Stanford Financial Group's certificate of deposits have attracted the attention of federal and state regulators who are investigating the investment strategies that allow the firm to offer interest rates more than twice the market average, BusinessWeek reported.
Stanford says it generates the high returns by investing CD money in stocks, real estate, hedge funds and precious metals. The Houston-based firm says it follows industry standards for marketing and sales and that the regulatory scrutiny is part of "routine examinations," according to BusinessWeek.
Privately held Stanford, founded in 1932, says on its Web site that its investment goal is to "provide consistent returns regardless of market volatility." The company says its assets under management or advisement top $50 billion.
The Securities & Exchange Commission, the Florida Office of Financial Regulation, and the Financial Industry Regulatory Authority are all investigating Stanford Financial, focusing on the high-yield CDs and how the company could afford to offer employees large bonuses and other perks such as luxury cars and vacations, BusinessWeek reported, citing people close to the investigations.