SEC Missed Stanford Warning Signs

Minor fines levied for violations that should have been red flags

By Rob Quinn, Newser Staff

Posted Feb 19, 2009 5:24 AM CST

(Newser) – Years of SEC probes into the Stanford Group's finances resulted in wrist-slaps for violations that experts believe should have been huge red flags for investigators, the New York Times reports. The firm, suspected of engaging in an $8 billion fraud, paid out just $60,000 in the past 2 years to settle three separate claims of securities violations.

The company paid $10,000 in 2007 to settle charges of not having enough capital to operate as a broker-dealer, a condition that should have been a clear danger sign, one expert said. "Either the firm is in big financial trouble, or it’s hugely incompetent. Neither one is good,” he said. The SEC, often accused of lax enforcement in the past, is reviewing its handling of the case.

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Investigators from the US Marshals office walk out of the offices of Stanford Financial Group and head to their other office building this week in Houston. (AP Photo/Houston Chronicle, Steve Campbell)

$Infractions by Stanford Financial that netted SEC fines should have been major red flags to the regulator, securities experts say.$

Infractions by Stanford Financial that netted SEC fines should have been major red flags to the regulator, securities experts say. (Shutter Stock)

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A net capital violation is a major, major, major red flag. Generally when a firm has a net capital violation, it's already on the brink of bankruptcy. - Greg LaRoche of LaRoche Research

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SEC Missed Stanford Warning Signs