I 

112TH CONGRESS 

1ST SESSION H. R. 1987 

To amend the Securities Investor Protection Act of 1970 to provide insurance 

coverage for certain indirect investors caught in Ponzi schemes, and 

for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 25, 2011 

Mr. ACKERMAN introduced the following bill; which was referred to the 

Committee on Financial Services 

A BILL 

To amend the Securities Investor Protection Act of 1970 

to provide insurance coverage for certain indirect investors caught in Ponzi schemes, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Ponzi Scheme Investor 

5 Protection Act of 2011’’. 


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1 SEC. 2. ADDITIONAL PROTECTIONS FOR INVESTORS IN 

2 PONZI SCHEMES. 

3 (a) IN GENERAL.—The Securities Investor Protec4 tion Act of 1970 (15 U.S.C. 78aaa et seq.) is amended 

5 by inserting after section 8 the following new section: 

6 ‘‘SEC. 8A. SPECIAL PROVISIONS RELATED TO PONZI 

7 SCHEMES. 

8 ‘‘(a) DETERMINATION BY TRUSTEE.—Promptly after 

9 the appointment of the trustee, such trustee shall deter10 mine if the debtor is a Ponzi scheme. If the trustee deter11 mines that the debtor is a Ponzi scheme— 

12 ‘‘(1) the trustee shall notify SIPC; 

13 ‘‘(2) SIPC shall make such determination pub14 licly available, including on SIPC’s Web site; and 

15 ‘‘(3) if the trustee determines that customers 

16 invested more than $1,000,000,000 in such Ponzi 

17 scheme, the trustee and SIPC shall, not later than 

18 30 days after such determination is made, jointly 

19 submit to the Committee on Financial Services of 

20 the House, the Committee on Banking, Housing, 

21 and Urban Affairs of the Senate, and the Secretary 

22 of the Treasury a reasonable expected timeline for 

23 the consideration of claims made under this section. 

24 ‘‘(b) STATEMENT OF CLAIM.— 

25 ‘‘(1) IN GENERAL.—An indirect Ponzi scheme 

26 investor may, not later than the end of the 1-year 


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1 period beginning on the date SIPC makes a deter2 mination publicly available under subsection (a), file 

3 with the trustee a written claim— 

4 ‘‘(A) stating the type of securities held by 

5 the Ponzi scheme on behalf of the Ponzi scheme 

6 investor on behalf of the indirect Ponzi scheme 

7 investor; 

8 ‘‘(B) stating the number of such securities, 

9 or in the case of a pooled investment, the per10 centage of such securities; 

11 ‘‘(C) stating the amount of any funds in12 vested by the indirect Ponzi scheme investor 

13 with the Ponzi scheme investor that were in14 vested with the Ponzi scheme, but for which the 

15 indirect Ponzi scheme investor has not received 

16 a statement or other documentation that would 

17 allow the indirect Ponzi scheme investor to 

18 identify in which securities the Ponzi scheme 

19 stated such funds were invested; and 

20 ‘‘(D) containing such other information as 

21 SIPC may determine necessary to carry out the 

22 provisions of this section. 

23 ‘‘(2) NOTICE.—At the time an indirect Ponzi 

24 scheme investor makes a claim under paragraph (1), 

25 the indirect Ponzi scheme investor shall also file a 


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1 copy of the claim with the appropriate Ponzi scheme 

2 investor. 

3 ‘‘(c) COORDINATION WITH PONZI SCHEME INVES4 TOR.—To the extent necessary, the trustee shall coordi5 nate with Ponzi scheme investors to ensure proper pay6 ments to indirect Ponzi scheme investors under this sec7 tion. 

8 ‘‘(d) PAYMENTS TO INDIRECT PONZI SCHEME INVES9 TORS.— 

10 ‘‘(1) IN GENERAL.—After receipt of a written 

11 statement of claim pursuant to subsection (b), un12 less the trustee determines such claim to be fraudu13 lent, the trustee shall, with respect to the securities 

14 that are the subject of such claim, take the following 

15 actions in the following order: 

16 ‘‘(A) With respect to a claim relating to se17 curities of a class and series of an issuer which 

18 are ascertainable from the books and records of 

19 the Ponzi scheme or are otherwise established 

20 to the satisfaction of the trustee, deliver securi21 ties of such class and series to the indirect 

22 Ponzi scheme investor if and to the extent 

23 available to satisfy such claims in whole or in 

24 part, with partial deliveries to be made pro rata 


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1 to the greatest extent considered practicable by 

2 the trustee. 

3 ‘‘(B) Pay the indirect Ponzi scheme inves4 tor a cash amount equal to— 

5 ‘‘(i) the value of any securities identi6 fied in the claim and not otherwise deliv7 ered to the indirect Ponzi scheme investor 

8 under subparagraph (A); and 

9 ‘‘(ii) the value of any funds identified 

10 in the claim as being invested in the Ponzi 

11 scheme by the Ponzi scheme investor on 

12 behalf of the indirect Ponzi scheme inves13 tor, but for which the indirect Ponzi 

14 scheme investor is unable to identify in 

15 which specific securities the Ponzi scheme 

16 stated such funds were invested. 

17 ‘‘(2) MAXIMUM AMOUNT.—The aggregate 

18 amount of the value of all securities and cash deliv19 ered under paragraph (1) may not exceed, for each 

20 indirect Ponzi scheme investor, an amount equal 

21 to— 

22 ‘‘(A) $100,000, minus 

23 ‘‘(B) the aggregate amount of all cash and 

24 securities invested in the Ponzi scheme by the 

25 Ponzi scheme investor on behalf of the indirect 


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1 Ponzi scheme investor that is recovered by the 

2 Ponzi scheme investor from the trustee. 

3 ‘‘(3) ADVANCES BY SIPC.—With respect to pay4 ments made pursuant to this section, the trustee 

5 may satisfy claims out of moneys made available to 

6 the trustee by SIPC notwithstanding the fact that 

7 there has not been any showing or determination 

8 that there are sufficient funds of the Ponzi scheme 

9 available to satisfy such claims. 

10 ‘‘(4) WAIVER.—By accepting any security or 

11 cash from the trustee under this section, the indirect 

12 Ponzi scheme investor agrees to waive the right to 

13 sue the Ponzi scheme investor with respect to such 

14 security or with respect to the security that was the 

15 basis for such cash payment. 

16 ‘‘(5) SECURITY VALUATION.—For purposes of 

17 this subsection, the value of a security shall be 

18 deemed to be the amount listed for such security on 

19 the last statement the indirect Ponzi scheme investor 

20 received from the Ponzi scheme investor before the 

21 trustee determined the debtor was a Ponzi scheme 

22 pursuant to subsection (a). 

23 ‘‘(e) PROHIBITION ON DOUBLE PAYMENTS.—Securi24 ties delivered pursuant to subsection (d), and securities, 

25 or percentages of securities, which were the basis for cash 


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1 paid pursuant to subsection (d), may not be the basis for 

2 any other payment by the trustee or SIPC under this Act. 

3 ‘‘(f) RECOVERY OF FUNDS.—The trustee of a Ponzi 

4 scheme may not seek to recover money, including profits, 

5 from any investor in the Ponzi scheme unless such inves6 tor— 

7 ‘‘(1) was complicit in the Ponzi scheme; or 

8 ‘‘(2) was registered, or should have been reg9 istered, with the Commission under the securities 

10 laws as an investment adviser, broker, dealer, or 

11 other person with a fiduciary duty to the customers 

12 or investors of the person. 

13 ‘‘(g) NON-APPLICABILITY IF LAWSUIT FILED.—This 

14 section shall not apply to a claim filed by an indirect Ponzi 

15 scheme investor if such investor has filed a lawsuit against 

16 the Ponzi scheme investor, the Ponzi scheme, or the trust17 ee in connection with the securities that are the basis of 

18 such claim. 

19 ‘‘(h) RETROACTIVE APPLICABILITY.—With respect to 

20 the appointment of a trustee made before the date of the 

21 enactment of this section, such trustee shall make the de22 termination required under subsection (a) not later than 

23 30 days after such date of enactment, and only if such 

24 trustee makes a determination that the debtor is a Ponzi 


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1 scheme and customers invested more than $1,000,000,000 

2 in the Ponzi scheme. 

3 ‘‘(i) INTEREST PAYMENTS.—If the Secretary of the 

4 Treasury makes a determination that claims under this 

5 section are not being considered in accordance with the 

6 timeline submitted to the Secretary under subsection 

7 (a)(3), the Secretary may require any future payments 

8 made under this section to be made with interest. 

9 ‘‘(j) TREATMENT OF INTEREST ON CASH.—SIPC 

10 shall issue regulations to ensure that any adjustment in 

11 the net equity of a Ponzi scheme investor required under 

12 the last sentence of section 16(11) is passed to the appro13 priate indirect Ponzi scheme investors. 

14 ‘‘(k) RULEMAKING.—SIPC shall issue regulations to 

15 carry out the provisions of this section.’’. 

16 (b) SIPC AUTHORITY TO ADVANCE FUNDS.—Sec17 tion 9 of such Act (15 U.S.C. 78fff–3) is amended by add18 ing at the end the following new subsection: 

19 ‘‘(d) ADVANCES RELATED TO PONZI SCHEMES.— 

20 SIPC shall advance to the trustee— 

21 ‘‘(1) such moneys as may be required to pay 

22 claims made under section 8A; and 

23 ‘‘(2) such moneys as may be required to carry 

24 out section 8A.’’. 


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1 (c) OVERSIGHT OF TRUSTEE COMPENSATION.—Sec2 tion 5(b)(5)(C) of such Act (15 U.S.C. 78eee(b)(5)(C)) 

3 is amended by striking ‘‘In any case in which such allow4 ances are to be paid by SIPC without reasonable expecta5 tion of recoupment thereof as provided in this Act and 

6 there is no difference between the amounts requested and 

7 the amounts recommended by SIPC, the court shall award 

8 the amounts recommended by SIPC. In determining the 

9 amount of allowances in all other cases, the court shall 

10 give due consideration to the nature, extent, and value of 

11 the services rendered, and shall place considerable reliance 

12 on the recommendation of SIPC.’’ and inserting ‘‘In deter13 mining the amount to be awarded for allowances, the court 

14 shall give due consideration to the nature, extent, and 

15 value of the services rendered. In any case in which such 

16 allowances are to be paid by SIPC and there is a reason17 able expectation of recoupment thereof as provided in this 

18 Act, the court shall place considerable reliance on the rec19 ommendation of SIPC.’’. 

20 SEC. 3. SIPC FUND ASSESSMENT. 

21 Not later than the end of the 60-day period beginning 

22 on the date of the enactment of this Act, SIPC shall issue 

23 regulations to modify the SIPC Fund assessment levels 

24 to ensure they are adequate to cover the anticipated costs 


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1 to the SIPC Fund of carrying out the amendments made 

2 by this Act. 

3 SEC. 4. AUDITS OF CERTAIN TRUSTEES. 

4 Section 11(c) of the Securities Investor Protection 

5 Act of 1970 (15 U.S.C. 78ggg(c)) is amended by adding 

6 at the end the following new paragraph: 

7 ‘‘(3) AUDITS OF CERTAIN TRUSTEES.—With re8 spect to a liquidation proceeding for which SIPC 

9 does not have a reasonable expectation of 

10 recoupment of the advances made by SIPC for such 

11 liquidation proceeding, SIPC shall— 

12 ‘‘(A) select an independent public account13 ant to perform an annual audit of the trustee 

14 of the debtor in such proceeding; and 

15 ‘‘(B) issue a report to the Commission con16 taining the results of such audit.’’. 

17 SEC. 5. DEFINITIONS. 

18 Section 16 of the Securities Investor Protection Act 

19 of 1970 (15 U.S.C. 78lll) is amended— 

20 (1) in paragraph (11), by adding at the end the 

21 following: ‘‘In determining net equity under this 

22 paragraph with respect to a Ponzi scheme investor, 

23 the amount of cash in the account or accounts of 

24 such investor, as calculated under subparagraphs 

25 (A) through (C), shall be adjusted by the percentage 


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1 increase or decrease in the Consumer Price Index 

2 for All Urban Consumers published by the Bureau 

3 of Labor Statistics of the Department of Labor for 

4 the period of time between when the cash was placed 

5 in the account and the time the net equity is deter6 mined.’’; and 

7 (2) by adding at the end the following new 

8 paragraphs: 

9 ‘‘(15) SECURITIES LAWS.—The term ‘securities 

10 laws’ has the meaning given such term under section 

11 3 of the Securities Exchange Act of 1934. 

12 ‘‘(16) DEFINITIONS RELATED TO PONZI

13 SCHEMES.— 

14 ‘‘(A) PONZI SCHEME.—The term ‘Ponzi 

15 scheme’ means any fraudulent investment oper16 ation which is managed in a manner that pro17 vides investors with returns (or purported re18 turns) derived substantially from investments 

19 made by other investors rather than from prof20 its. 

21 ‘‘(B) PONZI SCHEME INVESTOR.—The 

22 term ‘Ponzi scheme investor’ means a customer 

23 of a debtor, where the trustee of such debtor 

24 has determined the debtor to be a Ponzi 

25 scheme. 


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1 ‘‘(C) INDIRECT PONZI SCHEME INVES2 TOR.—The term ‘indirect Ponzi scheme inves3 tor’ means any person (including any person 

4 with whom the Ponzi scheme investor deals as 

5 principal or agent) who is not a customer of a 

6 Ponzi scheme, but who is an investor in a Ponzi 

7 scheme investor and on whose behalf the Ponzi 

8 scheme investor has a claim on account of secu9 rities received, acquired, or held by the Ponzi 

10 scheme in the ordinary course of its business as 

11 a broker or dealer from or for the securities ac12 counts of such Ponzi scheme investor for safe13 keeping, with a view to sale, to cover con14 summated sales, pursuant to purchases, as col15 lateral, security, or for purposes of effecting 

16 transfer.’’. 

Æ 


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