15 U.S.C. § 78ddd — SIPC Fund

Page 481 TITLE 15—COMMERCE AND TRADE § 78ddd § 78ddd. SIPC Fund (a) In general (1) Establishment of fund SIPC shall establish a ‘‘SIPC Fund’’ (herein- after in this chapter referred to as the ‘‘fund’’). All amounts received by SIPC (other than amounts paid directly to any lender pur- suant 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 con- sist of the aggregate at such time of the fol- lowing 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 pro- vide that moneys so borrowed are to be repay- able by SIPC not less than one year from the time of such borrowings (including, for pur- poses 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 ap- propriate, 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 De- cember 30, 1970, the balance of the fund shall ag- gregate not less than $75,000,000, less any amounts expended from the fund within that pe- riod. (c) Assessments (1) Initial assessments Each member of SIPC shall pay to SIPC, or the collection agent for SIPC specified in sec- tion 78iii(a) of this title, on or before the one hundred and twentieth day following Decem- ber 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 percent- age of gross revenues from the securities busi- ness is appropriate for any class or classes of members (taking into account relevant fac- tors, 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 mem- ber pursuant to this paragraph be less than $150. (2) General assessment authority SIPC shall, by bylaw, impose upon its mem- bers 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 bor- rowings by SIPC. Any assessments so made shall be in conformity with contractual obli- gations made by SIPC in connection with any borrowing incurred by SIPC. Subject to para- graph (3) and subsection (d)(1)(A), any such as- sessment 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 fac- tors: the amount or composition of their gross revenues from the securities business, the number or dollar volume of transactions ef- fected by them, the number of customer ac- counts 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 fac- tors. (3) Limitations Notwithstanding any other provision of this chapter— (A) no assessment shall be made upon a member otherwise than pursuant to para- graph (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 deter- mines, in accordance with a bylaw, that such rate of assessment during such period will not have a material adverse effect on the fi- nancial 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 reve- nues 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 advi- sory services to one or more registered in- vestment companies or insurance company separate accounts. Page 482 TITLE 15—COMMERCE AND TRADE § 78ddd (d) Requirements respecting assessments and lines of credit (1) Assessments (A) 1⁄2 of 1 percent assessment Subject to subsection (c)(3), SIPC shall im- pose upon each of its members an assess- ment 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 mem- ber— (i) until the balance of the fund aggre- gates not less than $150,000,000 (or such other amount as the Commission may de- termine in the public interest), (ii) during any period when there is out- standing borrowing by SIPC pursuant to subsection (f) or subsection (g) of this sec- tion, 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 con- firmed lines of credit, SIPC shall endeavor to make assessments in such a manner that the aggregate assess- ments 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 0.02 percent of the gross reve- nues from the securities business of such member of SIPC. (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 in- terest) SIPC shall phase out of the fund all confirmed lines of credit. (e) Prior trusts; overpayments and underpay- ments (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). 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 mem- ber 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 mem- ber, the unpaid portion thereof shall bear in- terest 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 pen- alty 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 cir- cumstances where it considers such waiver ap- propriate. (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 condi- tions 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). The inter- est payable on a borrowing pursuant to sub- section (g) 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 prin- cipal of, and interest and premium, if any, on, all bonds, notes, or other evidences of indebted- ness 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 assess- ments 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 Page 483 TITLE 15—COMMERCE AND TRADE § 78ddd borrowing by SIPC pursuant to subsection (g) of this section is outstanding, no pledge of any as- sessment upon a member to secure any bonds, notes, or other evidences of indebtedness issued other than pursuant to subsection (g) of this sec- tion 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. Nei- ther the instrument by which a pledge is author- ized or created, nor any statement or other doc- ument relative thereto, need be filed or recorded in any State or other jurisdiction. The Commis- sion may by rule or regulation provide for the filing of any instrument by which a pledge or borrowing is authorized or created, but the fail- ure 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 reason- ably 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 cus- tomers of brokers or dealers and the mainte- nance of confidence in the United States securi- ties 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). 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 eq- uity securities in transactions on national secu- rities 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 se- curities. 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 pur- poses 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 ac- count of a broker or dealer registered under sec- tion 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 nec- essary 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 man- ner as assessments imposed pursuant to sub- section (c) 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), the Commission is author- ized to issue to the Secretary of the Treasury notes or other obligations in an aggregate amount of not to exceed $2,500,000,000, in such forms and denominations, bearing such matu- rities, 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 Sec- retary of the Treasury, taking into consider- ation the current average market yield on out- standing 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 obliga- tions 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 pur- poses for which securities may be issued under that chapter are extended to include any pur- chase of such notes and obligations. The Sec- retary of the Treasury may at any time sell any of the notes or other obligations acquired by him under this subsection. All redemptions, pur- chases, and sales by the Secretary of the Treas- ury 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 consoli- dated basis for such member and all its subsidi- aries (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. (Pub. L. 91–598, § 4, Dec. 30, 1970, 84 Stat. 1639; Pub. L. 95–283, § 6, May 21, 1978, 92 Stat. 253; Pub. L. 111–203, title IX, §§ 929C, 929V(a), July 21, 2010, 124 Stat. 1852, 1868.) Editorial Notes 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. CODIFICATION In subsec. (h), ‘‘chapter 31 of title 31’’ and ‘‘that chap- ter’’ substituted for ‘‘the Second Liberty Bond Act, as amended’’ and ‘‘that Act, as amended,’’, respectively, on authority of Pub. L. 97–258, § 4(b), Sept. 13, 1982, 96 Page 484 TITLE 15—COMMERCE AND TRADE § 78eee 1 So in original. Probably should be ‘‘(i)’’. 2 So in original. Probably should be ‘‘(ii)’’. Stat. 1067, the first section of which enacted Title 31, Money and Finance. AMENDMENTS 2010—Subsec. (d)(1)(C). Pub. L. 111–203, § 929V(a), sub- stituted ‘‘0.02 percent of the gross revenues from the se- curities business of such member of SIPC’’ for ‘‘$150 per annum’’. Subsec. (h). Pub. L. 111–203, § 929C, substituted ‘‘$2,500,000,000’’ for ‘‘$1,000,000,000’’ in first sentence. 1978—Subsec. (a). Pub. L. 95–283, § 6(a), in par. (2) sub- stituted ‘‘Except as otherwise provided in this section, the’’ for ‘‘The’’, in par. (2)(C) inserted provisions for in- applicability to other lines of credit, and added par. (4). Subsec. (c). Pub. L. 95–283, § 6(b), in par. (2) struck out ‘‘or rule’’ after ‘‘bylaw’’, and in par. (3) struck out ref- erence 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, § 6(c), added subpar. (C). Subsec. (e). Pub. L. 95–283, § 6(d), in par. (2) sub- stituted ‘‘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 provi- sions authorizing interest to be imposed by SIPC bylaw or rule. Subsec. (f). Pub. L. 95–283, § 6(e), struck out ‘‘exam- ining authority as’’ before ‘‘collection agent for SIPC, shall immediately be subject’’. Subsec. (g). Pub. L. 95–283, § 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 na- tional securities exchange and in cl. (3) substituted pro- visions relating to exemptions by rule of transactions in the over-the-counter market or on any national se- curities exchange, for provisions relating to exemp- tions by rules and regulations of transactions in the over-the-counter market, and inserted provisions au- thorizing 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, § 6(g), substituted ‘‘Consoli- dated group’’ for ‘‘ ‘Gross revenues’ defined’’ in heading, redesignated par. (2) as entire section and, as so redes- ignated, substituted provisions relating to computa- tions by a member, for provisions relating to computa- tions by a broker or dealer. Pars. (1) and (3), which gen- erally defined term ‘‘gross revenues’’ and authorized the SIPC to define all other terms used in this subsec., respectively, were struck out. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2010 AMENDMENT Amendment by Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking. § 78eee. Protection of customers (a) Determination of need of protection (1) Notice to SIPC If the Commission or any self-regulatory or- ganization is aware of facts which lead it to believe that any broker or dealer subject to its regulation is in or is approaching financial dif- ficulty, it shall immediately notify SIPC, and, if such notification is by a self-regulatory or- ganization, the Commission. (2) Action by self-regulatory organization If a self-regulatory organization has given notice to SIPC pursuant to subsection (a)(1) with respect to a broker or dealer, and such broker or dealer undertakes to liquidate or re- duce its business either pursuant to the direc- tion of a self-regulatory organization or volun- tarily, 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 (A) In general SIPC may, upon notice to a member of SIPC, file an application for a protective de- cree with any court of competent jurisdic- tion specified in section 78u(e) or 78aa of this title, 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 pur- suant to section 78fff–3 of this title, if SIPC determines that— (A) 1 the member (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) 2 one or more of the conditions speci- fied in subsection (b)(1) exist with respect to such member. (B) Consent required No member of SIPC that has a customer may enter into an insolvency, receivership, or bankruptcy proceeding, under Federal or State law, without the specific consent of SIPC, except as provided in title II of the Dodd-Frank Wall Street Reform and Con- sumer Protection Act [12 U.S.C. 5381 et seq.]. (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 Commis- sion, 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); and (B) may be filed notwithstanding the pend- ency 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 mem- ber or its property, or any proceeding to en- force a lien against property of such mem- ber. (b) Court action (1) Issuance of protective decree Upon receipt of an application by SIPC under subsection (a)(3), the court shall forth-