SEC to Focus on Returning Funds to Victims of Stock Fraud
Securities and Exchange Commission Chairman Christopher Cox said he has ordered the creation of a new office that will work full-time to return funds to investors harmed by stock fraud.
Congress authorized the SEC in 2002 to distribute fines and court-ordered restitution to victims of securities fraud and other corporate wrongdoing, but delays in distributing such funds have left many investors uncompensated, Cox testified Wednesday to a Senate appropriations subcommittee.
Cox said the SEC will move "very soon" to distribute about $3.4 billion owed to investors victimized by mutual-fund trading scandals, largely clearing up a $3.8 billion backlog in funds owed to investors under the so-called "Fair Funds" program.
Cox told lawmakers the new SEC office will ensure that investors' money is returned as quickly as possibly, and that the SEC is working with the U.S. Treasury Department's Bureau of Public Debt so that money it collects is invested in interest-bearing accounts while awaiting distribution.
In response to questions from lawmakers, Cox said the SEC has yet to make a decision on its stance in a case pitting Enron Corp. investors against three investment banks that allegedly helped the Houston energy-trading company conceal liabilities, eventually leading to its collapse into bankruptcy in 2001. The shareholders are seeking a Supreme Court review of a lower court ruling in March that blocked their class-action lawsuit against the banks, and want the SEC to file a friend-of-the-court brief supporting their position. The SEC chief said he expects the five-member commission will consider and vote on its position in the case shortly.