Mexico’s National Banking and Securities Commission (Comision Nacional Bancaria y de Valores – CNBV) has commenced an investigation of Stanford International Bank Ltd.’s unit in Mexico, Stanford Fondos, S.A. de C.V., for possible violation of financial institution laws, according to the CNBV website.  The CNBV is looking into whether Stanford Fondos violated Mexican laws that forbid Mexican banks from encouraging clients to invest in unauthorized certificates of deposit abroad. 

Specifically, the laws prohibit “any person from requesting, offering or promoting the procurement of funds or resources of an undetermined person, or obtaining or soliciting funds or resources in a habitual or professional manner without having authorization from Mexican financial authorities”.  The CNBV has the authority to impose sanctions on violators of such laws.

The CNBV said it has not frozen any accounts at Stanford Fondos or otherwise interfered with the company’s operations and that its clients may request redemption of their funds at Stanford’s Mexico City offices.  A Sentido Comun report indicated that Stanford Fondos clients are being asked to complete a form and told that Stanford Fondos will process redemption requests during the week in which they are received.  Notwithstanding the report, it remains unclear whether Stanford Fondos is honoring such requests or whether the financial condition of SIB or its U.S. affiliates will affect Stanford Fondo’s ability to honor such requests.

Stanford Fondos is licensed to operate in Mexico as a distributor of investment funds, not as a full-fledged bank, according to FT.com.  It has operated in Mexico since 2005 and manages approximately US$50 million for 3,400 clients.  The whereabouts of Stanford’s founder, Sir Allen Stanford, are unknown.

Many Mexican and other Latin American investors invested significant amounts of money with the Mexican, Venezuelan, Panamanian, Peruvian and Ecuadorian affiliates of Antigua-based, Houston-headquarted, SIB hoping to escape financial instability in their home countries and on Stanford’s promise of high returns.  Bloomberg reports that in certain cases investors may have directed money to Stanford to avoid taxes in their home countries, which could affect their willingness to recoup their funds because it could attract attention from tax authorities.

Mexican and other Latin American investors who have invested money with SIB in Houston or its other U.S. affiliates, such as Stanford Capital Management and Stanford Financial Group, should consult their U.S. attorneys to determine the proper course of action and any remedies that may be available.