U.S. brokerage regulators fined R. Allen Stanford’s firm more than a year ago for misleading investors while selling certificates of deposit

U.S. brokerage regulators fined R. Allen Stanford’s firm more than a year ago for misleading investors while selling certificates of deposit, raising new questions about watchdogs already under scrutiny for missing Bernard Madoff’s alleged $50 billion Ponzi scheme. Stanford Group Co. was fined $10,000 by the Financial Industry Regulatory Authority in November 2007 for distributing marketing material that “failed to present fair and balanced treatment” of the risks associated with CDs. The U.S. Securities and Exchange Commission yesterday filed a civil lawsuit calling the sales by the Houston-based firm a “massive, ongoing fraud.” “From what we know, the problem that led to the fine was a red flag,” said Robert Hillman, a securities law professor at the University of California, Davis. “If you have a red flag of this nature, then you have to do something more than simply levy a fine and close the file.” The SEC accused Stanford of touting “improbable, if not impossible” returns for more than a decade on CDs issued by an affiliated bank in Antigua. The case follows congressional scrutiny of the SEC and Finra, which is funded by the brokerage industry, for missing Madoff’s alleged scheme.