DALLAS (Bloomberg) — Peter Kaltman, a retired accountant, says he was reassured by the Securities Investor Protection Corp. logo on the stationery of the brokerage that sold him $550,000 in Stanford International Bank certificates of deposit.

"The CDs were sold by a SIPC-insured organisation," Kaltman said, referring to Stanford Group Co., the Antigua-based bank's sister firm. "At the bottom of their business cards and stationary, there was the SIPC logo. Any correspondence I received with account information also had it. I absolutely thought I was covered."

Kaltman was wrong, unfortunately for him and other investors who lost $7 billion in the alleged Ponzi scheme involving Stanford CDs. The federal corporation won't help any of them as it has some victims of swindler Bernard Madoff, SIPC's president notified Stanford's court-appointed receiver.

"There's an inordinately fine line being drawn here," Kaltman, 63, of Reno, Nevada, said of SIPC's decision to treat the two groups viewed by the government as Ponzi scheme victims differently. "It's worse than a slap in the face. If I was allowed to use four-letter words, I would."

Under US law, SIPC repays up to $500,000 in custodial losses to investors whose securities are missing from accounts at member firms, SIPC President Stephen Harbeck said in an interview. The protection doesn't extend to investors who've got their certificates, even if the securities have been rendered worthless by fraudulent conduct, he said.

"The fact that they went down in value is of no consequence," Harbeck said. "The investors have custody of those CDs."

If the fraudulent securities were issued by a non-member institution, such as Stanford International Bank, investors are doubly out of luck, Harbeck said. Bernard Madoff Investment Securities LLC in Manhattan was a SIPC member. Stanford International Bank, unlike the related brokerage, wasn't.

Madoff was sentenced to 150 years in prison June 29 after pleading guilty to running a Ponzi scheme that paid fictitious returns without ever buying the securities customers paid for.

Stanford Group's founder and chief executive officer, Allen Stanford, pleaded not guilty and is in jail awaiting trial on charges he misled investors about the safety of their investments and took more than $1 billion for his personal use.