842 F. Supp. 2d 321
D.D.C.2012Background
- SEC seeks order requiring SIPC to file in Texas for SIPA liquidation of Stanford Group Co. assets.
- SIPC has refused to file an application for a protective decree over SGC customers.
- SGC marketed CDs via SIBL; Stanford alleged Ponzi scheme and massive misappropriation.
- Texas court appointed Receiver; SIPC customers potentially protected by SIPA if conditions met.
- Question whether SIPA allows a summary proceeding (no plenary suit) and SEC may compel SIPC action.
- Court must determine scope and procedures for a summary proceeding, and whether to compel SIPC to file an application.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the SEC action a summary proceeding or plenary suit? | SEC: plain language supports summary proceeding. | SIPC: resembles plenary action requiring full civil procedure. | Summary proceeding; not a plenary action. |
| May SEC compel SIPC to file an application for a protective decree absent a formal complaint? | SEC may apply for relief under SIPA. | SIPC cannot be compelled without court process. | SEC may seek court-ordered relief; not a plenary suit. |
| Is the SEC's preliminary determination reviewable or should it be unreviewable? | SEC's determination is not subject to review. | Court must review SIPC's determinations in summary fashion. | Court must review whether SIPC refused to act. |
| Should discovery or formal Rules of Civil Procedure apply? | Formal discovery not necessary for summary issue. | Procedural formality should apply; discovery may be required. | Procedures to be decided; not all Rules apply. |
| Does the statute require a de novo review of SIPC's determination by the court? | De novo review aligns with similar SIPA provisions. | Tribunal should defer to SEC’s determination. | De novo review appropriate when SEC seeks relief. |
Key Cases Cited
- Securities and Exchange Comm’n v. Barbour, 421 U.S. 412 (1975) (customers may not compel SIPC; context of enforcement in district court)
- Securities Exchange Comm’n v. McCarthy, 322 F.3d 650 (9th Cir. 2003) (use of 'application' supports summary proceeding (McCarthy))
- SEC v. Scanlon, 362 U.S. 404 (1960) (summary proceedings allowed in specific statutory contexts)
- Securities and Exchange Comm’n v. Hughes, Inc., 461 F.2d 974 (2d Cir. 1972) (de novo review when SIPC determination challenged)
- Securities Investor Protection v. Blinder, Robinson & Co., 962 F.2d 960 (10th Cir. 1992) (de novo review similarly required)