The fund set aside to aid customers of failed brokerage firms would be drained if it's forced to cover investors' losses in the fraud of R. Allen Stanford and similar cases, said Stephen Harbeck, president of the Securities Investor Protection Corp. http://www.fa-mag.com/fa-news/10252-covering-stanford-losses-would-drain-fund-sipc-says.html
I think the courts will back up the SIPC in this case if it goes that far. Can't see how they would be forced to payout to customers of a foreign firm that was not a member of the SIPC. "Seems" like a slam dunk, but more info needed to back SEC claim.
It is absurd that the SEC expects the SIPC to pay for losses for a foreign firm that is not a SIPC member.
Yet the foreign firm (Stanford Bank) was an offshore affiliate of Stanford U.S. Brokers with offshore affiliates have advertised SIPC protection of their foreign affiliates' customers based on the fact that the securities are held in the U.S. and shown on the U.S. member's books.