Whether victims of R. Allen Stanford’s alleged multibillion-dollar investment fraud are entitled to relief from a safety net funded by the brokerage industry is now up to the federal courts.

The Securities and Exchange Commission on Monday asked a federal judge to order the Securities Investor Protection Corp. to field claims from Stanford customers, who as of 2009 were out an estimated $7.2 billion.

The SEC said the SIPC has refused to fulfill its responsibility.

The congressionally chartered SIPC, which provides a backstop for customers of brokerage firms in much the way that the FDIC protects bank depositors, had determined that Stanford’s clients did not qualify for SIPC assistance.

If the SIPC were required to pay claims by Stanford customers, it might have to borrow from the U.S. Treasury, said Stephen Harbeck, the SIPC president.

Indicted financier R. Allen Stanford, accused of leading an estimated $7.2 billion investment fraud scheme, arrives for a hearing at the Bob Casey Federal Courthouse in Houston, Tex., Jan. 6, 2011. Whether victims of his alleged fraud are entitled to relief from a safety net funded by the brokerage industry is now up to the federal courts. (F. Carter Smith/BLOOMBERG)

Stanford faces civil and criminal charges that he defrauded investors when his Stanford International Bank, based on the Caribbean island of Antigua, issued certificates of deposit promising strong returns. He was actually running a Ponzi scheme, the government says.

As of early 2009, when the SEC sued Stanford, the CDs were held by about 21,500 investors.

Stanford has been defending himself and is awaiting trial.

Harbeck said the SIPC sympathizes with Stanford’s victims but lacks legal authority to pay their claims. The SIPC provides coverage of up to $500,000 per customer for clients of failed brokerage firms. However, it only covers assets missing from customers’ accounts, Harbeck said.

Though it appears that the Stanford certificates of deposit were issued fraudulently, they are not missing, Harbeck said. The SIPC does not protect against fraud in the sale of securities, Harbeck said.

“It’s a bright-line rule,” he said.

What’s more, though Stanford ran a brokerage firm and the brokerage allegedly promoted the CDs, Harbeck said the certificates were issued by the Stanford bank, which is not an SIPC member firm.

Harbeck contrasted the Stanford case from the situation at MF Global, where an SIPC trustee has estimated that $1.2 billion may be missing from customers’ accounts.

The SEC, which failed to stop the alleged Stanford Ponzi scheme for more than a decade even though SEC officials suspected fraud, has been under political pressure to aid the investors.

In June, the SEC ordered the SIPC to intervene.

The SIPC refused to follow that order, setting up the SEC action Monday and a showdown in court.

The SEC urged the U.S. District Court for the District of Columbia to defer to the agency’s assessment, saying the SEC is superior to the SIPC in the regulatory scheme and may excercise “unreviewable discretion” when deciding whether customers need protection.

The court should refrain from engaging in “an onerous and lengthy fact-finding exercise concerning the legitimacy of . . . customers’ claims,” the SEC said in a legal filing.

The SEC recently asked a judge in a different case to show similar deference, but that judge rejected a proposed $285 million settlement between the SEC and Citigroup.

The SIPC has about $1.4 billion on hand, Harbeck said. It has the authority to raise funds from the brokerage industry and to borrow from the government.