Florida judge dismisses lawsuit against US regulator for negligence in Stanford case
US District Judge Robert Scola dismissed the lawsuit filed against the US Securities and Exchange Commission over the handling of the Allen Stanford case. Plaintiffs Carlos Zelaya and George Glantz made allegations that the federal market regulator already considered Stanford's operations a Ponzi scheme after four separate investigations done from 1997 to 2004. SEC, however, did not advise Securities Investor Protection Corp (SIPC), said the plaintiffs. The SIPC is a federally-mandated corporation that protects customers of failed brokerage firms.
The Florida judge ruled that SEC was protected under the Federal Tort Claims Act (FTCA). He said an FTCA exception shielded the regulator from claims arising due to deceit or misrepresentation. The exception also did not give him any jurisdiction over the case. In his decision, Scola wrote "The plaintiffs claim that they were induced into entering disadvantageous business transactions because of the SEC's misrepresentation. The plaintiffs' cause of action is a classic claim for misrepresentation."
The plaintiffs, through their lawyer, said that they would appeal. SEC did not give any comment on the decision.