters report] under an exception to the Federal Tort Claims Act (FTCA) [DOJ backgrounder], which bars claims arising from misrepresentation or deceit. Scola previously ruled [JURIST report] in September of last year that the lawsuit could proceed under the claim that the SEC had identified that Stanford was running a Ponzi scheme on four occasions prior to his indictment in 2009, and that the SEC had a non-discretionary duty to report Stanford to the Securities Investor Protection Corporation (SIPC) [official website]. The suit also alleges that SEC investigators declined to pursue action against Stanford due to the complexity of his Ponzi scheme and instead chose to pursue easier cases, ignoring several warnings. In Monday's dismissal, however, Scola stated that he had no jurisdiction to decide the case due to the FTCA exception against claims arising from misrepresentation or deceit. Plaintiffs' attorney reported that they plan to appeal Monday's decision and stated, "We believe that the judge did not draw the appropriate distinction between a claim based on a misrepresentation and our claim based on a failure to warn in line with the SEC's mandatory duty to notify SIPC."
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