US (United States) Code. Title 15. Chapter 2B-1: Securities Investor Protection

Codificación normativa de EEUU (Estados Unidos). Legislación federal estadounidense # Commerce and Trade

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publicidad

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15 USC CHAPTER 2B-1 - SECURITIES INVESTOR PROTECTION 01/06/03

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TITLE 15 - COMMERCE AND TRADE

CHAPTER 2B-1 - SECURITIES INVESTOR PROTECTION

.

-HEAD-

CHAPTER 2B-1 - SECURITIES INVESTOR PROTECTION

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Sec.

78aaa. Short title.

78bbb. Application of Securities Exchange Act of 1934.

78ccc. Securities Investor Protection Corporation.

(a) Creation and membership.

(b) Powers.

(c) Board of Directors.

(d) Meetings of Board.

(e) Bylaws and rules.

78ddd. SIPC Fund.

(a) In general.

(b) Initial required balance for fund.

(c) Assessments.

(d) Requirements respecting assessments and lines of

credit.

(e) Prior trusts; overpayments and underpayments.

(f) Borrowing authority.

(g) SEC loans to SIPC.

(h) SEC notes issued to Treasury.

(i) Consolidated group.

78eee. Protection of customers.

(a) Determination of need of protection.

(b) Court action.

(c) SEC participation in proceedings.

(d) SIPC participation.

78fff. General provisions of a liquidation proceeding.

(a) Purposes.

(b) Application of title 11.

(c) Determination of customer status.

(d) Apportionment.

(e) Costs and expenses of administration.

78fff-1. Powers and duties of a trustee.

(a) Trustee powers.

(b) Trustee duties.

(c) Reports by trustee to court.

(d) Investigations.

78fff-2. Special provisions of a liquidation proceeding.

(a) Notice and claims.

(b) Payments to customers.

(c) Customer related property.

(d) Purchase of securities.

(e) Closeouts.

(f) Transfer of customer accounts.

78fff-3. SIPC advances.

(a) Advances for customers' claims.

(b) Other advances.

(c) Discretionary advances.

78fff-4. Direct payment procedure.

(a) Determination regarding direct payments.

(b) Notice.

(c) Payments to customers.

(d) Effect on claims.

(e) Jurisdiction of Bankruptcy Courts.

(f) Discontinuance of direct payment procedures.

(g) References.

78ggg. SEC functions.

(a) Administrative procedure.

(b) Enforcement of actions.

(c) Examinations and reports.

78hhh. Examining authority functions.

78iii. Functions of self-regulatory organizations.

(a) Collection agent.

(b) Immunity.

(c) Inspections.

(d) Reports.

(e) Consultation.

(f) Financial condition of members.

78jjj. Prohibited acts.

(a) Failure to pay assessment, etc.

(b) Engaging in business after appointment of trustee

or initiation of direct payment procedure.

(c) Concealment of assets; false statements or

claims.

78kkk. Miscellaneous provisions.

(a) Public inspection of reports.

(b) Liability of members of SIPC.

(c) Liability of SIPC and Directors, officers, or

employees.

(d) Advertising.

(e) SIPC exempt from taxation.

(f) Section 78t(a) of this title not to apply.

(g) SEC study of unsafe or unsound practices.

78lll. Definitions.

-SECREF-

CHAPTER REFERRED TO IN OTHER SECTIONS

This chapter is referred to in section 78c of this title; title 7

section 12a; title 11 sections 555, 559, 742.

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15 USC Sec. 78aaa 01/06/03

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TITLE 15 - COMMERCE AND TRADE

CHAPTER 2B-1 - SECURITIES INVESTOR PROTECTION

-HEAD-

Sec. 78aaa. Short title

-STATUTE-

This chapter may be cited as the ''Securities Investor Protection

Act of 1970''.

-SOURCE-

(Pub. L. 91-598, Sec. 1(a), Dec. 30, 1970, 84 Stat. 1636.)

-REFTEXT-

REFERENCES IN TEXT

This chapter, referred to in text, was in the original ''This

Act'', meaning Pub. L. 91-598, Dec. 30, 1970, 84 Stat. 1636. For

complete classification of this Act to the Code, see Tables.

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SHORT TITLE OF 1978 AMENDMENT

Pub. L. 95-283, Sec. 1, May 21, 1978, 92 Stat. 249, provided

that: ''This Act (enacting sections 78fff-1 to 78fff-4 of this

title, amending sections 77c, 78c, 78k, and 78ccc to 78lll of this

title and enacting provisions set out as a note under section 78k

of this title) may be cited as the 'Securities Investor Protection

Act Amendments of 1978'.''

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15 USC Sec. 78bbb 01/06/03

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TITLE 15 - COMMERCE AND TRADE

CHAPTER 2B-1 - SECURITIES INVESTOR PROTECTION

-HEAD-

Sec. 78bbb. Application of Securities Exchange Act of 1934

-STATUTE-

Except as otherwise provided in this chapter, the provisions of

the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.)

(hereinafter referred to as the ''1934 Act'') apply as if this

chapter constituted an amendment to, and was included as a section

of, such Act.

-SOURCE-

(Pub. L. 91-598, Sec. 2, Dec. 30, 1970, 84 Stat. 1637.)

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REFERENCES IN TEXT

This chapter, referred to in text, was in the original ''this

Act'', meaning Pub. L. 91-598, Dec. 30, 1970, 84 Stat. 1636. For

complete classification of this Act to the Code, see Tables.

The Securities Exchange Act of 1934, referred to in text, is act

June 6, 1934, ch. 404, 48 Stat. 881, as amended, which is

classified generally to chapter 2B (Sec. 78a et seq.) of this

title. For complete classification of this Act to the Code, see

section 78a of this title and Tables.

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15 USC Sec. 78ccc 01/06/03

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TITLE 15 - COMMERCE AND TRADE

CHAPTER 2B-1 - SECURITIES INVESTOR PROTECTION

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Sec. 78ccc. Securities Investor Protection Corporation

-STATUTE-

(a) Creation and membership

(1) Creation

There is hereby established a body corporate to be known as the

''Securities Investor Protection Corporation'' (hereafter in this

chapter referred to as ''SIPC''). SIPC shall be a nonprofit

corporation and shall have succession until dissolved by Act of

the Congress. SIPC shall -

(A) not be an agency or establishment of the United States

Government; and

(B) except as otherwise provided in this chapter, be subject

to, and have all the powers conferred upon a nonprofit

corporation by, the District of Columbia Nonprofit Corporation

Act.

(2) Membership

(A) Members of SIPC

SIPC shall be a membership corporation the members of which

shall be all persons registered as brokers or dealers under

section 78o(b) of this title, other than -

(i) persons whose principal business, in the determination

of SIPC, taking into account business of affiliated entities,

is conducted outside the United States and its territories

and possessions;

(ii) persons whose business as a broker or dealer consists

exclusively of (I) the distribution of shares of registered

open end investment companies or unit investment trusts, (II)

the sale of variable annuities, (III) the business of

insurance, or (IV) the business of rendering investment

advisory services to one or more registered investment

companies or insurance company separate accounts; and

(iii) persons who are registered as a broker or dealer

pursuant to section 78o(b)(11)(A) of this title.

(B) Commission review

SIPC shall file with the Commission a copy of any

determination made pursuant to subparagraph (A)(i). Within

thirty days after the date of such filing, or within such

longer period as the Commission may designate of not more than

ninety days after such date if it finds such longer period to

be appropriate and publishes its reasons for so finding, the

Commission shall, consistent with the public interest and the

purposes of this chapter, affirm, reverse, or amend any such

determination of SIPC.

(C) Additional members

SIPC shall provide by rule that persons excluded from

membership in SIPC under subparagraph (A)(i) may become members

of SIPC under such conditions and upon such terms as SIPC shall

require by rule, taking into account such matters as the

availability of assets and the ability to conduct a liquidation

if necessary.

(D) Disclosure

Any broker or dealer excluded from membership in SIPC under

subparagraph (A)(i) shall, as required by the Commission by

rule, make disclosures of its exclusion and other relevant

information to the customers of such broker or dealer who are

living in the United States or its territories and possessions.

(b) Powers

In addition to the powers granted to SIPC elsewhere in this

chapter, SIPC shall have the power -

(1) to sue and be sued, complain and defend, in its corporate

name and through its own counsel, in any State, Federal, or other

court;

(2) to adopt, alter, and use a corporate seal, which shall be

judicially noticed;

(3) to adopt, amend, and repeal, by its Board of Directors,

such bylaws as may be necessary or appropriate to carry out the

purposes of this chapter, including bylaws relating to -

(A) the conduct of its business; and

(B) the indemnity of its directors, officers, and employees

(including any such person acting as trustee or otherwise in

connection with a liquidation proceeding) for liabilities and

expenses actually and reasonably incurred by any such person in

connection with the defense or settlement of an action or suit

if such person acted in good faith and in a manner reasonably

believed to be consistent with the purposes of this chapter.

(4) to adopt, amend, and repeal, by its Board of Directors,

such rules as may be necessary or appropriate to carry out the

purposes of this chapter, including rules relating to -

(A) the definition of terms used in this chapter, other than

those terms for which a definition is provided in section 78lll

of this title;

(B) the procedures for the liquidation of members and direct

payment procedures, including the transfer of customer

accounts, the distribution of customer property, and the

advance and payment of SIPC funds; and

(C) the exercise of all other rights and powers granted to it

by this chapter;

(5) to conduct its business (including the carrying on of

operations and the maintenance of offices) and to exercise all

other rights and powers granted to it by this chapter in any

State or other jurisdiction without regard to any qualification,

licensing, or other statute in such State or other jurisdiction;

(6) to lease, purchase, accept gifts or donations of or

otherwise acquire, to own, hold, improve, use, or otherwise deal

in or with, and to sell, convey, mortgage, pledge, lease,

exchange or otherwise dispose of, any property, real, personal or

mixed, or any interest therein, wherever situated;

(7) subject to the provisions of subsection (c) of this

section, to elect or appoint such officers, attorneys, employees,

and agents as may be required, to determine their qualifications,

to define their duties, to fix their salaries, require bonds for

them and fix the penalty thereof;

(8) to enter into contracts, to execute instruments, to incur

liabilities, and to do any and all other acts and things as may

be necessary or incidental to the conduct of its business and the

exercise of all other rights and powers granted to SIPC by this

chapter; and

(9) by bylaw, to establish its fiscal year.

(c) Board of Directors

(1) Functions

SIPC shall have a Board of Directors which, subject to the

provisions of this chapter, shall determine the policies which

shall govern the operations of SIPC.

(2) Number and appointment

The Board of Directors shall consist of seven persons as

follows:

(A) One director shall be appointed by the Secretary of the

Treasury from among the officers and employees of the

Department of the Treasury.

(B) One director shall be appointed by the Federal Reserve

Board from among the officers and employees of the Federal

Reserve Board.

(C) Five directors shall be appointed by the President, by

and with the advice and consent of the Senate, as follows -

(i) three such directors shall be selected from among

persons who are associated with, and representative of

different aspects of, the securities industry, not all of

whom shall be from the same geographical area of the United

States, and

(ii) two such directors shall be selected from the general

public from among persons who are not associated with a

broker or dealer or associated with a member of a national

securities exchange, within the meaning of section 78c(a)(18)

or section 78c(a)(21), respectively, of this title, or

similarly associated with any self-regulatory organization or

other securities industry group, and who have not had any

such association during the two years preceding appointment.

(3) Chairman and Vice Chairman

The President shall designate a Chairman and Vice Chairman from

among those directors appointed under paragraph (2)(C)(ii) of

this subsection.

(4) Terms

(A) Except as provided in subparagraphs (B) and (C), each

director shall be appointed for a term of three years.

(B) Of the directors first appointed under paragraph (2) -

(i) two shall hold office for a term expiring on December

31, 1971,

(ii) two shall hold office for a term expiring on December

31, 1972, and

(iii) three shall hold office for a term expiring on

December 31, 1973,

as designated by the President at the time they take office.

Such designation shall be made in a manner which will assure

that no two persons appointed under the authority of the same

clause of paragraph (2)(C) shall have terms which expire

simultaneously.

(C) A vacancy in the Board shall be filled in the same manner

as the original appointment was made. Any director appointed

to fill a vacancy occurring prior to the expiration of the term

for which his predecessor was appointed shall be appointed only

for the remainder of such term. A director may serve after the

expiration of his term until his successor has taken office.

(5) Compensation

All matters relating to compensation of directors shall be as

provided in the bylaws of SIPC.

(d) Meetings of Board

The Board of Directors shall meet at the call of its Chairman, or

as otherwise provided by the bylaws of SIPC.

(e) Bylaws and rules

(1) Proposed bylaw changes

The Board of Directors of SIPC shall file with the Commission a

copy of any proposed bylaw or any proposed amendment to or repeal

of any bylaw of SIPC (hereinafter in this paragraph collectively

referred to as a ''proposed bylaw change''), accompanied by a

concise general statement of the basis and purpose of such

proposed bylaw change. Each such proposed bylaw change shall

take effect thirty days after the date of the filing of a copy

thereof with the Commission, or upon such later date as SIPC may

designate or such earlier date as the Commission may determine,

unless -

(A) the Commission, by notice to SIPC setting forth the

reasons therefor, disapproves such proposed bylaw change as

being contrary to the public interest or contrary to the

purposes of this chapter; or

(B) the Commission finds that such proposed bylaw change

involves a matter of such significant public interest that

public comment should be obtained, in which case it may, after

notifying SIPC in writing of such finding, require that the

procedures set forth in paragraph (2) be followed with respect

to such proposed bylaw change, in the same manner as if such

proposed bylaw change were a proposed rule change within the

meaning of such paragraph.

(2) Proposed rule changes

(A) Filing of proposed rule changes

The Board of Directors of SIPC shall file with the

Commission, in accordance with such rules as the Commission may

prescribe, a copy of any proposed rule or any proposed

amendment to or repeal of any rule of SIPC (hereinafter in this

subsection collectively referred to as a ''proposed rule

change''), accompanied by a concise general statement of the

basis and purpose of such proposed rule change. The Commission

shall, upon the filing of any proposed rule change, publish

notice thereof, together with the terms of substance of such

proposed rule change or a description of the subjects and

issues involved. The Commission shall give interested persons

an opportunity to submit written data, views, and arguments

with respect to such proposed rule change. No proposed rule

change shall take effect unless approved by the Commission or

otherwise permitted in accordance with the provisions of this

paragraph.

(B) Action by the Commission

Within thirty-five days after the date of publication of

notice of the filing of a proposed rule change, or within such

longer period as the Commission may designate of not more than

ninety days after such date if it finds such longer period to

be appropriate and publishes its reasons for so finding, or as

to which SIPC consents, the Commission shall -

(i) by order approve such proposed rule change; or

(ii) institute proceedings to determine whether such

proposed rule change should be disapproved.

(C) Proceedings

Proceedings instituted with respect to a proposed rule change

pursuant to subparagraph (B)(ii) shall include notice of the

grounds for disapproval under consideration and opportunity for

hearing, and shall be concluded within one hundred eighty days

after the date of publication of notice of the filing of such

proposed rule change. At the conclusion of such proceedings,

the Commission shall, by order, approve or disapprove such

proposed rule change. The Commission may extend the time for

conclusion of such proceedings for not more than sixty days if

it finds good cause for such extension and publishes its

reasons for so finding, or for such longer period as to which

SIPC consents.

(D) Grounds for approval or disapproval

The Commission shall approve a proposed rule change if it

finds that such proposed rule change is in the public interest

and is consistent with the purposes of this chapter, and any

proposed rule change so approved shall be given force and

effect as if promulgated by the Commission. The Commission

shall disapprove a proposed rule change if it does not make the

finding referred to in the preceding sentence. The Commission

shall not approve any proposed rule change prior to thirty days

after the date of publication of notice of the filing thereof,

unless the Commission finds good cause for so doing and

publishes its reasons for so finding.

(E) Exception

Notwithstanding any other provision of this paragraph, a

proposed rule change may take effect -

(i) upon the date of filing with the Commission, if such

proposed rule change is designated by SIPC as relating solely

to matters which the Commission, consistent with the public

interest and the purposes of this subsection, determines by

rule do not require the procedures set forth in this

paragraph; or

(ii) upon such date as the Commission shall for good cause

determine. Any proposed rule change which takes effect under

this clause shall be filed promptly thereafter and reviewed

in accordance with the provisions of subparagraph (A).

At any time within sixty days after the date of filing of any

rule change which has taken effect pursuant to this

subparagraph, the Commission may summarily abrogate such rule

change and require that it be refiled and reviewed in

accordance with the provisions of this paragraph, if the

Commission finds that such action is necessary or appropriate

in the public interest, for the protection of investors, or

otherwise in furtherance of the purposes of this chapter. Any

action of the Commission pursuant to the preceding sentence

shall not affect the validity or force of a rule change during

the period it was in effect and shall not be reviewable under

section 78y of this title or deemed to be final agency action

for purposes of section 704 of title 5.

(3) Action required by Commission

The Commission may, by such rules as it determines to be

necessary or appropriate in the public interest or to carry out

the purposes of this chapter, require SIPC to adopt, amend, or

repeal any SIPC bylaw or rule, whenever adopted.

-SOURCE-

(Pub. L. 91-598, Sec. 3, Dec. 30, 1970, 84 Stat. 1637; Pub. L.

95-283, Sec. 2-5, May 21, 1978, 92 Stat. 249-251; Pub. L. 106-554,

Sec. 1(a)(5) (title II, Sec. 203(d)(2)), Dec. 21, 2000, 114 Stat.

2763, 2763A-424.)

-REFTEXT-

REFERENCES IN TEXT

This chapter, referred to in subsecs. (a) to (c) and (e), was in

the original ''this Act'', meaning Pub. L. 91-598, Dec. 30, 1970,

84 Stat. 1636. For complete classification of this Act to the Code,

see Tables.

The District of Columbia Nonprofit Corporation Act, referred to

in subsec. (a)(1)(B), is Pub. L. 87-569, Aug. 6, 1962, 76 Stat.

265, as amended, which is not classified to the Code.

-MISC2-

AMENDMENTS

2000 - Subsec. (a)(2)(A)(iii). Pub. L. 106-554 added cl. (iii).

1978 - Subsec. (a). Pub. L. 95-283, Sec. 2(a), substituted

''Creation and membership'' for ''Creation'' in heading,

redesignated introductory text and cls. (1) and (3) as par. (1),

and added par. 2 which incorporated provisions formerly contained

in cl. (2) as par. (2)(A).

Subsec. (b). Pub. L. 95-283, Sec. 3, in par. (1) substituted

''State, Federal, or other court'' for ''court, State, or

Federal'', in par. (3) substituted provisions relating to adoption,

etc., of bylaws by the Board of Directors, for provisions relating

to adoption, etc., of bylaws and rules by the Board of Directors,

added par. (4), and redesignated former pars. (4) to (8) as (5) to

(9), respectively.

Subsec. (c)(2)(C)(ii). Pub. L. 95-283, Sec. 4(a), substituted ''a

broker or dealer or associated with a member of a national

securities exchange, within the meaning of section 78c(a)(18) or

section 78c(a)(21), respectively, of this title, or similarly

associated with any self-regulatory organization or other

securities industry group,'' for ''any broker or dealer, within the

meaning of paragraph (18) of section 78c(a) of this title, or

similarly associated with a national securities exchange or other

securities industry group''.

Subsec. (c)(5). Pub. L. 95-283, Sec. 4(b), substituted

''Compensation'' for ''Compensation, etc.'' in heading, and in text

struck out provisions relating to determinations of dollar volume

of trading on exchanges.

Subsec. (e). Pub. L. 95-283, Sec. 5, inserted ''and rules'' after

''Bylaws'' in heading, and in text substituted provisions relating

to procedures applicable to proposed changes in the bylaws and

rules of SIPC and required action by the Commission with respect to

any SIPC bylaw or rule, for provisions relating to procedures

applicable to adoption of initial bylaws and rules of SIPC and any

alteration, supplement, repeal, or addition, effective date of any

such bylaw or rule, and required action by the Commission with

respect to any SIPC bylaw or rule.

Subsec. (f). Pub. L. 95-283, Sec. 2(b), struck out subsec. (f)

which set forth qualifications for other members of SIPC.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 78ggg of this title.

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15 USC Sec. 78ddd 01/06/03

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TITLE 15 - COMMERCE AND TRADE

CHAPTER 2B-1 - SECURITIES INVESTOR PROTECTION

-HEAD-

Sec. 78ddd. SIPC Fund

-STATUTE-

(a) In general

(1) Establishment of fund

SIPC shall establish a ''SIPC Fund'' (hereinafter in this

chapter referred to as the ''fund''). All amounts received by

SIPC (other than amounts paid directly to any lender pursuant to

any pledge securing a borrowing by SIPC) shall be deposited in

the fund, and all expenditures made by SIPC shall be made out of

the fund.

(2) Balance of the fund

Except as otherwise provided in this section, the balance of

the fund at any time shall consist of the aggregate at such time

of the following items:

(A) Cash on hand or on deposit.

(B) Amounts invested in United States Government or agency

securities.

(C) Such confirmed lines of credit as SIPC may from time to

time maintain, other than those maintained pursuant to

paragraph (4).

(3) Confirmed lines of credit

For purposes of this section, the amount of confirmed lines of

credit as of any time is the aggregate amount which SIPC at such

time has the right to borrow from banks and other financial

institutions under confirmed lines of credit or other written

agreements which provide that moneys so borrowed are to be

repayable by SIPC not less than one year from the time of such

borrowings (including, for purposes of determining when such

moneys are repayable, all rights of extension, refunding, or

renewal at the election of SIPC).

(4) Other lines

SIPC may maintain such other confirmed lines of credit as it

considers necessary or appropriate, and such other confirmed

lines of credit shall not be included in the balance of the fund,

but amounts received from such lines of credit may be disbursed

by SIPC under this chapter as though such amounts were part of

the fund.

(b) Initial required balance for fund

Within one hundred and twenty days from December 30, 1970, the

balance of the fund shall aggregate not less than $75,000,000, less

any amounts expended from the fund within that period.

(c) Assessments

(1) Initial assessments

Each member of SIPC shall pay to SIPC, or the collection agent

for SIPC specified in section 78iii(a) of this title, on or

before the one hundred and twentieth day following December 30,

1970, an assessment equal to one-eighth of 1 per centum of the

gross revenues from the securities business of such member during

the calendar year 1969, or if the Commission shall determine

that, for purposes of assessment pursuant to this paragraph, a

lesser percentage of gross revenues from the securities business

is appropriate for any class or classes of members (taking into

account relevant factors, including but not limited to types of

business done and nature of securities sold), such lesser

percentages as the Commission, by rule or regulation, shall

establish for such class or classes, but in no event less than

one sixteenth of 1 per centum for any such class. In no event

shall any assessment upon a member pursuant to this paragraph be

less than $150.

(2) General assessment authority

SIPC shall, by bylaw, impose upon its members such assessments

as, after consultation with self-regulatory organizations, SIPC

may deem necessary and appropriate to establish and maintain the

fund and to repay any borrowings by SIPC. Any assessments so made

shall be in conformity with contractual obligations made by SIPC

in connection with any borrowing incurred by SIPC. Subject to

paragraph (3) and subsection (d)(1)(A) of this section, any such

assessment upon the members, or any one or more classes thereof,

may, in whole or in part, be based upon or measured by (A) the

amount of their gross revenues from the securities business, or

(B) all or any of the following factors: the amount or

composition of their gross revenues from the securities business,

the number or dollar volume of transactions effected by them, the

number of customer accounts maintained by them or the amounts of

cash and securities in such accounts, their net capital, the

nature of their activities (whether in the securities business or

otherwise) and the consequent risks, or other relevant factors.

(3) Limitations

Notwithstanding any other provision of this chapter -

(A) no assessment shall be made upon a member otherwise than

pursuant to paragraph (1) or (2) of this subsection,

(B) an assessment may be made under paragraph (2) of this

subsection at a rate in excess of one-half of one per centum

during any twelve-month period if SIPC determines, in

accordance with a bylaw, that such rate of assessment during

such period will not have a material adverse effect on the

financial condition of its members or their customers, except

that no assessments shall be made pursuant to such paragraph

upon a member which require payments during any such period

which exceed in the aggregate one per centum of such member's

gross revenues from the securities business for such period,

and

(C) no assessment shall include any charge based upon the

member's activities (i) in the distribution of shares of

registered open end investment companies or unit investment

trusts, (ii) in the sale of variable annuities, (iii) in the

business of insurance, or (iv) in the business of rendering

investment advisory services to one or more registered

investment companies or insurance company separate accounts.

(d) Requirements respecting assessments and lines of credit

(1) Assessments

(A) 1/2 of 1 percent assessment

Subject to subsection (c)(3) of this section, SIPC shall

impose upon each of its members an assessment at a rate of not

less than one-half of 1 per centum per annum of the gross

revenues from the securities business of such member -

(i) until the balance of the fund aggregates not less than

$150,000,000 (or such other amount as the Commission may

determine in the public interest),

(ii) during any period when there is outstanding borrowing

by SIPC pursuant to subsection (f) or subsection (g) of this

section, and

(iii) whenever the balance of the fund (exclusive of

confirmed lines of credit) is below $100,000,000 (or such

other amount as the Commission may determine in the public

interest).

(B) 1/4 of 1 percent assessment

During any period during which -

(i) the balance of the fund (exclusive of confirmed lines

of credit) aggregates less than $150,000,000 (or such other

amount as the Commission has determined under paragraph

(2)(B)), or

(ii) SIPC is required under paragraph (2)(B) to phase out

of the fund all confirmed lines of credit,

SIPC shall endeavor to make assessments in such a manner that

the aggregate assessments payable by its members during such

period shall not be less than one-fourth of 1 per centum per

annum of the aggregate gross revenues from the securities

business for such members during such period.

(C) Minimum assessment

The minimum assessment imposed upon each member of SIPC shall

be $25 per annum through the year ending December 31, 1979, and

thereafter shall be the amount from time to time set by SIPC

bylaw, but in no event shall the minimum assessment be greater

than $150 per annum.

(2) Lines of credit

(A) $50,000,000 limit after 1973

After December 31, 1973, confirmed lines of credit shall not

constitute more than $50,000,000 of the balance of the fund.

(B) Phaseout requirement

When the balance of the fund aggregates $150,000,000 (or such

other amount as the Commission may determine in the public

interest) SIPC shall phase out of the fund all confirmed lines

of credit.

(e) Prior trusts; overpayments and underpayments

(1) Prior trusts

There may be contributed and transferred at any time to SIPC

any funds held by any trust established by a self-regulatory

organization prior to January 1, 1970, and the amounts so

contributed and transferred shall be applied, as may be

determined by SIPC with approval of the Commission, as a

reduction in the amounts payable pursuant to assessments made or

to be made by SIPC upon members of such self-regulatory

organization pursuant to subsection (c)(2) of this section. No

such reduction shall be made at any time when there is

outstanding any borrowing by SIPC pursuant to subsection (g) of

this section or any borrowings under confirmed lines of credit.

(2) Overpayments

To the extent that any payment by a member exceeds the maximum

rate permitted by subsection (c) of this section, the excess

shall be recoverable only against future payments by such member,

except as otherwise provided by SIPC bylaw.

(3) Underpayments

If a member fails to pay when due all or any part of an

assessment made upon such member, the unpaid portion thereof

shall bear interest at such rate as may be determined by SIPC

bylaw and, in addition to such interest, SIPC may impose such

penalty charge as may be determined by SIPC bylaw. Any such

penalty charge imposed upon a SIPC member shall not exceed 25 per

centum of any unpaid portion of the assessment. SIPC may waive

such penalty charge in whole or in part in circumstances where it

considers such waiver appropriate.

(f) Borrowing authority

SIPC shall have the power to borrow moneys and to evidence such

borrowed moneys by the issuance of bonds, notes, or other evidences

of indebtedness, all upon such terms and conditions as the Board of

Directors may determine in the case of a borrowing other than

pursuant to subsection (g) of this section, or as may be prescribed

by the Commission in the case of a borrowing pursuant to subsection

(g) of this section. The interest payable on a borrowing pursuant

to subsection (g) of this section shall be equal to the interest

payable on the related notes or other obligations issued by the

Commission to the Secretary of the Treasury. To secure the payment

of the principal of, and interest and premium, if any, on, all

bonds, notes, or other evidences of indebtedness so issued, SIPC

may make agreements with respect to the amount of future

assessments to be made upon members and may pledge all or any part

of the assets of SIPC and of the assessments made or to be made

upon members. Any such pledge of future assessments shall (subject

to any prior pledge) be valid and binding from the time that it is

made, and the assessments so pledged and thereafter received by

SIPC, or any collection agent for SIPC, shall immediately be

subject to the lien of such pledge without any physical delivery

thereof or further act, and the lien of such pledge shall be valid

and binding against all parties having claims of any kind against

SIPC or such collection agent whether pursuant to this chapter, in

tort, contract or otherwise, irrespective of whether such parties

have notice thereof. During any period when a borrowing by SIPC

pursuant to subsection (g) of this section is outstanding, no

pledge of any assessment upon a member to secure any bonds, notes,

or other evidences of indebtedness issued other than pursuant to

subsection (g) of this section shall be effective as to the excess

of the payments under the assessment on such member during any

twelve-month period over one-fourth of 1 per centum of such

member's gross revenues from the securities business for such

period. Neither the instrument by which a pledge is authorized or

created, nor any statement or other document relative thereto, need

be filed or recorded in any State or other jurisdiction. The

Commission may by rule or regulation provide for the filing of any

instrument by which a pledge or borrowing is authorized or created,

but the failure to make or any defect in any such filing shall not

affect the validity of such pledge or borrowing.

(g) SEC loans to SIPC

In the event that the fund is or may reasonably appear to be

insufficient for the purposes of this chapter, the Commission is

authorized to make loans to SIPC. At the time of application for,

and as a condition to, any such loan, SIPC shall file with the

Commission a statement with respect to the anticipated use of the

proceeds of the loan. If the Commission determines that such loan

is necessary for the protection of customers of brokers or dealers

and the maintenance of confidence in the United States securities

markets and the SIPC has submitted a plan which provides as

reasonable an assurance of prompt repayment as may be feasible

under the circumstances, then the Commission shall so certify to

the Secretary of the Treasury, and issue notes or other obligations

to the Secretary of the Treasury pursuant to subsection (h) of this

section. If the Commission determines that the amount or time for

payment of the assessments pursuant to such plan would not

satisfactorily provide for the repayment of such loan, it may, by

rules and regulations, impose upon the purchasers of equity

securities in transactions on national securities exchanges and in

the over-the-counter markets a transaction fee in such amount as at

any time or from time to time it may determine to be appropriate,

but not exceeding one-fiftieth of 1 per centum of the purchase

price of the securities. No such fee shall be imposed on a

transaction (as defined by rules or regulations of the Commission)

of less than $5,000. For the purposes of the next preceding

sentence, (1) the fee shall be based upon the total dollar amount

of each purchase; (2) the fee shall not apply to any purchase on a

national securities exchange or in an over-the-counter market by or

for the account of a broker or dealer registered under section

78o(b) of this title unless such purchase is for an investment

account of such broker or dealer (and for this purpose any transfer

from a trading account to an investment account shall be deemed a

purchase at fair market value); and (3) the Commission may, by

rule, exempt any transaction in the over-the-counter markets or on

any national securities exchange where necessary to provide for the

assessment of fees on purchasers in transactions in such markets

and exchanges on a comparable basis. Such fee shall be collected

by the broker or dealer effecting the transaction for or with the

purchaser, or by such other person as provided by the Commission by

rule, and shall be paid to SIPC in the same manner as assessments

imposed pursuant to subsection (c) of this section but without

regard to the limits on such assessments, or in such other manner

as the Commission may by rule provide.

(h) SEC notes issued to Treasury

To enable the Commission to make loans under subsection (g) of

this section, the Commission is authorized to issue to the

Secretary of the Treasury notes or other obligations in an

aggregate amount of not to exceed $1,000,000,000, in such forms and

denominations, bearing such maturities, and subject to such terms

and conditions, as may be prescribed by the Secretary of the

Treasury. Such notes or other obligations shall bear interest at a

rate determined by the Secretary of the Treasury, taking into

consideration the current average market yield on outstanding

marketable obligations of the United States of comparable

maturities during the month preceding the issuance of the notes or

other obligations. The Secretary of the Treasury may reduce the

interest rate if he determines such reduction to be in the national

interest. The Secretary of the Treasury is authorized and directed

to purchase any notes and other obligations issued hereunder and

for that purpose he is authorized to use as a public debt

transaction the proceeds from the sale of any securities issued

under chapter 31 of title 31, and the purposes for which securities

may be issued under that chapter are extended to include any

purchase of such notes and obligations. The Secretary of the

Treasury may at any time sell any of the notes or other obligations

acquired by him under this subsection. All redemptions, purchases,

and sales by the Secretary of the Treasury of such notes or other

obligations shall be treated as public debt transactions of the

United States.

(i) Consolidated group

Except as otherwise provided by SIPC bylaw, gross revenues from

the securities business of a member of SIPC shall be computed on a

consolidated basis for such member and all its subsidiaries (other

than the foreign subsidiaries of such member), and the operations

of a member of SIPC shall include those of any business to which

such member has succeeded.

-SOURCE-

(Pub. L. 91-598, Sec. 4, Dec. 30, 1970, 84 Stat. 1639; Pub. L.

95-283, Sec. 6, May 21, 1978, 92 Stat. 253.)

-REFTEXT-

REFERENCES IN TEXT

This chapter, referred to in subsecs. (a)(1), (4), (c)(3), (g),

and (i)(1), was in the original ''this Act'', meaning Pub. L.

91-598, Dec. 30, 1970, 84 Stat. 1636. For complete classification

of this Act to the Code, see Tables.

-COD-

CODIFICATION

In subsec. (h), ''chapter 31 of title 31'' and ''that chapter''

substituted for ''the Second Liberty Bond Act, as amended'' and

''that Act, as amended,'', respectively, on authority of Pub. L.

97-258, Sec. 4(b), Sept. 13, 1982, 96 Stat. 1067, the first section

of which enacted Title 31, Money and Finance.

-MISC3-

AMENDMENTS

1978 - Subsec. (a). Pub. L. 95-283, Sec. 6(a), in par. (2)

substituted ''Except as otherwise provided in this section, the''

for ''The'', in par. (2)(C) inserted provisions for inapplicability

to other lines of credit, and added par. (4).

Subsec. (c). Pub. L. 95-283, Sec. 6(b), in par. (2) struck out

''or rule'' after ''bylaw'', and in par. (3) struck out reference

to section 78ccc(f) of this title in introductory text and ''or

rule'' after ''bylaw'' in subpar. (B).

Subsec. (d)(1)(C). Pub. L. 95-283, Sec. 6(c), added subpar. (C).

Subsec. (e). Pub. L. 95-283, Sec. 6(d), in par. (2) substituted

''be recoverable only against future payments by such member,

except as otherwise provided by SIPC bylaw'' for ''not be

recoverable except against future payments by such member in

accordance with a bylaw or rule of SIPC'', and in par. (3)

substituted provisions authorizing interest and penalty charges to

be imposed by SIPC bylaw and amount of penalty charge, for

provisions authorizing interest to be imposed by SIPC bylaw or

rule.

Subsec. (f). Pub. L. 95-283, Sec. 6(e), struck out ''examining

authority as'' before ''collection agent for SIPC, shall

immediately be subject''.

Subsec. (g). Pub. L. 95-283, Sec. 6(f), redesignated cls. (A) to

(C) as (1) to (3), respectively, and, as so redesignated, in cl.

(2) struck out applicability to a member of a national securities

exchange and in cl. (3) substituted provisions relating to

exemptions by rule of transactions in the over-the-counter market

or on any national securities exchange, for provisions relating to

exemptions by rules and regulations of transactions in the

over-the-counter market, and inserted provisions authorizing the

collection of fees by such other persons as designated by the

Commission by rule for such purpose, and provisions relating to

limits on manner of payment of fees.

Subsec. (i). Pub. L. 95-283, Sec. 6(g), substituted

''Consolidated group'' for '' 'Gross revenues' defined'' in

heading, redesignated par. (2) as entire section and, as so

redesignated, substituted provisions relating to computations by a

member, for provisions relating to computations by a broker or

dealer. Pars. (1) and (3), which generally defined term ''gross

revenues'' and authorized the SIPC to define all other terms used

in this subsec., respectively, were struck out.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 78ccc, 78hhh, 78iii,

78kkk of this title.

-CITE-

15 USC Sec. 78eee 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 2B-1 - SECURITIES INVESTOR PROTECTION

-HEAD-

Sec. 78eee. Protection of customers

-STATUTE-

(a) Determination of need of protection

(1) Notice to SIPC

If the Commission or any self-regulatory organization is aware

of facts which lead it to believe that any broker or dealer

subject to its regulation is in or is approaching financial

difficulty, it shall immediately notify SIPC, and, if such

notification is by a self-regulatory organization, the

Commission.

(2) Action by self-regulatory organization

If a self-regulatory organization has given notice to SIPC

pursuant to subsection (a)(1) of this section with respect to a

broker or dealer, and such broker or dealer undertakes to

liquidate or reduce its business either pursuant to the direction

of a self-regulatory organization or voluntarily, such

self-regulatory organization may render such assistance or

oversight to such broker or dealer as it considers appropriate to

protect the interests of customers of such broker or dealer. The

assistance or oversight by a self-regulatory organization shall

not be deemed the assumption or adoption by such self-regulatory

organization of any obligation or liability to customers, other

creditors, shareholders, or partners of the broker or dealer, and

shall not prevent or act as a bar to any action by SIPC.

(3) Action by SIPC

If SIPC determines that -

(A) any member of SIPC (including any person who was a member

within one hundred eighty days prior to such determination) has

failed or is in danger of failing to meet its obligations to

customers; and

(B) one or more of the conditions specified in subsection

(b)(1) of this section exist with respect to such member,

SIPC may, upon notice to such member, file an application for a

protective decree with any court of competent jurisdiction

specified in section 78u(e) or 78aa, except that no such

application shall be filed with respect to a member the only

customers of which are persons whose claims could not be

satisfied by SIPC advances pursuant to section 78fff-3.

(4) Effect of other pending actions

An application with respect to a member of SIPC filed with a

court under paragraph (3) -

(A) may, with the consent of the Commission, be combined with

any action brought by the Commission, including an action by

the Commission for a temporary receiver pending an appointment

of a trustee under subsection (b)(3) of this section; and

(B) may be filed notwithstanding the pendency in the same or

any other court of any bankruptcy, mortgage foreclosure, or

equity receivership proceeding or any proceeding to reorganize,

conserve, or liquidate such member or its property, or any

proceeding to enforce a lien against property of such member.

(b) Court action

(1) Issuance of protective decree

Upon receipt of an application by SIPC under subsection (a)(3)

of this section, the court shall forthwith issue a protective

decree if the debtor consents thereto, if the debtor fails to

contest such application, or if the court finds that such debtor

-

(A) is insolvent within the meaning of section 101 of title

11, or is unable to meet its obligations as they mature;

(B) is the subject of a proceeding pending in any court or

before any agency of the United States or any State in which a

receiver, trustee, or liquidator for such debtor has been

appointed;

(C) is not in compliance with applicable requirements under

the 1934 Act (15 U.S.C. 78a et seq.) or rules of the Commission

or any self-regulatory organization with respect to financial

responsibility or hypothecation of customers' securities; or

(D) is unable to make such computations as may be necessary

to establish compliance with such financial responsibility or

hypothecation rules.

Unless the debtor consents to the issuance of a protective

decree, the application shall be heard three business days after

the date on which it is filed, or at such other time as the court

shall determine, taking into consideration the urgency which the

circumstances require.

(2) Jurisdiction and powers of court

(A) Exclusive jurisdiction

Upon the filing of an application with a court for a

protective decree with respect to a debtor, such court -

(i) shall have exclusive jurisdiction of such debtor and

its property wherever located (including property located

outside the territorial limits of such court and property

held by any other person as security for a debt or subject to

a lien);

(ii) shall have exclusive jurisdiction of any suit against

the trustee with respect to a liquidation proceeding; and

(iii) except as inconsistent with the provisions of this

chapter, shall have the jurisdiction, powers, and duties

conferred upon a court of the United States having

jurisdiction over cases under title 11, together with such

other jurisdiction, powers, and duties as are prescribed by

this chapter.

(B) Stay of pending actions

Pending the issuance of a protective decree under paragraph

(1), the court with which an application has been filed -

(i) shall stay any pending bankruptcy, mortgage

foreclosure, equity receivership, or other proceeding to

reorganize, conserve, or liquidate the debtor or its property

and any other suit against any receiver, conservator, or

trustee of the debtor or its property, and shall continue

such stay upon appointment of a trustee pursuant to paragraph

(3);

(ii) may stay any proceeding to enforce a lien against

property of the debtor or any other suit against the debtor,

including a suit by stockholders of the debtor which

interferes with prosecution by the trustee of claims against

former directors, officers, or employees of the debtor, and

may continue such stay upon appointment of a trustee pursuant

to paragraph (3);

(iii) may stay enforcement of, and upon appointment of a

trustee pursuant to paragraph (3), may continue the stay for

such period of time as may be appropriate, but shall not

abrogate any right of setoff, except to the extent such right

may be affected under section 553 of title 11, and shall not

abrogate the right to enforce a valid, nonpreferential lien

or pledge against the property of the debtor; and

(iv) may appoint a temporary receiver.

(3) Appointment of trustee and attorney

If the court issues a protective decree under paragraph (1),

such court shall forthwith appoint, as trustee for the

liquidation of the business of the debtor and as attorney for the

trustee, such persons as SIPC, in its sole discretion,

specifies. The persons appointed as trustee and as attorney for

the trustee may be associated with the same firm. SIPC may, in

its sole discretion, specify itself or one of its employees as

trustee in any case in which SIPC has determined that the

liabilities of the debtor to unsecured general creditors and to

subordinated lenders appear to aggregate less than $750,000 and

that there appear to be fewer than five hundred customers of such

debtor. No person may be appointed to serve as trustee or

attorney for the trustee if such person is not disinterested

within the meaning of paragraph (6), except that for any

specified purpose other than to represent a trustee in conducting

a liquidation proceeding, the trustee may, with the approval of

SIPC and the court, employ an attorney who is not disinterested.

A trustee appointed under this paragraph shall qualify by filing

a bond in the manner prescribed by section 322 of title 11,

except that neither SIPC nor any employee of SIPC shall be

required to file a bond when appointed as trustee.

(4) Removal to bankruptcy court

Upon the issuance of a protective decree and appointment of a

trustee, or a trustee and counsel, under this section, the court

shall forthwith order the removal of the entire liquidation

proceeding to the court of the United States in the same judicial

district having jurisdiction over cases under title 11. The

latter court shall thereupon have all of the jurisdiction,

powers, and duties conferred by this chapter upon the court to

which application for the issuance of the protective decree was

made.

(5) Compensation for services and reimbursement of expenses

(A) Allowances in general

The court shall grant reasonable compensation for services

rendered and reimbursement for proper costs and expenses

incurred (hereinafter in this paragraph referred to as

''allowances'') by a trustee, and by the attorney for such a

trustee, in connection with a liquidation proceeding. No

allowances (other than reimbursement for proper costs and

expenses incurred) shall be granted to SIPC or any employee of

SIPC for serving as trustee. Allowances may be granted on an

interim basis during the course of the liquidation proceeding

at such times and in such amounts as the court considers

appropriate.

(B) Application for allowances

Any person seeking allowances shall file with the court an

application which complies in form and content with the

provisions of title 11 governing applications for allowances

under such title. A copy of such application shall be served

upon SIPC when filed. The court shall fix a time for a hearing

on such application, and notice of such hearing shall be given

to the applicant, the trustee, the debtor, the creditors, SIPC,

and such other persons as the court may designate, except that

notice need not be given to customers whose claims have been or

will be satisfied in full or to creditors who cannot reasonably

be expected to receive any distribution during the course of

the liquidation proceeding.

(C) Recommendations of SIPC and awarding of allowances

Whenever an application for allowances is filed pursuant to

subparagraph (B), SIPC shall file its recommendation with

respect to such allowances with the court prior to the hearing

on such application and shall, if it so requests, be allowed a

reasonable time after such hearing within which to file a

further recommendation. In any case in which such allowances

are to be paid by SIPC without reasonable expectation of

recoupment thereof as provided in this chapter and there is no

difference between the amounts requested and the amounts

recommended by SIPC, the court shall award the amounts

recommended by SIPC. In determining the amount of allowances in

all other cases, the court shall give due consideration to the

nature, extent, and value of the services rendered, and shall

place considerable reliance on the recommendation of SIPC.

(D) Applicable restrictions

The restrictions on sharing of compensation set forth in

section 504 of title 11 shall apply to allowances.

(E) Charge against estate

Allowances granted by the court, including interim

allowances, shall be charged against the general estate of the

debtor as a cost and expense of administration. If the general

estate is insufficient to pay allowances in whole or in part,

SIPC shall advance such funds as are necessary for such

payment.

(6) Disinterestedness

(A) Standards

For purposes of paragraph (3), a person shall not be deemed

disinterested if -

(i) such person is a creditor (including a customer),

stockholder, or partner of the debtor;

(ii) such person is or was an underwriter of any of the

outstanding securities of the debtor or within five years

prior to the filing date was the underwriter of any

securities of the debtor;

(iii) such person is, or was within two years prior to the

filing date, a director, partner, officer, or employee of the

debtor or such an underwriter, or an attorney for the debtor

or such an underwriter; or

(iv) it appears that such person has, by reason of any

other direct or indirect relationship to, connection with, or

interest in the debtor or such an underwriter, or for any

other reason, an interest materially adverse to the interests

of any class of creditors (including customers) or

stockholders,

except that SIPC shall in all cases be deemed disinterested,

and an employee of SIPC shall be deemed disinterested if such

employee would, except for his association with SIPC, meet the

standards set forth in this subparagraph.

(B) Hearing

The court shall fix a time for a hearing on

disinterestedness, to be held promptly after the appointment of

a trustee. Notice of such hearing shall be mailed at least ten

days prior thereto to each person who, from the books and

records of the debtor, appears to have been a customer of the

debtor with an open account within the past twelve months, to

the address of such person as it appears from the books and

records of the debtor, and to the creditors and stockholders of

the debtor, to SIPC, and to such other persons as the court may

designate. The court may, in its discretion, also require that

notice be given by publication in such newspaper or newspapers

of general circulation as it may designate. At such hearing,

at any adjournment thereof, or upon application, the court

shall hear objections to the retention in office of a trustee

or attorney for a trustee on the grounds that such person is

not disinterested.

(c) SEC participation in proceedings

The Commission may, on its own motion, file notice of its

appearance in any proceeding under this chapter and may thereafter

participate as a party.

(d) SIPC participation

SIPC shall be deemed to be a party in interest as to all matters

arising in a liquidation proceeding, with the right to be heard on

all such matters, and shall be deemed to have intervened with

respect to all such matters with the same force and effect as if a

petition for such purpose had been allowed by the court.

-SOURCE-

(Pub. L. 91-598, Sec. 5, Dec. 30, 1970, 84 Stat. 1644; Pub. L.

95-283, Sec. 7, May 21, 1978, 92 Stat. 254; Pub. L. 95-598, title

III, Sec. 308(a)-(f), Nov. 6, 1978, 92 Stat. 2674.)

-REFTEXT-

REFERENCES IN TEXT

The 1934 Act, referred to in subsec. (b)(1)(C), means act June 6,

1934, ch. 404, 48 Stat. 881, as amended, known as the Securities

Exchange Act of 1934, which is classified principally to chapter 2B

(Sec. 78a et seq.) of this title. For complete classification of

this Act to the Code, see section 78a of this title and Tables.

This chapter, referred to in subsecs. (b)(2)(A)(iii), (5)(C), and

(c), was in the original ''this Act'', meaning Pub. L. 91-598, Dec.

30, 1970, 84 Stat. 1636. For complete classification of this Act to

the Code, see Tables.

-MISC2-

AMENDMENTS

1978 - Subsec. (a). Pub. L. 95-283, Sec. 7(a), added par. (2),

redesignated former par. (2) as (3) and, as so redesignated,

revised format of provisions by setting out cls. (A) and (B) and

inserted provisions relating to any person who was a member within

180 days prior to such determination and provisions relating to

claims filed under section 78fff-3 of this title, and redesignated

former par. (3) as (4) and, as so redesignated, substituted ''with

respect to a member of SIPC filed with a court under paragraph

(3)'' for ''under paragraph (2)'' in introductory text and inserted

''may,'' before ''with the'' in cl. (A).

Subsec. (b)(1)(A). Pub. L. 95-598, Sec. 308(a)(1), substituted

''section 101 of title 11'' for ''the Bankruptcy Act''.

Subsec. (b)(1)(B) to (E). Pub. L. 95-598, Sec. 308(a)(2), (3),

redesignated subpars. (C) to (E) as subpars. (B) to (D),

respectively. Former subpar. (B), which provided for issuance of

protective decree where court found that debtor had committed act

of bankruptcy within meaning of Bankruptcy Act, was struck out.

Subsec. (b)(2)(A)(iii). Pub. L. 95-598, Sec. 308(b), substituted

''the United States having jurisdiction over cases under title 11''

for ''bankruptcy by the Bankruptcy Act''.

Subsec. (b)(2)(B)(iii). Pub. L. 95-598, Sec. 308(c), substituted

''any right of setoff, except to the extent such right may be

affected under section 553 of title 11, and shall not abrogate''

for ''the right of setoff provided in section 68 of the Bankruptcy

Act''.

Subsec. (b)(3). Pub. L. 95-598, Sec. 308(d), substituted

''section 322 of title 11'' for ''the applicable provisions of the

Bankruptcy Act''.

Subsec. (b)(4). Pub. L. 95-598, Sec. 308(e), substituted

provisions relating to removal of proceeding to Bankruptcy Court

for provisions relating to reference of proceeding to referee in

bankruptcy.

Subsec. (b)(5)(B). Pub. L. 95-598, Sec. 308(f)(1), (2), (5),

redesignated subpar. (C) as (B) and substituted ''title 11

governing applications for allowances under such title'' for ''the

Bankruptcy Act governing applications for allowances under such

Act''. Former subpar. (B), which covered allowances to a referee in

bankruptcy or special master, was struck out.

Subsec. (b)(5)(C). Pub. L. 95-598, Sec. 308(f)(2), (3), (5),

redesignated subpar. (D) as (C) and substituted ''subparagraph

(B)'' for ''subparagraph (C)''. Former subpar. (C) redesignated

(B).

Subsec. (b)(5)(D). Pub. L. 95-598, Sec. 308(f)(2), (4), (5),

redesignated subpar. (E) as (D) and substituted ''Section 504 of

title 11'' for ''the Bankruptcy Act''. Former subpar. (D)

redesignated (C).

Subsec. (b)(5)(E), (F). Pub. L. 95-598, Sec. 308(f)(5),

redesignated subpar. (F) as (E). Former subpar. (E) redesignated

(D).

Subsec. (b). Pub. L. 95-283, Sec. 7(b), in par. (1) inserted

''protective'' after ''of'' in heading and substituted provisions

relating to issuance of protective decrees, for provisions relating

to specific findings necessary for issuance of a decree and

uncontested, etc., applications, in par. (2) substituted

''Jurisdiction and powers of court'' for ''Exclusive jurisdiction

over debtor'' in heading and substituted provisions setting forth

jurisdiction and powers of court with respect to exclusivity of

such jurisdiction, for provisions relating to exclusive

jurisdiction over the debtor, in par. (3) inserted ''and attorney''

after ''trustee'' in heading and substituted provisions relating to

appointment of trustee and attorney, for provisions relating to

appointment of trustee, in par. (4) substituted ''Reference to

referee in bankruptcy'' for ''Debtor and filing date defined'' in

heading and substituted provisions relating to reference to referee

in bankruptcy, for provisions defining terms ''debtor'' and

''filing date'', and added pars. (5) and (6).

Subsec. (d). Pub. L. 95-283, Sec. 7(c), added subsec. (d).

EFFECTIVE DATE OF 1978 AMENDMENT

Amendment by Pub. L. 95-598 effective Oct. 1, 1979, see section

402(a) of Pub. L. 95-598, set out as an Effective Date note

preceding section 101 of Title 11, Bankruptcy.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 78fff-4, 78iii, 78lll of

this title; title 11 section 362.

-CITE-

15 USC Sec. 78fff 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 2B-1 - SECURITIES INVESTOR PROTECTION

-HEAD-

Sec. 78fff. General provisions of a liquidation proceeding

-STATUTE-

(a) Purposes

The purposes of a liquidation proceeding under this chapter shall

be -

(1) as promptly as possible after the appointment of a trustee

in such liquidation proceeding, and in accordance with the

provisions of this chapter -

(A) to deliver customer name securities to or on behalf of

the customers of the debtor entitled thereto as provided in

section 78fff-2(c)(2) of this title; and

(B) to distribute customer property and (in advance thereof

or concurrently therewith) otherwise satisfy net equity claims

of customers to the extent provided in this section;

(2) to sell or transfer offices and other productive units of

the business of the debtor;

(3) to enforce rights of subrogation as provided in this

chapter; and

(4) to liquidate the business of the debtor.

(b) Application of title 11

To the extent consistent with the provisions of this chapter, a

liquidation proceeding shall be conducted in accordance with, and

as though it were being conducted under chapters 1, 3, and 5 and

subchapters I and II of chapter 7 of title 11. For the purposes of

applying such title in carrying out this section, a reference in

such title to the date of the filing of the petition shall be

deemed to be a reference to the filing date under this chapter.

(c) Determination of customer status

In a liquidation proceeding under this chapter, whenever a person

has acted with respect to cash or securities with the debtor after

the filing date and in a manner which would have given him the

status of a customer with respect to such cash or securities had

the action occurred prior to the filing date, and the trustee is

satisfied that such action was taken by the customer in good faith

and prior to the appointment of the trustee, the date on which such

action was taken shall be deemed to be the filing date for purposes

of determining the net equity of such customer with respect to such

cash or securities.

(d) Apportionment

In a liquidation proceeding under this chapter, any cash or

securities remaining after the liquidation of a lien or pledge made

by a debtor shall be apportioned between his general estate and

customer property in the proportion in which the general property

of the debtor and the cash and securities of the customers of such

debtor contributed to such lien or pledge. Securities apportioned

to the general estate under this subsection shall be subject to the

provisions of section 78lll(5)(A) of this title.

(e) Costs and expenses of administration

All costs and expenses of administration of the estate of the

debtor and of the liquidation proceeding shall be borne by the

general estate of the debtor to the extent it is sufficient

therefor, and the priorities of distribution from the general

estate shall be as provided in section 726 of title 11. Costs and

expenses of administration shall include payments pursuant to

section 78fff-2(e) of this title and section 78fff-3(c)(1) of this

title (to the extent such payments recovered securities which were

apportioned to the general estate pursuant to subsection (d) of

this section) and costs and expenses of SIPC employees utilized by

the trustee pursuant to section 78fff-1(a)(2) of this title. All

funds advanced by SIPC to a trustee for such costs and expenses of

administration shall be recouped from the general estate under

section 507(a)(1) of title 11.

-SOURCE-

(Pub. L. 91-598, Sec. 6, Dec. 30, 1970, 84 Stat. 1646; Pub. L.

95-283, Sec. 8, May 21, 1978, 92 Stat. 259; Pub. L. 95-598, title

III, Sec. 308(g), (h), Nov. 6, 1978, 92 Stat. 2675.)

-REFTEXT-

REFERENCES IN TEXT

This chapter, referred to in subsecs. (a)(1), (3), (b), (c), and

(d), was in the original ''this Act'', meaning Pub. L. 91-598, Dec.

30, 1970, 84 Stat. 1636. For complete classification of this Act to

the Code, see Tables.

-MISC2-

AMENDMENTS

1978 - Pub. L. 95-283 substituted ''General provisions of a

liquidation proceeding'' for ''Liquidation proceedings'' in section

catchline.

Subsec. (a). Pub. L. 95-283 in heading substituted ''Purposes''

for ''General purposes of liquidation proceeding'', in introductory

text substituted provisions relating to purposes of liquidation

proceedings under this chapter, for provisions relating to purposes

of any proceeding in which a trustee has been appointed under

section 78eee(b)(3) of this title, in par. (1) substituted

provisions requiring execution of authorities to deliver customer

name securities and distribute customer property in accordance with

this chapter, for provisions requiring execution of authorities to

return specifically identifiable property and distribute the single

and separate fund in accordance with this section, and in par. (2)

substituted provisions authorizing sale, etc., of productive units

of the debtor, for provisions authorizing operation of the business

of the debtor.

Subsec. (b). Pub. L. 95-598, Sec. 308(g), in heading substituted

''title 11'' for ''Bankruptcy Act'' and in text ''under chapters 1,

3, and 5 and subchapters I and II of chapter 7 of title 11. For the

purposes of applying such title in carrying out this section, a

reference in such title to the date of the filing of the petition

shall be deemed to be a reference to the filing date under this

chapter.'' for ''under, the Bankruptcy Act. For purposes of

applying the Bankruptcy Act to this chapter, any reference in the

Bankruptcy Act to the date of commencement of proceedings under the

Bankruptcy Act shall be deemed to be a reference to the filing date

under this chapter.''

Pub. L. 95-283 in heading substituted ''Application of Bankruptcy

Act'' for ''Powers and Duties of Trustee'', and in text substituted

provisions relating to applicability of Bankruptcy Act to

liquidation proceedings, for provisions relating to the powers and

duties of trustees. See section 78fff-1 of this title.

Subsec. (c). Pub. L. 95-283 in heading substituted

''Determination of customer status'' for ''Application of

Bankruptcy Act'', and in text substituted provisions relating to

determination of status of a customer with respect to cash or

securities, for provisions setting forth general and special

provisions of the Bankruptcy Act applicable to liquidation

proceedings, and defining terms for purposes of such applicability

and the provisions of this section. See subsec. (b) of this

section and section 78fff-2(c) of this title.

Subsec. (d). Pub. L. 95-283 in heading substituted

''Apportionment'' for ''Completion of open contractual

commitments'', and in text substituted provisions relating to

apportionment of cash or securities remaining after the liquidation

of a lien or pledge made by a debtor, for provisions relating to

completion by the trustee of open contractual commitments, which

were made in the ordinary course of the debtor's business and which

were outstanding on the filing date. See section 78fff-2(e) of

this title.

Subsec. (e). Pub. L. 95-598, Sec. 308(h), substituted in first

sentence ''section 726 of title 11'' for ''the Bankruptcy Act'' and

in last sentence ''under section 507(a)(1) of title 11'' for ''as a

first priority under the Bankruptcy Act''.

Pub. L. 95-283 in heading substituted ''Costs and expense of

administration'' for ''Notice'', and in text substituted provisions

relating to costs and expenses of administration of the estate of

the debtor and of the liquidation proceeding, for provisions

relating to notice requirements for the trustee subsequent to

appointment as trustee. See section 78fff-2(a)(l) of this title.

Subsec. (f). Pub. L. 95-283 struck out subsec. (f) requiring

advances by the SIPC to the trustee for customers' claims and

completion of open contractual commitments, and authorizing

discretionary advances to the trustee for compensation of personnel

deemed necessary for the liquidation proceeding. See section

78fff-3 of this title.

Subsec. (g). Pub. L. 95-283 struck out subsec. (g) setting forth

provisions relating to payments to customers by the trustee, and

provisions respecting the quantum of proof of claim required for

such payment. See section 78fff-2(a)(2) and (b) of this title.

Subsec. (h). Pub. L. 95-283 struck out subsec. (h) relating to

nonapplicability of provisions to proof of claim by associates and

others connected in some way with the debtor. See section

78fff-2(a)(2) of this title.

Subsec. (i). Pub. L. 95-283 struck out subsec. (i) setting forth

provisions relating to reports by the trustee to the court. See

section 78fff-1(c) of this title.

Subsec. (j). Pub. L. 95-283 struck out subsec. (j) which related

to nonapplicability of provisions to rights of persons to establish

by formal proof such claims as they may have to payment or delivery

of specific securities. See section 78fff-2(a)(4) of this title.

EFFECTIVE DATE OF 1978 AMENDMENT

Amendment by Pub. L. 95-598 effective Oct. 1, 1979, see section

402(a) of Pub. L. 95-598, set out as an Effective Date note

preceding section 101 of Title 11, Bankruptcy.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 78fff-2, 78lll of this

title.

-CITE-

15 USC Sec. 78fff-1 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 2B-1 - SECURITIES INVESTOR PROTECTION

-HEAD-

Sec. 78fff-1. Powers and duties of a trustee

-STATUTE-

(a) Trustee powers

A trustee shall be vested with the same powers and title with

respect to the debtor and the property of the debtor, including the

same rights to avoid preferences, as a trustee in a case under

title 11. In addition, a trustee may, with the approval of SIPC but

without any need for court approval -

(1) hire and fix the compensation of all personnel (including

officers and employees of the debtor and of its examining

authority) and other persons (including accountants) that are

deemed by the trustee necessary for all or any purposes of the

liquidation proceeding;

(2) utilize SIPC employees for all or any purposes of a

liquidation proceeding; and

(3) margin and maintain customer accounts of the debtor for the

purposes of section 78fff-2(f) of this title.

(b) Trustee duties

To the extent consistent with the provisions of this chapter or

as otherwise ordered by the court, a trustee shall be subject to

the same duties as a trustee in a case under chapter 7 of title 11,

including, if the debtor is a commodity broker, as defined under

section 101 of such title, the duties specified in subchapter IV of

such chapter 7, except that a trustee may, but shall have no duty

to, reduce to money any securities constituting customer property

or in the general estate of the debtor. In addition, the trustee

shall -

(1) deliver securities to or on behalf of customers to the

maximum extent practicable in satisfaction of customer claims for

securities of the same class and series of an issuer; and

(2) subject to the prior approval of SIPC but without any need

for court approval, pay or guarantee all or any part of the

indebtedness of the debtor to a bank, lender, or other person if

the trustee determines that the aggregate market value of

securities to be made available to the trustee upon the payment

or guarantee of such indebtedness does not appear to be less than

the total amount of such payment or guarantee.

(c) Reports by trustee to court

The trustee shall make to the court and to SIPC such written

reports as may be required of a trustee in a case under chapter 7

of title 11, and shall include in such reports information with

respect to the progress made in distributing cash and securities to

customers. Such reports shall be in such form and detail as the

Commission determines by rule to present fairly the results of the

liquidation proceeding as of the date of or for the period covered

by such reports, having due regard for the requirements of section

78q of this title and the rules prescribed under such section and

the magnitude of items and transactions involved in connection with

the operations of a broker or dealer.

(d) Investigations

The trustee shall -

(1) as soon as practicable, investigate the acts, conduct,

property, liabilities, and financial condition of the debtor, the

operation of its business, and any other matter, to the extent

relevant to the liquidation proceeding, and report thereon to the

court;

(2) examine, by deposition or otherwise, the directors and

officers of the debtor and any other witnesses concerning any of

the matters referred to in paragraph (1);

(3) report to the court any facts ascertained by the trustee

with respect to fraud, misconduct, mismanagement, and

irregularities, and to any causes of action available to the

estate; and

(4) as soon as practicable, prepare and submit, to SIPC and

such other persons as the court designates and in such form and

manner as the court directs, a statement of his investigation of

matters referred to in paragraph (1).

-SOURCE-

(Pub. L. 91-598, Sec. 7, as added Pub. L. 95-283, Sec. 9, May 21,

1978, 92 Stat. 260; amended Pub. L. 95-598, title III, Sec.

308(i)-(k), Nov. 6, 1978, 92 Stat. 2675.)

-MISC1-

PRIOR PROVISIONS

A prior section 7 of Pub. L. 91-598 was renumbered section 11 and

is classified to section 78ggg of this title.

AMENDMENTS

1978 - Subsec. (a). Pub. L. 95-598, Sec. 308(i), substituted

''trustee in a case under title 11'' for ''trustee in bankruptcy

under the Bankruptcy Act has with respect to a bankrupt and the

property of a bankrupt''.

Subsec. (b). Pub. L. 95-598, Sec. 308(j), substituted ''trustee

in a case under chapter 7 of title 11, including, if the debtor is

a commodity broker, as defined under section 101 of such title, the

duties specified in subchapter IV of such chapter 7,'' for

''trustee in bankruptcy''.

Subsec. (c). Pub. L. 95-598, Sec. 308(k), substituted ''required

of a trustee in a case under chapter 7 of title 11'' for ''required

by the Bankruptcy Act''.

EFFECTIVE DATE OF 1978 AMENDMENT

Amendment by Pub. L. 95-598 effective Oct. 1, 1979, see section

402(a) of Pub. L. 95-598, set out as an Effective Date note

preceding section 101 of Title 11, Bankruptcy.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 78fff, 78fff-2, 78fff-3,

78fff-4 of this title.

-CITE-

15 USC Sec. 78fff-2 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 2B-1 - SECURITIES INVESTOR PROTECTION

-HEAD-

Sec. 78fff-2. Special provisions of a liquidation proceeding

-STATUTE-

(a) Notice and claims

(1) Notice of proceedings

Promptly after the appointment of the trustee, such trustee

shall cause notice of the commencement of proceedings under this

section to be published in one or more newspapers of general

circulation in the form and manner determined by the court, and

at the same time shall cause a copy of such notice to be mailed

to each person who, from the books and records of the debtor,

appears to have been a customer of the debtor with an open

account within the past twelve months, to the address of such

person as it appears from the books and records of the debtor.

Notice to creditors other than customers shall be given in the

manner prescribed by title 11, except that such notice shall be

given by the trustee.

(2) Statement of claim

A customer shall file with the trustee a written statement of

claim but need not file a formal proof of claim, except that no

obligation of the debtor to any person associated with the debtor

within the meaning of section 78c(a)(18) of this title or section

78c(a)(21) of this title, any beneficial owner of 5 per centum or

more of the voting stock of the debtor, or any member of the

immediate family of any such person or owner may be satisfied

without formal proof of claim.

(3) Time limitations

No claim of a customer or other creditor of the debtor which is

received by the trustee after the expiration of the six-month

period beginning on the date of publication of notice under

paragraph (1) shall be allowed, except that the court may, upon

application within such period and for cause shown, grant a

reasonable, fixed extension of time for the filing of a claim by

the United States, by a State or political subdivision thereof,

or by an infant or incompetent person without a guardian. Any

claim of a customer for net equity which is received by the

trustee after the expiration of such period of time as may be

fixed by the court (not exceeding sixty days after the date of

publication of notice under paragraph (1)) need not be paid or

satisfied in whole or in part out of customer property, and, to

the extent such claim is satisfied from moneys advanced by SIPC,

it shall be satisfied in cash or securities (or both) as the

trustee determines is most economical to the estate.

(4) Effect on claims

Except as otherwise provided in this section, and without

limiting the powers and duties of the trustee to discharge

obligations promptly as specified in this section, nothing in

this section shall limit the right of any person, including any

subrogee, to establish by formal proof or otherwise as the court

may provide such claims as such person may have against the

debtor, including claims for the payment of money and the

delivery of specific securities, without resort to moneys

advanced by SIPC to the trustee.

(b) Payments to customers

After receipt of a written statement of claim pursuant to

subsection (a)(2), of this section, the trustee shall promptly

discharge, in accordance with the provisions of this section, all

obligations of the debtor to a customer relating to, or net equity

claims based upon, securities or cash, by the delivery of

securities or the making of payments to or for the account of such

customer (subject to the provisions of subsection (d) of this

section and section 78fff-3(a) of this title) insofar as such

obligations are ascertainable from the books and records of the

debtor or are otherwise established to the satisfaction of the

trustee. For purposes of distributing securities to customers, all

securities shall be valued as of the close of business on the

filing date. For purposes of this subsection, the court shall,

among other things -

(1) with respect to net equity claims, authorize the trustee to

satisfy claims out of moneys made available to the trustee by

SIPC notwithstanding the fact that there has not been any showing

or determination that there are sufficient funds of the debtor

available to satisfy such claims; and

(2) with respect to claims relating to, or net equities based

upon, securities of a class and series of an issuer which are

ascertainable from the books and records of the debtor or are

otherwise established to the satisfaction of the trustee,

authorize the trustee to deliver securities of such class and

series if and to the extent available to satisfy such claims in

whole or in part, with partial deliveries to be made pro rata to

the greatest extent considered practicable by the trustee.

Any payment or delivery of property pursuant to this subsection may

be conditioned upon the trustee requiring claimants to execute, in

a form to be determined by the trustee, appropriate receipts,

supporting affidavits, releases, and assignments, but shall be

without prejudice to any right of a claimant to file formal proof

of claim within the period specified in subsection (a)(3) of this

section for any balance of securities or cash to which such

claimant considers himself entitled.

(c) Customer related property

(1) Allocation of customer property

The trustee shall allocate customer property of the debtor as

follows:

(A) first, to SIPC in repayment of advances made by SIPC

pursuant to section 78fff-3(c)(1) of this title, to the extent

such advances recovered securities which were apportioned to

customer property pursuant to section 78fff(d) of this title;

(B) second, to customers of such debtor, who shall share

ratably in such customer property on the basis and to the

extent of their respective net equities;

(C) third, to SIPC as subrogee for the claims of customers;

(D) fourth, to SIPC in repayment of advances made by SIPC

pursuant to section 78fff-3(c)(2) of this title.

Any customer property remaining after allocation in accordance

with this paragraph shall become part of the general estate of

the debtor. To the extent customer property and SIPC advances

pursuant to section 78fff-3(a) of this title are not sufficient

to pay or otherwise satisfy in full the net equity claims of

customers, such customers shall be entitled, to the extent only

of their respective unsatisfied net equities, to participate in

the general estate as unsecured creditors. For purposes of

allocating customer property under this paragraph, securities to

be delivered in payment of net equity claims for securities of

the same class and series of an issuer shall be valued as of the

close of business on the filing date.

(2) Delivery of customer name securities

The trustee shall deliver customer name securities to or on

behalf of a customer of the debtor entitled thereto if the

customer is not indebted to the debtor. If the customer is so

indebted, such customer may, with the approval of the trustee,

reclaim customer name securities upon payment to the trustee,

within such period of time as the trustee determines, of all

indebtedness of such customer to the debtor.

(3) Recovery of transfers

Whenever customer property is not sufficient to pay in full the

claims set forth in subparagraphs (A) through (D) of paragraph

(1), the trustee may recover any property transferred by the

debtor which, except for such transfer, would have been customer

property if and to the extent that such transfer is voidable or

void under the provisions of title 11. Such recovered property

shall be treated as customer property. For purposes of such

recovery, the property so transferred shall be deemed to have

been the property of the debtor and, if such transfer was made to

a customer or for his benefit, such customer shall be deemed to

have been a creditor, the laws of any State to the contrary

notwithstanding.

(d) Purchase of securities

The trustee shall, to the extent that securities can be purchased

in a fair and orderly market, purchase securities as necessary for

the delivery of securities to customers in satisfaction of their

claims for net equities based on securities under section

78fff-1(b)(1) of this title and for the transfer of customer

accounts under subsection (f) of this section, in order to restore

the accounts of such customers as of the filing date. To the

extent consistent with subsection (c) of this section, customer

property and moneys advanced by SIPC may be used by the trustee to

pay for securities so purchased. Moneys advanced by SIPC for each

account of a separate customer may not be used to purchase

securities to the extent that the aggregate value of such

securities on the filing date exceeded the amount permitted to be

advanced by SIPC under the provisions of section 78fff-3(a) of this

title.

(e) Closeouts

(1) In general

Any contract of the debtor for the purchase or sale of

securities in the ordinary course of its business with other

brokers or dealers which is wholly executory on the filing date

shall not be completed by the trustee, except to the extent

permitted by SIPC rule. Upon the adoption by SIPC of rules with

respect to the closeout of such a contract but prior to the

adoption of rules with respect to the completion of such a

contract, the other broker or dealer shall close out such

contract, without unnecessary delay, in the best available market

and pursuant to such SIPC rules. Until such time as SIPC adopts

rules with respect to the completion or closeout of such a

contract, such a contract shall be closed out in accordance with

Commission Rule S6(d)-1 as in effect on May 21, 1978, or any

comparable rule of the Commission subsequently adopted, to the

extent not inconsistent with the provisions of this subsection.

(2) Net profit or loss

A broker or dealer shall net all profits and losses on all

contracts closed out under this subsection and -

(A) if such broker or dealer shows a net profit on such

contracts, he shall pay such net profit to the trustee; and

(B) if such broker or dealer sustains a net loss on such

contracts, he shall be entitled to file a claim against the

debtor with the trustee in the amount of such net loss.

To the extent that a net loss sustained by a broker or dealer

arises from contracts pursuant to which such broker or dealer was

acting for its own customer, such broker or dealer shall be

entitled to receive funds advanced by SIPC to the trustee in the

amount of such loss, except that such broker or dealer may not

receive more than $40,000 for each separate customer with respect

to whom it sustained a loss. With respect to a net loss which is

not payable under the preceding sentence from funds advanced by

SIPC, the broker or dealer shall be entitled to participate in

the general estate as an unsecured creditor.

(3) Registered clearing agencies

Neither a registered clearing agency which by its rules has an

established procedure for the closeout of open contracts between

an insolvent broker or dealer and its participants, nor its

participants to the extent such participants' claims are or may

be processed within the registered clearing agency, shall be

entitled to receive SIPC funds in payment of any losses on such

contracts, except as SIPC may otherwise provide by rule. If such

registered clearing agency or its participants sustain a net loss

on the closeout of such contracts with the debtor, they shall

have the right to participate in the general estate as unsecured

creditors to the extent of such loss. Any funds or other

property owed to the debtor, after the closeout of such

contracts, shall be promptly paid to the trustee. Rules adopted

by SIPC under this paragraph shall provide that in no case may a

registered clearing agency or its participants, to the extent

such participants' claims are or may be processed within the

registered clearing agency, be entitled to receive funds advanced

by SIPC in an amount greater, in the aggregate, than could be

received by the participants if such participants proceeded

individually under paragraph (1) and (2).

(4) ''Customer'' defined

For purposes of this subsection, the term ''customer'' does not

include any person who -

(A) is a broker or dealer;

(B) had a claim for cash or securities which by contract,

agreement, or understanding, or by operation of law, was part

of the capital of the claiming broker or dealer or was

subordinated to the claims of any or all creditors of such

broker or dealer; or

(C) had a relationship of the kind specified in section

78fff-3(a)(5) of this title with the debtor.

A claiming broker or dealer shall be deemed to have been acting

on behalf of its customer if it acted as agent for such customer

or if it held such customer's order which was to be executed as a

part of its contract with the debtor.

(f) Transfer of customer accounts

In order to facilitate the prompt satisfaction of customer claims

and the orderly liquidation of the debtor, the trustee may,

pursuant to terms satisfactory to him and subject to the prior

approval of SIPC, sell or otherwise transfer to another member of

SIPC, without consent of any customer, all or any part of the

account of a customer of the debtor. In connection with any such

sale or transfer to another member of SIPC and subject to the prior

approval of SIPC, the trustee may -

(1) waive or modify the need to file a written statement of

claim pursuant to subsection (a)(2) of this section; and

(2) enter into such agreements as the trustee considers

appropriate under the circumstances to indemnify any such member

of SIPC against shortages of cash or securities in the customer

accounts sold or transferred.

The funds of SIPC may be made available to guarantee or secure any

indemnification under paragraph (2). The prior approval of SIPC to

such indemnification shall be conditioned, among such other

standards as SIPC may determine, upon a determination by SIPC that

the probable cost of any such indemnification can reasonably be

expected not to exceed the cost to SIPC of proceeding under section

78fff-3(a) of this title and section 78fff-3(b) of this title.

-SOURCE-

(Pub. L. 91-598, Sec. 8, as added Pub. L. 95-283, Sec. 9, May 21,

1978, 92 Stat. 261; amended Pub. L. 95-598, title III, Sec. 308(l),

(m), Nov. 6, 1978, 92 Stat. 2675.)

-MISC1-

PRIOR PROVISIONS

A prior section 8 of Pub. L. 91-598 was renumbered section 12 and

is classified to section 78hhh of this title.

AMENDMENTS

1978 - Subsecs. (a)(1), (c)(3). Pub. L. 95-598 substituted

''title 11'' for ''the Bankruptcy Act''.

EFFECTIVE DATE OF 1978 AMENDMENT

Amendment by Pub. L. 95-598 effective Oct. 1, 1979, see section

402(a) of Pub. L. 95-598, set out as an Effective Date note

preceding section 101 of Title 11, Bankruptcy.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 78fff, 78fff-1, 78fff-3,

78fff-4, 78lll of this title.

-CITE-

15 USC Sec. 78fff-3 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 2B-1 - SECURITIES INVESTOR PROTECTION

-HEAD-

Sec. 78fff-3. SIPC advances

-STATUTE-

(a) Advances for customers' claims

In order to provide for prompt payment and satisfaction of net

equity claims of customers of the debtor, SIPC shall advance to the

trustee such moneys, not to exceed $500,000 for each customer, as

may be required to pay or otherwise satisfy claims for the amount

by which the net equity of each customer exceeds his ratable share

of customer property, except that -

(1) if all or any portion of the net equity claim of a customer

in excess of his ratable share of customer property is a claim

for cash, as distinct from a claim for securities, the amount

advanced to satisfy such claim for cash shall not exceed $100,000

for each such customer;

(2) a customer who holds accounts with the debtor in separate

capacities shall be deemed to be a different customer in each

capacity;

(3) if all or any portion of the net equity claim of a customer

in excess of his ratable share of customer property is satisfied

by the delivery of securities purchased by the trustee pursuant

to section 78fff-2(d) of this title, the securities so purchased

shall be valued as of the filing date for purposes of applying

the dollar limitations of this subsection;

(4) no advance shall be made by SIPC to the trustee to pay or

otherwise satisfy, directly or indirectly, any net equity claim

of a customer who is a general partner, officer, or director of

the debtor, a beneficial owner of five per centum or more of any

class of equity security of the debtor (other than a

nonconvertible stock having fixed preferential dividend and

liquidation rights), a limited partner with a participation of

five per centum or more in the net assets or net profits of the

debtor, or a person who, directly or indirectly and through

agreement or otherwise, exercised or had the power to exercise a

controlling influence over the management or policies of the

debtor; and

(5) no advance shall be made by SIPC to the trustee to pay or

otherwise satisfy any net equity claim of any customer who is a

broker or dealer or bank, other than to the extent that it shall

be established to the satisfaction of the trustee, from the books

and records of the debtor or from the books and records of a

broker or dealer or bank, or otherwise, that the net equity claim

of such broker or dealer or bank against the debtor arose out of

transactions for customers of such broker or dealer or bank

(which customers are not themselves a broker or dealer or bank or

a person described in paragraph (4)), in which event each such

customer of such broker or dealer or bank shall be deemed a

separate customer of the debtor.

To the extent moneys are advanced by SIPC to the trustee to pay or

otherwise satisfy the claims of customers, in addition to all other

rights it may have at law or in equity, SIPC shall be subrogated to

the claims of such customers with the rights and priorities

provided in this chapter, except that SIPC as subrogee may assert

no claim against customer property until after the allocation

thereof to customers as provided in section 78fff-2(c) of this

title.

(b) Other advances

SIPC shall advance to the trustee -

(1) such moneys as may be required to carry out section

78fff-2(e) of this title; and

(2) to the extent the general estate of the debtor is not

sufficient to pay any and all costs and expenses of

administration of the estate of the debtor and of the liquidation

proceeding, the amount of such costs and expenses.

(c) Discretionary advances

SIPC may advance to the trustee such moneys as may be required to

-

(1) pay or guarantee indebtedness of the debtor to a bank,

lender, or other person under section 78fff-1(b)(2) of this

title;

(2) guarantee or secure any indemnity under section 78fff-2(f)

of this title; and

(3) purchase securities under section 78fff-2(d) of this title.

-SOURCE-

(Pub. L. 91-598, Sec. 9, as added Pub. L. 95-283, Sec. 9, May 21,

1978, 92 Stat. 265; amended Pub. L. 96-433, Sec. 1, Oct. 10, 1980,

94 Stat. 1855.)

-REFTEXT-

REFERENCES IN TEXT

This chapter, referred to in subsec. (a), was in the original

''this Act'', meaning Pub. L. 91-598, Dec. 30, 1970, 84 Stat. 1636.

For complete classification of this Act to the Code, see Tables.

-MISC2-

PRIOR PROVISIONS

A prior section 9 of Pub. L. 91-598 was renumbered section 13 and

is classified to section 78iii of this title.

AMENDMENTS

1980 - Subsec. (a). Pub. L. 96-433, Sec. 1(1), substituted in

opening par. ''$500,000'' for ''$100,000''.

Subsec. (a)(1). Pub. L. 96-433, Sec. 1(2), substituted

''$100,000'' for ''$40,000''.

EFFECTIVE DATE OF 1980 AMENDMENT

Amendment by Pub. L. 96-433 effective Oct. 10, 1980, see section

5(a) of Pub. L. 96-433, set out as a note under section 78u of this

title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 78eee, 78fff, 78fff-2,

78fff-4 of this title.

-CITE-

15 USC Sec. 78fff-4 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 2B-1 - SECURITIES INVESTOR PROTECTION

-HEAD-

Sec. 78fff-4. Direct payment procedure

-STATUTE-

(a) Determination regarding direct payments

If SIPC determines that -

(1) any member of SIPC (including a person who was a member

within one hundred eighty days prior to such determination) has

failed or is in danger of failing to meet its obligations to

customers;

(2) one or more of the conditions specified in section

78eee(b)(1) of this title exist with respect to such member;

(3) the claim of each customer of the member is within the

limits of protection provided in section 78fff-3(a) of this

title;

(4) the claims of all customers of the member aggregate less

than $250,000;

(5) the cost to SIPC of satisfying customer claims under this

section will be less than the cost under a liquidation

proceeding; and

(6) such member's registration as a broker-dealer under section

78o(b) of this title has been terminated, or such member has

consented to the use of the direct payment procedure set forth in

this section,

SIPC may, in its discretion, use the direct payment procedure set

forth in this section in lieu of instituting a liquidation

proceeding with respect to such member.

(b) Notice

Promptly after a determination under subsection (a) of this

section that the direct payment procedure is to be used with

respect to a member, SIPC shall cause notice of such direct payment

procedure to be published in one or more newspapers of general

circulation in a form and manner determined by SIPC, and at the

same time shall cause to be mailed a copy of such notice to each

person who appears, from the books and records of such member, to

have been a customer of the member with an open account within the

past twelve months, to the address of such person as it appears

from the books and records of such member. Such notice shall state

that SIPC will satisfy customer claims directly, without a

liquidation proceeding, and shall set forth the form and manner in

which claims may be presented. A direct payment procedure shall be

deemed to commence on the date of first publication under this

subsection and no claim by a customer shall be paid or otherwise

satisfied by SIPC unless received within the six-month period

beginning on such date, except that SIPC shall, upon application

within such period, and for cause shown, grant a reasonable, fixed

extension of time for the filing of a claim by the United States,

by a State or political subdivision thereof, or by an infant or

incompetent person without a guardian.

(c) Payments to customers

SIPC shall promptly satisfy all obligations of the member to each

of its customers relating to, or net equity claims based upon,

securities or cash by the delivery of securities or the effecting

of payments to such customer (subject to the provisions of section

78fff-2(d) of this title and section 78fff-3(a) of this title

insofar as such obligations are ascertainable from the books and

records of the member or are otherwise established to the

satisfaction of SIPC. For purposes of distributing securities to

customers, all securities shall be valued as of the close of

business on the date of publication under subsection (b) of this

section. Any payment or delivery of securities pursuant to this

section may be conditioned upon the execution and delivery, in a

form to be determined by SIPC, of appropriate receipts, supporting

affidavits, releases, and assignments. To the extent moneys of

SIPC are used to satisfy the claims of customers, in addition to

all other rights it may have at law or in equity, SIPC shall be

subrogated to the claims of such customers against the member.

(d) Effect on claims

Except as otherwise provided in this section, nothing in this

section shall limit the right of any person, including any

subrogee, to establish by formal proof or otherwise such claims as

such person may have against the member, including claims for the

payment of money and the delivery of specific securities, without

resort to moneys of SIPC.

(e) Jurisdiction of Bankruptcy Courts

After SIPC has published notice of the institution of a direct

payment procedure under this section, any person aggrieved by any

determination of SIPC with respect to his claim under subsection

(c) of this section may, within six months following mailing by

SIPC of its determination with respect to such claim, seek a final

adjudication of such claim. The courts of the United States having

jurisdiction over cases under title 11 shall have original and

exclusive jurisdiction of any civil action for the adjudication of

such claim, without regard to the citizenship of the parties or the

amount in controversy. Any such action shall be brought in the

judicial district where the head office of the debtor is located.

Any determination of the rights of a customer under subsection (c)

of this section shall not prejudice any other right or remedy of

the customer against the member.

(f) Discontinuance of direct payment procedures

If, at any time after the institution of a direct payment

procedure with respect to a member, SIPC determines, in its

discretion, that continuation of such direct payment procedure is

not appropriate, SIPC may cease such direct payment procedure and,

upon so doing, may seek a protective decree pursuant to section

78eee of this title. To the extent payments of cash, distributions

of securities, or determinations with respect to the validity of a

customer's claim are made under this section, such payments,

distributions, and determinations shall be recognized and given

full effect in the event of any subsequent liquidation proceeding.

Any action brought under subsection (e) of this section and pending

at the time of the appointment of a trustee under section

78eee(b)(3) of this title shall be permanently stayed by the court

at the time of such appointment, and the court shall enter an order

directing the transfer or removal to it of such suit. Upon such

removal or transfer the complaint in such action shall constitute

the plaintiff's claim in the liquidation proceeding, if

appropriate, and shall be deemed received by the trustee on the

date of his appointment regardless of the date of actual transfer

or removal of such action.

(g) References

For purposes of this section, any reference to the trustee in

sections 78fff-1(b)(1), 78fff-2(d), 78fff-2(f), 78fff-3(a),

78lll(5) and 78lll(12) of this title shall be deemed a reference to

SIPC, and any reference to the date of publication of notice under

section 78fff-2(a) of this title shall be deemed a reference to the

publication of notice under this section.

-SOURCE-

(Pub. L. 91-598, Sec. 10, as added Pub. L. 95-283, Sec. 9, May 21,

1978, 92 Stat. 266; amended Pub. L. 95-598, title III, Sec. 308(n),

Nov. 6, 1978, 92 Stat. 2675.)

-MISC1-

PRIOR PROVISIONS

A prior section 10 of Pub. L. 91-598 was renumbered section 14

and is classified to section 78jjj of this title.

AMENDMENTS

1978 - Subsec. (e). Pub. L. 95-598 substituted in heading

''Bankruptcy Courts'' for ''District Courts'' and in text ''courts

of the United States having jurisdiction over cases under title

11'' for ''district courts of the United States'' and struck out

'', without regard to the citizenship of the parties or the amount

in controversy'' after ''adjudication of such claim''.

EFFECTIVE DATE OF 1978 AMENDMENT

Amendment by Pub. L. 95-598 effective Oct. 1, 1979, see section

402(a) of Pub. L. 95-598, set out as an Effective Date note

preceding section 101 of Title 11, Bankruptcy.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 78lll of this title.

-CITE-

15 USC Sec. 78ggg 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 2B-1 - SECURITIES INVESTOR PROTECTION

-HEAD-

Sec. 78ggg. SEC functions

-STATUTE-

(a) Administrative procedure

Determinations of the Commission, for purposes of making rules

pursuant to section 78ccc(e)(3) and section 78iii(f) of this title

shall be after appropriate notice and opportunity for a hearing,

and for submission of views of interested persons in accordance

with the rulemaking procedures specified in section 553 of title 5,

but the holding of a hearing shall not prevent adoption of any such

rule or regulation upon expiration of the notice period specified

in subsection (d) of such section and shall not be required to be

on a record within the meaning of subchapter II of chapter 5 of

such title.

(b) Enforcement of actions

In the event of the refusal of SIPC to commit its funds or

otherwise to act for the protection of customers of any member of

SIPC, the Commission may apply to the district court of the United

States in which the principal office of SIPC is located for an

order requiring SIPC to discharge its obligations under this

chapter and for such other relief as the court may deem appropriate

to carry out the purposes of this chapter.

(c) Examinations and reports

(1) Examination of SIPC, etc.

The Commission may make such examinations and inspections of

SIPC and require SIPC to furnish it with such reports and records

or copies thereof as the Commission may consider necessary or

appropriate in the public interest or to effectuate the purposes

of this chapter.

(2) Reports from SIPC

As soon as practicable after the close of each fiscal year,

SIPC shall submit to the Commission a written report relative to

the conduct of its business, and the exercise of the other rights

and powers granted by this chapter, during such fiscal year.

Such report shall include financial statements setting forth the

financial position of SIPC at the end of such fiscal year and the

results of its operations (including the source and application

of its funds) for such fiscal year. The financial statements so

included shall be examined by an independent public accountant or

firm of independent public accountants, selected by SIPC and

satisfactory to the Commission, and shall be accompanied by the

report thereon of such accountant or firm. The Commission shall

transmit such report to the President and the Congress with such

comment thereon as the Commission may deem appropriate.

-SOURCE-

(Pub. L. 91-598, Sec. 11, formerly Sec. 7, Dec. 30, 1970, 84 Stat.

1652, 1653; renumbered Sec. 11 and amended Pub. L. 95-283, Sec. 9,

10, May 21, 1978, 92 Stat. 260, 268.)

-REFTEXT-

REFERENCES IN TEXT

This chapter, referred to in subsecs. (b) and (c), was in the

original ''this Act'', meaning Pub. L. 91-598, Dec. 30, 1970, 84

Stat. 1636. For complete classification of this Act to the Code,

see Tables.

-COD-

CODIFICATION

Section is comprised of section 11 of Pub. L. 91-598. Subsec. (d)

of section 11 of Pub. L. 91-598 amended section 78o of this title.

-MISC3-

PRIOR PROVISIONS

A prior section 11 of Pub. L. 91-598 was renumbered section 15

and is classified to section 78kkk of this title.

AMENDMENTS

1978 - Subsec. (a). Pub. L. 95-283 substituted ''pursuant to

section 78ccc(e)(3) and section 78iii(f) of this title'' for ''or

regulations pursuant to section 78ccc(e) and 78iii(f) of this

title''.

TERMINATION OF REPORTING REQUIREMENTS

For termination, effective May 15, 2000, of provisions in subsec.

(c)(2) of this section relating to submittal of annual report to

Congress, see section 3003 of Pub. L. 104-66, as amended, set out

as a note under section 1113 of Title 31, Money and Finance, and

page 191 of House Document No. 103-7.

-CITE-

15 USC Sec. 78hhh 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 2B-1 - SECURITIES INVESTOR PROTECTION

-HEAD-

Sec. 78hhh. Examining authority functions

-STATUTE-

Each member of SIPC shall file with such member's examining

authority, or collection agent if a collection agent has been

designated pursuant to section 78iii(a) of this title, such

information (including reports of, and information with respect to,

the gross revenues from the securities business of such member,

including the composition thereof, transactions in securities

effected by such member, and other information with respect to such

member's activities, whether in the securities business or

otherwise, including customer accounts maintained, net capital

employed, and activities conducted) as SIPC may determine to be

necessary or appropriate for the purpose of making assessments

under section 78ddd of this title. The examining authority or

collection agent shall file with SIPC all or such part of such

information (and such compilations and analyses thereof) as SIPC,

by bylaw or rule, shall prescribe. No application, report, or

document filed pursuant to this section shall be deemed to be filed

pursuant to section 78r of this title.

-SOURCE-

(Pub. L. 91-598, Sec. 12, formerly Sec. 8, Dec. 30, 1970, 84 Stat.

1653; renumbered Sec. 12 and amended Pub. L. 95-283, Sec. 9, 11,

May 21, 1978, 92 Stat. 260, 268.)

-MISC1-

PRIOR PROVISIONS

A prior section 12 of Pub. L. 91-598 was renumbered section 16

and is classified to section 78lll of this title.

AMENDMENTS

1978 - Pub. L. 95-283 inserted provisions relating to

applicability to a collection agent.

-CITE-

15 USC Sec. 78iii 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 2B-1 - SECURITIES INVESTOR PROTECTION

-HEAD-

Sec. 78iii. Functions of self-regulatory organizations

-STATUTE-

(a) Collection agent

Each self-regulatory organization shall act as collection agent

for SIPC to collect the assessments payable by all members of SIPC

for whom such self-regulatory organization is the examining

authority, unless SIPC designates a self-regulatory organization

other than the examining authority to act as collection agent for

any member of SIPC who is a member of or participant in more than

one self-regulatory organization. If the only self-regulatory

organization of which a member of SIPC is a member or in which it

is a participant is a registered clearing agency that is not the

examining authority for the member, SIPC may, nevertheless,

designate such registered clearing agency as collection agent for

the member or may require that payments be made directly to SIPC.

The collection agent shall be obligated to remit to SIPC

assessments made under section 78ddd of this title only to the

extent that payments of such assessment are received by such

collection agent. Members of SIPC who are not members of or

participants in a self-regulatory organization shall make payments

directly to SIPC.

(b) Immunity

No self-regulatory organization shall have any liability to any

person for any action taken or omitted in good faith pursuant to

section 78eee(a)(1) and section 78eee(a)(2) of this title.

(c) Inspections

The self-regulatory organization of which a member of SIPC is a

member or in which it is a participant shall inspect or examine

such member for compliance with applicable financial responsibility

rules, except that -

(1) if the self-regulatory organization is a registered

clearing agency, the Commission may designate itself as

responsible for the examination of such member for compliance

with applicable financial responsibility rules; and

(2) if a member of SIPC is a member of or participant in more

than one self-regulatory organization, the Commission, pursuant

to section 78q(d) of this title, shall designate one of such

self-regulatory organizations or itself as responsible for the

examination of such member for compliance with applicable

financial responsibility rules.

(d) Reports

There shall be filed with SIPC by the self-regulatory

organizations such reports of inspections or examinations of the

members of SIPC (or copies thereof) as may be designated by SIPC by

bylaw or rule.

(e) Consultation

SIPC shall consult and cooperate with the self-regulatory

organizations toward the end:

(1) that there may be developed and carried into effect

procedures reasonably designed to detect approaching financial

difficulty upon the part of any member of SIPC;

(2) that, as nearly as may be practicable, examinations to

ascertain whether members of SIPC are in compliance with

applicable financial responsibility rules will be conducted by

the self-regulatory organizations under appropriate standards

(both as to method and scope) and reports of such examinations

will, where appropriate, be standard in form; and

(3) that, as frequently as may be practicable under the

circumstances, each member of SIPC will file financial

information with, and be examined by, the self-regulatory

organization which is the examining authority for such member.

(f) Financial condition of members

The Commission may, by such rules as it determines necessary or

appropriate in the public interest and to carry out the purposes of

this chapter, require any self-regulatory organization to furnish

SIPC with reports and records (or copies thereof) relating to the

financial condition of members of or participants in such

self-regulatory organization.

-SOURCE-

(Pub. L. 91-598, Sec. 13, formerly Sec. 9, Dec. 30, 1970, 84 Stat.

1654; amended Pub. L. 94-29, Sec. 26, June 4, 1975, 89 Stat. 163;

renumbered Sec. 13 and amended Pub. L. 95-283, Sec. 9, 12, May 21,

1978, 92 Stat. 260, 269.)

-REFTEXT-

REFERENCES IN TEXT

This chapter, referred to in subsec. (f), was in the original

''this Act'', meaning Pub. L. 91-598, Dec. 30, 1970, 84 Stat. 1636.

For complete classification of this Act to the Code, see Tables.

-MISC2-

AMENDMENTS

1978 - Subsec. (a). Pub. L. 95-283, Sec. 12(a), in heading

substituted ''Collection'' for ''Collecting'', and in text inserted

provisions relating to designation of a self-regulatory

organization other than the examining authority to act as

collection agent and provisions relating to designation of a

registered clearing agency as collection agent, and substituted

provisions relating to remittances by the collection agent to SIPC,

for provisions relating to remittances by an examining authority to

SIPC.

Subsec. (b). Pub. L. 95-283, Sec. 12(b), inserted reference to

section 78eee(a)(2) of this title.

Subsec. (c). Pub. L. 95-283, Sec. 12(c), revised existing format

and provisions into introductory text and cl. (2) and, as so

revised, in introductory text inserted provisions respecting

participation by a member of SIPC in a self-regulatory organization

and in cl. (2) inserted provisions respecting such participation

and authorization for the Commission to designate itself as

responsible for the statutory examination, and added cl. (1).

Subsec. (f). Pub. L. 95-283, Sec. 12(d), substituted provisions

authorizing the Commission to set out rules requiring

self-regulatory organizations to furnish SIPC with reports and

records of members or participants in such self-regulatory

organizations, for provisions authorizing the Commission to set out

rules, and regulations requiring self-regulatory organizations to

adopt rules, practices, and procedures respecting inspections and

examinations of members and examiners, to furnish SIPC and the

Commission with reports and records of members, and to inspect or

examine members.

1975 - Subsec. (c). Pub. L. 94-29 directed the Commission to

designate the self-regulatory organization to be responsible for

enforcing applicable rules with respect to any firm which is a

member of more than one self-regulatory organization.

EFFECTIVE DATE OF 1975 AMENDMENT

Amendment by Pub. L. 94-29 effective June 4, 1975, see section

31(a) of Pub. L. 94-29, set out as a note under section 78b of this

title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 78ddd, 78ggg, 78hhh,

78lll of this title.

-CITE-

15 USC Sec. 78jjj 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 2B-1 - SECURITIES INVESTOR PROTECTION

-HEAD-

Sec. 78jjj. Prohibited acts

-STATUTE-

(a) Failure to pay assessment, etc.

If a member of SIPC shall fail to file any report or information

required pursuant to this chapter, or shall fail to pay when due

all or any part of an assessment made upon such member pursuant to

this chapter, and such failure shall not have been cured, by the

filing of such report or information or by the making of such

payment, together with interest and penalty thereon, within five

days after receipt by such member of written notice of such failure

given by or on behalf of SIPC, it shall be unlawful for such

member, unless specifically authorized by the Commission, to engage

in business as a broker or dealer. If such member denies that it

owes all or any part of the amount specified in such notice, it may

after payment of the full amount so specified commence an action

against SIPC in the appropriate United States district court to

recover the amount it denies owing.

(b) Engaging in business after appointment of trustee or initiation

of direct payment procedure

It shall be unlawful for any broker or dealer for whom a trustee

has been appointed pursuant to this chapter or for whom a direct

payment procedure has been initiated to engage thereafter in

business as a broker or dealer, unless the Commission otherwise

determines in the public interest. The Commission may by order bar

or suspend for any period, any officer, director, general partner,

owner of 10 per centum or more of the voting securities, or

controlling person of any broker or dealer for whom a trustee has

been appointed pursuant to this chapter or for whom a direct

payment procedure has been initiated from being or becoming

associated with a broker or dealer, if after appropriate notice and

opportunity for hearing, the Commission shall determine such bar or

suspension to be in the public interest.

(c) Concealment of assets; false statements or claims

(1) Specific prohibited acts

Any person who, directly or indirectly, in connection with or

in contemplation of any liquidation proceeding or direct payment

procedure -

(A) employs any device, scheme, or artifice to defraud;

(B) engages in any act, practice, or course of business which

operates or would operate as a fraud or deceit upon any person;

or

(C) fraudulently or with intent to defeat this chapter -

(i) conceals or transfers any property belonging to the

estate of a debtor;

(ii) makes a false statement or account;

(iii) presents or uses any false claim for proof against

the estate of a debtor;

(iv) receives any material amount of property from a

debtor;

(v) gives, offers, receives, transfers, or obtains any

money or property, remuneration, compensation, reward,

advantage, other consideration, or promise thereof, for

acting or forebearing to act;

(vi) conceals, destroys, mutilates, falsifies, makes a

false entry in, or otherwise falsifies any document affecting

or relating to the property or affairs of a debtor; or

(vii) withholds, from any person entitled to its

possession, any document affecting or relating to the

property or affairs of a debtor,

shall be fined not more than $50,000 or imprisoned for not more

than five years, or both.

(2) Fraudulent conversion

Any person who, directly or indirectly steals, embezzles, or

fraudulently, or with intent to defeat this chapter, abstracts or

converts to his own use or to the use of another any of the

moneys, securities, or other assets of SIPC, or otherwise

defrauds or attempts to defraud SIPC or a trustee by any means,

shall be fined not more than $50,000 or imprisoned not more than

five years, or both.

-SOURCE-

(Pub. L. 91-598, Sec. 14, formerly Sec. 10, Dec. 30, 1970, 84 Stat.

1655; renumbered Sec. 14 and amended Pub. L. 95-283, Sec. 9, 13,

May 21, 1978, 92 Stat. 260, 269.)

-REFTEXT-

REFERENCES IN TEXT

This chapter, referred to in subsecs. (a), (b), and (c)(1)(C),

(2), was in the original ''this Act'', meaning Pub. L. 91-598, Dec.

30, 1970, 84 Stat. 1636. For complete classification of this Act to

the Code, see Tables.

-MISC2-

AMENDMENTS

1978 - Subsec. (a). Pub. L. 95-283, Sec. 13(a), inserted ''and

penalty'' after ''interest'', and substituted ''it'' for ''he''

wherever appearing.

Subsec. (b). Pub. L. 95-283, Sec. 13(b), in heading inserted ''or

initiation of direct payment procedure'' after ''trustee'', and in

text inserted references to initiation of direct payment procedure

in two places.

Subsec. (c). Pub. L. 95-283, Sec. 13(c), in heading substituted

''Concealment of assets; false statements or claims'' for

''Embezzlement, etc., of assets of SIPC'', added par. (1), and

designated existing provisions as par. (2) and, as so designated,

inserted references to direct or indirect acts, and provisions

covering defrauding or attempts to defraud SIPC or a trustee, and

substituted provisions covering activities constituting fraudulent,

or with intent to defeat this chapter, abstracts or conversions,

for provisions covering activities constituting unlawfully

abstracting or unlawfully and willfully converting moneys, etc.

-CITE-

15 USC Sec. 78kkk 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 2B-1 - SECURITIES INVESTOR PROTECTION

-HEAD-

Sec. 78kkk. Miscellaneous provisions

-STATUTE-

(a) Public inspection of reports

Any notice, report, or other document filed with SIPC pursuant to

this chapter shall be available for public inspection unless SIPC

or the Commission shall determine that disclosure thereof is not in

the public interest. Nothing herein shall act to deny documents or

information to the Congress of the United States or the committees

of either House having jurisdiction over financial institutions,

securities regulation, or related matters under the rules of each

body. Nor shall the Commission be denied any document or

information which the Commission, in its judgment, needs.

(b) Liability of members of SIPC

Except for such assessments as may be made upon such member

pursuant to the provisions of section 78ddd of this title, no

member of SIPC shall have any liability under this chapter as a

member of SIPC for, or in connection with, any act or omission of

any other broker or dealer whether in connection with the conduct

of the business or affairs of such broker or dealer or otherwise

and, without limiting the generality of the foregoing, no member

shall have any liability for or in respect of any indebtedness or

other liability of SIPC.

(c) Liability of SIPC and Directors, officers, or employees

Neither SIPC nor any of its Directors, officers, or employees

shall have any liability to any person for any action taken or

omitted in good faith under or in connection with any matter

contemplated by this chapter.

(d) Advertising

SIPC shall by bylaw prescribe the manner in which a member of

SIPC may display any sign or signs (or include in any advertisement

a statement) relating to the protection to customers and their

accounts, or any other protections, afforded under this chapter.

No member may display any such sign, or include in an advertisement

any such statement, except in accordance with such bylaws. SIPC

may also by bylaw prescribe such minimal requirements as it

considers necessary and appropriate to require a member of SIPC to

provide public notice of its membership in SIPC.

(e) SIPC exempt from taxation

SIPC, its property, its franchise, capital, reserves, surplus,

and its income, shall be exempt from all taxation now or hereafter

imposed by the United States or by any State or local taxing

authority, except that any real property and any tangible personal

property (other than cash and securities) of SIPC shall be subject

to State and local taxation to the same extent according to its

value as other real and tangible personal property is taxed.

Assessments made upon a member of SIPC shall constitute ordinary

and necessary expenses in carrying on the business of such member

for the purpose of section 162(a) of title 26. The contribution and

transfer to SIPC of funds or securities held by any trust

established by a national securities exchange prior to January 1,

1970, for the purpose of providing assistance to customers of

members of such exchange, shall not result in any taxable gain to

such trust or give rise to any taxable income to any member of SIPC

under any provision of title 26, nor shall such contribution or

transfer, or any reduction in assessments made pursuant to this

chapter, in any way affect the status, as ordinary and necessary

expenses under section 162(a) of title 26, of any contributions

made to such trust by such exchange at any time prior to such

transfer. Upon dissolution of SIPC, none of its net assets shall

inure to the benefit of any of its members.

(f) Section 78t(a) of this title not to apply

The provisions of subsection (a) of section 78t of this title

shall not apply to any liability under or in connection with this

chapter.

(g) SEC study of unsafe or unsound practices

Not later than twelve months after December 30, 1970, the

Commission shall compile a list of unsafe or unsound practices by

members of SIPC in conducting their business and report to the

Congress (1) the steps being taken under the authority of existing

law to eliminate those practices and (2) recommendations concerning

additional legislation which may be needed to eliminate those

unsafe or unsound practices.

-SOURCE-

(Pub. L. 91-598, Sec. 15, formerly Sec. 11, Dec. 30, 1970, 84 Stat.

1655; renumbered Sec. 15 and amended Pub. L. 95-283, Sec. 9, 14,

May 21, 1978, 92 Stat. 260, 270; Pub. L. 99-514, Sec. 2, Oct. 22,

1986, 100 Stat. 2095.)

-REFTEXT-

REFERENCES IN TEXT

This chapter, referred to in subsecs. (a) to (f), was in the

original ''this Act'', meaning Pub. L. 91-598, Dec. 30, 1970, 84

Stat. 1636. For complete classification of this Act to the Code,

see Tables.

-MISC2-

AMENDMENTS

1986 - Subsec. (e). Pub. L. 99-514 substituted ''Internal Revenue

Code of 1986'' for ''Internal Revenue Code of 1954'' wherever

appearing, which for purposes of codification was translated as

''title 26'' thus requiring no change in text.

1978 - Subsec. (b). Pub. L. 95-283, Sec. 14(c), redesignated

subsec. (c) as (b). Former subsec. (b), relating to application of

securities investor protection provisions to foreign members, was

struck out.

Subsec. (c). Pub. L. 95-283, Sec. 14(a), (c), redesignated

subsec. (d) as (c) and inserted '', officers, or employees'' after

''Directors'' in heading and text. Former subsec. (c) redesignated

(b).

Subsec. (d). Pub. L. 95-283, Sec. 14(b), (c), redesignated

subsec. (e) as (d), inserted provisions authorizing SIPC to

prescribe necessary and proper minimal requirements for providing

public notice of membership by a member of SIPC in SIPC, and struck

out provisions authorizing rules by SIPC to implement advertising

requirements. Former subsec. (d) redesignated (c).

Subsecs. (e) to (h). Pub. L. 95-283, Sec. 14(c), redesignated

subsecs. (e) to (h) as (d) to (g), respectively.

-CITE-

15 USC Sec. 78lll 01/06/03

-EXPCITE-

TITLE 15 - COMMERCE AND TRADE

CHAPTER 2B-1 - SECURITIES INVESTOR PROTECTION

-HEAD-

Sec. 78lll. Definitions

-STATUTE-

For purposes of this chapter, including the application of the

Bankruptcy Act to a liquidation proceeding:

(1) Commission

The term ''Commission'' means the Securities and Exchange

Commission.

(2) Customer

The term ''customer'' of a debtor means any person (including

any person with whom the debtor deals as principal or agent) who

has a claim on account of securities received, acquired, or held

by the debtor in the ordinary course of its business as a broker

or dealer from or for the securities accounts of such person for

safekeeping, with a view to sale, to cover consummated sales,

pursuant to purchases, as collateral security, or for purposes of

effecting transfer. The term ''customer'' includes any person

who has a claim against the debtor arising out of sales or

conversions of such securities, and any person who has deposited

cash with the debtor for the purpose of purchasing securities,

but does not include -

(A) any person to the extent that the claim of such person

arises out of transactions with a foreign subsidiary of a

member of SIPC; or

(B) any person to the extent that such person has a claim for

cash or securities which by contract, agreement, or

understanding, or by operation of law, is part of the capital

of the debtor, or is subordinated to the claims of any or all

creditors of the debtor, notwithstanding that some ground

exists for declaring such contract, agreement, or understanding

void or voidable in a suit between the claimant and the debtor.

(3) Customer name securities

The term ''customer name securities'' means securities which

were held for the account of a customer on the filing date by or

on behalf of the debtor and which on the filing date were

registered in the name of the customer, or were in the process of

being so registered pursuant to instructions from the debtor, but

does not include securities registered in the name of the

customer which, by endorsement or otherwise, were in negotiable

form.

(4) Customer property

The term ''customer property'' means cash and securities

(except customer name securities delivered to the customer) at

any time received, acquired, or held by or for the account of a

debtor from or for the securities accounts of a customer, and the

proceeds of any such property transferred by the debtor,

including property unlawfully converted. The term ''customer

property'' includes -

(A) securities held as property of the debtor to the extent

that the inability of the debtor to meet its obligations to

customers for their net equity claims based on securities of

the same class and series of an issuer is attributable to the

debtor's noncompliance with the requirements of section

78o(c)(3) of this title and the rules prescribed under such

section;

(B) resources provided through the use or realization of

customers' debit cash balances and other customer-related debit

items as defined by the Commission by rule;

(C) any cash or securities apportioned to customer property

pursuant to section 78fff(d) of this title; and

(D) any other property of the debtor which, upon compliance

with applicable laws, rules, and regulations, would have been

set aside or held for the benefit of customers, unless the

trustee determines that including such property within the

meaning of such term would not significantly increase customer

property.

(5) Debtor

The term ''debtor'' means a member of SIPC with respect to whom

an application for a protective decree has been filed under

section 78eee(a)(3) of this title or a direct payment procedure

has been instituted under section 78fff-4(b) of this title.

(6) Examining authority

The term ''examining authority'' means, with respect to any

member of SIPC (A) the self-regulatory organization which

inspects or examines such member of SIPC, or (B) the Commission

if such member of SIPC is not a member of or participant in any

self-regulatory organization or if the Commission has designated

itself examining authority for such member pursuant to section

78iii(c) of this title.

(7) Filing date

The term ''filing date'' means the date on which an application

for a protective decree is filed under section 78eee(a)(3) of

this title, except that -

(A) if a petition under title 11 concerning the debtor was

filed before such date, the term ''filing date'' means the date

on which such petition was filed;

(B) if the debtor is the subject of a proceeding pending in

any court or before any agency of the United States or any

State in which a receiver, trustee, or liquidator for such

debtor has been appointed and such proceeding was commenced

before the date on which such application was filed, the term

''filing date'' means the date on which such proceeding was

commenced; or

(C) if the debtor is the subject of a direct payment

procedure or was the subject of a direct payment procedure

discontinued by SIPC pursuant to section 78fff-4(f) of this

title, the term ''filing date'' means the date on which notice

of such direct payment procedure was published under section

78fff-4(b) of this title.

(8) Foreign subsidiary

The term ''foreign subsidiary'' means any subsidiary of a

member of SIPC which has its principal place of business in a

foreign country or which is organized under the laws of a foreign

country.

(9) Gross revenues from the securities business

The term ''gross revenues from the securities business'' means

the sum of (but without duplication) -

(A) commissions earned in connection with transactions in

securities effected for customers as agent (net of commissions

paid to other brokers and dealers in connection with such

transactions) and markups with respect to purchases or sales of

securities as principal;

(B) charges for executing or clearing transactions in

securities for other brokers and dealers;

(C) the net realized gain, if any, from principal

transactions in securities in trading accounts;

(D) the net profit, if any, from the management of or

participation in the underwriting or distribution of

securities;

(E) interest earned on customers' securities accounts;

(F) fees for investment advisory services (except when

rendered to one or more registered investment companies or

insurance company separate accounts) or account supervision

with respect to securities;

(G) fees for the solicitation of proxies with respect to, or

tenders or exchanges of, securities;

(H) income from service charges or other surcharges with

respect to securities;

(I) except as otherwise provided by rule of the Commission,

dividends and interest received on securities in investment

accounts of the broker or dealer;

(J) fees in connection with put, call, and other option

transactions in securities;

(K) commissions earned from transactions in (i) certificates

of deposit, and (ii) Treasury bills, bankers acceptances, or

commercial paper which have a maturity at the time of issuance

of not exceeding nine months, exclusive of days of grace, or

any renewal thereof, the maturity of which is likewise limited,

except that SIPC shall by bylaw include in the aggregate of

gross revenues only an appropriate percentage of such

commissions based on SIPC's loss experience with respect to

such instruments over at least the preceding five years; and

(L) fees and other income from such other categories of the

securities business as SIPC shall provide by bylaw.

Such term does not include revenues received by a broker or

dealer in connection with the distribution of shares of a

registered open end investment company or unit investment trust

or revenues derived by a broker or dealer from the sale of

variable annuities or from the conduct of the business of

insurance.

(10) Liquidation proceeding

The term ''liquidation proceeding'' means any proceeding for

the liquidation of a debtor under this chapter in which a trustee

has been appointed under section 78eee(b)(3) of this title.

(11) Net equity

The term ''net equity'' means the dollar amount of the account

or accounts of a customer, to be determined by -

(A) calculating the sum which would have been owed by the

debtor to such customer if the debtor had liquidated, by sale

or purchase on the filing date, all securities positions of

such customer (other than customer name securities reclaimed by

such customer); minus

(B) any indebtedness of such customer to the debtor on the

filing date; plus

(C) any payment by such customer of such indebtedness to the

debtor which is made with the approval of the trustee and

within such period as the trustee may determine (but in no

event more than sixty days after the publication of notice

under section 78fff-2(a) of this title).

In determining net equity under this paragraph, accounts held by

a customer in separate capacities shall be deemed to be accounts

of separate customers.

(12) Persons registered as brokers or dealers

The term ''persons registered as brokers or dealers'' includes

any person who is a member of a national securities exchange

other than a government securities broker or government

securities dealer registered under section 78o-5(a)(1)(A) of this

title.

(13) Protective decree

The term ''protective decree'' means a decree, issued by a

court upon application of SIPC under section 78eee(a)(3) of this

title, that the customers of a member of SIPC are in need of the

protection provided under this chapter.

(14) Security

The term ''Security'' means any note, stock, treasury stock,

bond, debenture, evidence of indebtedness, any collateral trust

certificate, preorganization certificate or subscription,

transferable share, voting trust certificate, certificate of

deposit, certificate of deposit for a security, or any security

future as that term is defined in section 78c(a)(55)(A) of this

title, any investment contract or certificate of interest or

participation in any profit-sharing agreement or in any oil, gas,

or mineral royalty or lease (if such investment contract or

interest is the subject of a registration statement with the

Commission pursuant to the provisions of the Securities Act of

1933 (15 U.S.C. 77a et seq.)), any put, call, straddle, option,

or privilege on any security, or group or index of securities

(including any interest therein or based on the value thereof),

or any put, call, straddle, option, or privilege entered into on

a national securities exchange relating to foreign currency, any

certificate of interest or participation in, temporary or interim

certificate for, receipt for, guarantee of, or warrant or right

to subscribe to or purchase or sell any of the foregoing, and any

other instrument commonly known as a security. Except as

specifically provided above, the term ''security'' does not

include any currency, or any commodity or related contract or

futures contract, or any warrant or right to subscribe to or

purchase or sell any of the foregoing.

-SOURCE-

(Pub. L. 91-598, Sec. 16, formerly Sec. 12, Dec. 30, 1970, 84 Stat.

1656; renumbered Sec. 16 and amended Pub. L. 95-283, Sec. 9, 15,

May 21, 1978, 92 Stat. 260, 271; Pub. L. 95-598, title III, Sec.

308(o), Nov. 6, 1978, 92 Stat. 2676; Pub. L. 97-303, Sec. 7, Oct.

13, 1982, 96 Stat. 1410; Pub. L. 100-181, title VIII, Sec. 802,

Dec. 4, 1987, 101 Stat. 1265; Pub. L. 106-554, Sec. 1(a)(5) (title

II, Sec. 203(d)(1)), Dec. 21, 2000, 114 Stat. 2763, 2763A-424.)

-REFTEXT-

REFERENCES IN TEXT

This chapter, referred to in provision preceding par. (1), and in

pars. (10) and (13), was in the original ''this Act'', meaning Pub.

L. 91-598, Dec. 30, 1970, 84 Stat. 1636. For complete

classification of this Act to the Code, see Tables.

The Bankruptcy Act, referred to in provision preceding par. (1),

is act July 1, 1898, ch. 541, 30 Stat. 544, as amended, which was

classified generally to former Title 11, Bankruptcy. The Act was

repealed effective Oct. 1, 1979, by Pub. L. 95-598, Sec. 401(a),

402(a), Nov. 6, 1978, 92 Stat. 2682, section 101 of which enacted

revised Title 11.

The Securities Act of 1933, referred to in par. (14), is act May

27, 1933, ch. 38, title I, 48 Stat. 74, as amended, which is

classified generally to subchapter I (Sec. 77a et seq.) of chapter

2A of this title. For complete classification of this Act to the

Code, see section 77a of this title and Tables.

-MISC2-

AMENDMENTS

2000 - Par. (14). Pub. L. 106-554 inserted ''or any security

future as that term is defined in section 78c(a)(55)(A) of this

title,'' after ''certificate of deposit for a security,''.

1987 - Par. (12). Pub. L. 100-181 inserted ''other than a

government securities broker or government securities dealer

registered under section 78o-5(a)(1)(A) of this title''.

1982 - Par. (14). Pub. L. 97-303 inserted ''any put, call,

straddle, option, or privilege on any security, or group or index

of securities (including any interest therein or based on the value

thereof), or any put, call, straddle, option, or privilege entered

into on a national securities exchange relating to foreign

currency,'' after ''the Securities Act of 1933 (15 U.S.C.A. Sec.

77a et seq.)),'' and substituted ''Except as specifically provided

above, the term 'security' does not include'' for ''The term

'security' does not include''.

1978 - Par. (1). Pub. L. 95-598, Sec. 308(o)(1), (3), struck out

par. (1) definition of ''Bankruptcy Act'' and redesignated par. (2)

as (1).

Pars. (2) to (6). Pub. L. 95-598, Sec. 309(o)(3), redesignated

pars. (3) to (7) as (2) to (6), respectively. Former par. (2)

redesignated (1).

Par. (7). Pub. L. 95-598, Sec. 308(o)(2), (3), redesignated par.

(8) as (7) and substituted in subpar. (A) ''if a petition under

title 11 concerning the debtor was filed before such date'' for

''if a petition was filed before such date by or against the debtor

under the Bankruptcy Act, or under chapter X or XI of such Act, as

now in effect or as amended from time to time''. Former par. (7)

redesignated (6).

Pars. (8) to (15). Pub. L. 95-598, Sec. 308(o)(3), redesignated

pars. (9) to (15) as (8) to (14), respectively. Former par. (8)

redesignated (7).

Pub. L. 95-283 in introductory text inserted requirement for

applicability of terms to a liquidation proceeding involving the

Bankruptcy Act, in par. (1) heading substituted ''Bankruptcy Act''

for ''Self-regulatory organization'', and in text substituted

provisions defining such terms, in par. (2) heading substituted

''Commission'' for ''Financial responsibility rules'', and in text

substituted provisions defining such terms, in par. (3) heading

substituted ''Customer'' for ''Examining authority'', and in text

substituted provisions defining such terms, and added pars. (4) to

(15).

EFFECTIVE DATE OF 1978 AMENDMENT

Amendment of section by Pub. L. 95-598 effective Oct. 1, 1979,

see section 402(a) of Pub. L. 95-598, set out as an Effective Date

note preceding section 101 of Title 11, Bankruptcy.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 78ccc, 78fff, 78fff-4 of

this title.

-CITE-