I 

113TH CONGRESS 

1ST SESSION H. R. 3482 

To amend the Securities Investor Protection Act of 1970 to confirm that 

a customer’s net equity claim is based on the customer’s last statement 

and that certain recoveries are prohibited, to change how trustees are 

appointed, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

NOVEMBER 14, 2013 

Mr. GARRETT (for himself, Mrs. CAROLYN B. MALONEY of New York, Mr. 

KING of New York, Mr. LUETKEMEYER, Mr. HIMES, Mrs. BACHMANN, 

Mr. WESTMORELAND, Mr. AL GREEN of Texas, Mr. HURT, Mr. 

FINCHER, Mrs. MCCARTHY of New York, Mr. MULVANEY, Mr. ROSS, 

Mrs. WAGNER, Mr. MURPHY of Florida, Mr. CASSIDY, Mr. SESSIONS, 

Ms. ROS-LEHTINEN, Mr. DEUTCH, Mr. MCCAUL, Mr. HARPER, Mr. CULBERSON, Mr. DUNCAN of Tennessee, Mr. BOUSTANY, and Mr. GRIFFIN

of Arkansas) 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 confirm that a customer’s net equity claim is based 

on the customer’s last statement and that certain recoveries are prohibited, to change how trustees are appointed, 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, 


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1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘Restoring Main Street 

3 Investor Protection and Confidence Act’’. 

4 SEC. 2. SECURITIES INVESTOR PROTECTION ACT OF 1970 

5 AMENDMENTS. 

6 (a) NET EQUITY BASED ON LAST STATEMENT.— 

7 Section 16(11) of the Securities Investor Protection Act 

8 of 1970 (15 U.S.C. 78lll(11)) is amended to read as fol9 lows: 

10 ‘‘(11) NET EQUITY.— 

11 ‘‘(A) IN GENERAL.—The term ‘net equity’ 

12 means the dollar amount of the account or ac13 counts of a customer, to be determined by— 

14 ‘‘(i) calculating the sum which would 

15 have been owed by the debtor to such cus16 tomer if the debtor had liquidated, by sale 

17 or purchase on the filing date— 

18 ‘‘(I) all securities positions of 

19 such customer (other than customer 

20 name securities reclaimed by such 

21 customer); and 

22 ‘‘(II) all positions in futures con23 tracts and options on futures con24 tracts held in a portfolio margining 

25 account carried as a securities account 

26 pursuant to a portfolio margining proVerDate Mar 15 2010 22:05 Nov 15, 2013 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3482.IH H3482

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1 gram approved by the Commission, in2 cluding all property collateralizing 

3 such positions, to the extent that such 

4 property is not otherwise included 

5 herein; minus 

6 ‘‘(ii) any indebtedness of such cus7 tomer to the debtor on the filing date; plus 

8 ‘‘(iii) any payment by such customer 

9 of such indebtedness to the debtor which is 

10 made with the approval of the trustee and 

11 within such period as the trustee may de12 termine (but in no event more than sixty 

13 days after the publication of notice under 

14 section 8(a)). 

15 ‘‘(B) TREATMENT OF CERTAIN COM16 MODITY FUTURES CONTRACTS.—A claim for a 

17 commodity futures contract received, acquired, 

18 or held in a portfolio margining account pursu19 ant to a portfolio margining program approved 

20 by the Commission or a claim for a security fu21 tures contract, shall be deemed to be a claim 

22 with respect to such contract as of the filing 

23 date, and such claim shall be treated as a claim 

24 for cash. 


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1 ‘‘(C) TREATMENT OF ACCOUNTS HELD BY

2 A CUSTOMER IN SEPARATE CAPACITIES.—In de3 termining net equity under this paragraph, ac4 counts held by a customer in separate capac5 ities shall be deemed to be accounts of separate 

6 customers. 

7 ‘‘(D) RELIANCE ON FINAL CUSTOMER

8 STATEMENT.— 

9 ‘‘(i) IN GENERAL.—In determining 

10 net equity under this paragraph, the posi11 tions, options, and contracts of a customer 

12 reported to the customer as held by the 

13 debtor, and any indebtedness of the cus14 tomer to the debtor, shall be determined 

15 based on— 

16 ‘‘(I) the information contained in 

17 the last statement issued by the debt18 or to the customer before the filing 

19 date; and 

20 ‘‘(II) any additional written con21 firmations of the customer’s positions, 

22 options, contracts, or indebtedness re23 ceived after such last statement but 

24 before the filing date. 


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1 ‘‘(ii) EXCEPTION WHEN DEBTOR’S

2 RECORDS INDICATE HIGHER VALUE.—Not3 withstanding clause (i), if the books and 

4 records of the debtor indicate that the net 

5 value of a customer’s positions, options, 

6 and contracts reported to the customer as 

7 held by the debtor, and any indebtedness 

8 of the customer to the debtor, is greater 

9 than the net value of the customer as cal10 culated under clause (i) using the cus11 tomer’s last statement, then the determina12 tion of the net equity of the customer 

13 under this paragraph shall be done using 

14 the books and records of the debtor instead 

15 of the customer’s last statement. 

16 ‘‘(iii) FRAUD EXCEPTION.—The provi17 sions of this subparagraph shall not apply 

18 to any customer that— 

19 ‘‘(I) knew the debtor was in20 volved in fraudulent activity with re21 spect to any customer of the debtor 

22 which reasonably indicated a fraud 

23 adversely affecting a substantial num24 ber of customers; or 

25 ‘‘(II) was a person that— 


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1 ‘‘(aa) was, or was required 

2 to be, registered— 

3 ‘‘(AA) as a broker or 

4 dealer under the Securities 

5 Exchange Act of 1934; or 

6 ‘‘(BB) as an investment 

7 adviser under the Invest8 ment Advisers Act of 1940, 

9 or that would have been re10 quired to register as an in11 vestment adviser under the 

12 Investment Advisers Act of 

13 1940 but for section 203(m) 

14 of such Act; 

15 ‘‘(bb) knew, or, due to the 

16 activities of such person causing 

17 such person to be described 

18 under item (aa), should have 

19 known, that the debtor was in20 volved in fraudulent activity with 

21 respect to any customer of the 

22 debtor; and 

23 ‘‘(cc) did not notify SIPC, 

24 the Commission, or law enforce25 ment personnel that the debtor 


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1 was involved in such fraudulent 

2 activity.’’. 

3 (b) ALLOCATION OF CUSTOMER PROPERTY TO CUS4 TOMERS.—Section 8(c) of the Securities Investor Protec5 tion Act of 1970 (15 U.S.C. 78fff–2(c)) is amended— 

6 (1) in paragraph (1), by amending subpara7 graph (B) to read as follows: 

8 ‘‘(B) second, to customers of such debtor, 

9 as described under paragraph (4);’’; and 

10 (2) by adding at the end the following: 

11 ‘‘(4) ALLOCATION OF CUSTOMER PROPERTY TO

12 CUSTOMERS.— 

13 ‘‘(A) IN GENERAL.—Allocations of cus14 tomer property to customers under paragraph 

15 (1)(B) shall be made such that customers share 

16 in customer property based on a methodology— 

17 ‘‘(i) based on the net equity of a cus18 tomer, as determined using the last state19 ment issued by the debtor to the customer 

20 before the filing date; 

21 ‘‘(ii) determined by the trustee, in 

22 consultation with the Commission; and 

23 ‘‘(iii) approved by the court. 

24 ‘‘(B) ALTERNATE METHODOLOGY.—If the 

25 trustee determines that allocating customer 


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1 property in accordance with subparagraph (A) 

2 would be unfair and inequitable to a substantial 

3 segment of customers and would not fully serve 

4 the remedial purposes of this Act, allocations of 

5 customer property to customers under para6 graph (1)(B) shall be made such that customers 

7 share in customer property based on a fair and 

8 reasonable methodology, with special consider9 ation for the typical, non-professional investor, 

10 that— 

11 ‘‘(i) if the trustee determines that it is 

12 necessary in order to reach a fair and rea13 sonable result, is determined without re14 gard to section 16(11)(D); 

15 ‘‘(ii) is determined by the trustee, in 

16 consultation with the Commission; and 

17 ‘‘(iii) is approved by the court. 

18 ‘‘(C) PUBLIC NOTICE AND COMMENT.—Be19 fore approving a proposed methodology under 

20 subparagraph (A)(ii) or subparagraph (B)(ii), 

21 the court shall— 

22 ‘‘(i) notify customers and other inter23 ested parties that the court is considering 

24 the proposed methodology; and 


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1 ‘‘(ii) provide the customers and inter2 ested parties an opportunity to provide 

3 comments on the proposed methodology.’’. 

4 (c) PROHIBITION ON CERTAIN RECOVERIES.— 

5 (1) IN GENERAL.—Section 8 of the Securities 

6 Investor Protection Act of 1970 (15 U.S.C. 78fff–2) 

7 is amended by adding at the end the following new 

8 subsection: 

9 ‘‘(g) PROHIBITION ON CERTAIN RECOVERIES.—Not10 withstanding any other provision of this Act, a trustee 

11 may not recover any property transferred by the debtor 

12 to a customer before the filing date unless, at the time 

13 of such transfer, such customer— 

14 ‘‘(1) knew the debtor was involved in fraudulent 

15 activity with respect to any customer of the debtor 

16 which reasonably indicated a fraud adversely affect17 ing a substantial number of customers; or 

18 ‘‘(2) was a person that— 

19 ‘‘(A) was, or was required to be, reg20 istered— 

21 ‘‘(i) as a broker or dealer under the 

22 Securities Exchange Act of 1934; or 

23 ‘‘(ii) as an investment adviser under 

24 the Investment Advisers Act of 1940, or 

25 that would have been required to register 


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1 as an investment adviser under the Invest2 ment Advisers Act of 1940 but for section 

3 203(m) of such Act; 

4 ‘‘(B) knew, or, due to the activities of such 

5 person causing such person to be described 

6 under subparagraph (A), should have known, 

7 that the debtor was involved in fraudulent ac8 tivity with respect to any customer of the debt9 or; and 

10 ‘‘(C) did not notify SIPC, the Commission, 

11 or law enforcement personnel that the debtor 

12 was involved in such fraudulent activity.’’. 

13 (2) CONSTRUCTION.—Nothing in this Act, or 

14 the amendments made by this Act, shall be con15 strued as prohibiting a trustee appointed under the 

16 Securities Investor Protection Act of 1970 from re17 covering property transferred by a debtor to a per18 son who is not a customer of the debtor. 

19 (d) APPOINTMENT OF TRUSTEES.— 

20 (1) IN GENERAL.—Section 5(b)(3) of the Secu21 rities Investor Protection Act of 1970 (15 U.S.C. 

22 78eee(b)(3)) is amended to read as follows: 

23 ‘‘(3) APPOINTMENT OF TRUSTEE AND ATTOR24 NEY.— 


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1 ‘‘(A) IN GENERAL.—If the court issues a 

2 protective decree under paragraph (1), such 

3 court shall forthwith appoint, as trustee for the 

4 liquidation of the business of the debtor and as 

5 attorney for the trustee, such persons as the 

6 court determines best fit to serve as trustee and 

7 as attorney from among the persons selected by 

8 the Commission pursuant to subparagraph (B). 

9 The persons appointed as trustee and as attor10 ney for the trustee may be associated with the 

11 same firm. 

12 ‘‘(B) COMMISSION CANDIDATES.—The 

13 Commission shall maintain a list of candidates 

14 for the position of trustee and attorney for the 

15 trustee for a debtor in a liquidation pro16 ceedings, and shall periodically update the list, 

17 as appropriate. With respect to a debtor and 

18 upon the court issuing a protective decree under 

19 paragraph (1), the Commission shall forthwith 

20 provide the court with such list. 

21 ‘‘(C) DISINTEREST REQUIREMENT.—No 

22 person may be appointed to serve as trustee or 

23 attorney for the trustee if such person is not 

24 disinterested within the meaning of paragraph 

25 (6), except that for any specified purpose other 


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1 than to represent a trustee in conducting a liq2 uidation proceeding, the trustee may, with the 

3 approval of SIPC and the court, employ an at4 torney who is not disinterested. 

5 ‘‘(D) QUALIFICATION.—A trustee ap6 pointed under this paragraph shall qualify by 

7 filing a bond in the manner prescribed by sec8 tion 322 of title 11, United States Code, except 

9 that neither SIPC nor any employee of SIPC 

10 shall be required to file a bond when appointed 

11 as trustee. 

12 ‘‘(E) PROHIBITION ON TRUSTEE SERVING

13 IN MULTIPLE LIQUIDATIONS.—A trustee may 

14 not be appointed under this paragraph if the 

15 trustee is currently serving as trustee for the 

16 liquidation of the business of another debtor 

17 under this Act.’’. 

18 (2) COMPENSATION FOR TRUSTEE AND ATTOR19 NEY.—Section 5(b)(5) of the Securities Investor 

20 Protection Act of 1970 (15 U.S.C. 78eee(b)(5)) is 

21 amended— 

22 (A) in subparagraph (A), by adding at the 

23 end the following: ‘‘The court shall publicly dis24 close all such allowances that are granted.’’; 


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1 (B) by amending subparagraph (C) to read 

2 as follows: 

3 ‘‘(C) AWARDING OF ALLOWANCES.—When4 ever an application for allowances is filed pur5 suant to subparagraph (B), the court shall de6 termine the amount of allowances, giving due 

7 consideration to the nature, extent, and value of 

8 the services rendered.’’; and 

9 (C) by adding at the end the following: 

10 ‘‘(F) SIPC DISCLOSURES.—SIPC shall 

11 issue quarterly public reports on— 

12 ‘‘(i) all payments made by SIPC to 

13 the trustee; 

14 ‘‘(ii) all other costs in connection with 

15 the liquidation proceeding, including legal 

16 and accounting costs; and 

17 ‘‘(iii) all additional expenses incurred 

18 by SIPC, and the nature of such ex19 penses.’’. 

20 (3) EFFECTIVE DATE.—The amendment made 

21 this subsection shall take effect with respect to 

22 trustees and attorneys appointed after the date of 

23 the enactment of this Act. 


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1 (e) DEFINITION OF CUSTOMER STATUS.—Section 

2 16(2)(B) of the Securities Investor Protection Act of 1970 

3 (15 U.S.C. 78lll(2)(B)) is amended— 

4 (1) in clause (ii), by striking ‘‘; and’’ and in5 serting a semicolon; 

6 (2) in clause (iii), by striking the period at the 

7 end and inserting a semicolon; and 

8 (3) by adding at the end the following new 

9 clauses: 

10 ‘‘(iv) any person that had cash or se11 curities that were converted or otherwise 

12 misappropriated by the debtor (or any per13 son who controls, is controlled by, or is 

14 under common control with the debtor, if 

15 such person was operating through the 

16 debtor), irrespective of whether the debtor 

17 held or otherwise had custody, possession, 

18 or control of such cash or securities; and 

19 ‘‘(v) any other person that the Com20 mission, in its discretion and without any 

21 need for court approval, deems a customer 

22 of the debtor.’’. 

23 (f) DETERMINATION OF NEED OF PROTECTION.— 

24 Section 5 of the Securities Investor Protection Act of 1970 

25 (15 U.S.C. 78eee) is amended— 


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1 (1) in subsection (a)(3)— 

2 (A) by amending the heading for such 

3 paragraph by inserting ‘‘THE COMMISSION OR’’ 

4 before ‘‘SIPC’’; 

5 (B) in the first subparagraph (A)— 

6 (i) by inserting ‘‘The Commission or’’ 

7 before ‘‘SIPC may’’; and 

8 (ii) by inserting ‘‘the Commission or’’ 

9 before ‘‘SIPC determines’’; and 

10 (C) by redesignating the second subpara11 graph (A) and the first subparagraph (B) as 

12 clauses (i) and (ii), respectively, and moving 

13 such clauses 2 ems to the right; and 

14 (2) in subsection (b)(1), by striking ‘‘applica15 tion by SIPC’’ and inserting ‘‘application by the 

16 Commission or SIPC’’. 

17 (g) TIMING OF SIPC ADVANCES; RESULT OF

18 DELAY.—Section 9 of the Securities Investor Protection 

19 Act of 1970 (15 U.S.C. 78fff–3) is amended by adding 

20 at the end the following: 

21 ‘‘(f) TIMING OF SIPC ADVANCES; RESULT OF

22 DELAY.— 

23 ‘‘(1) IN GENERAL.—SIPC advances made to 

24 satisfy customer claims pursuant to subsection (a) 

25 shall be made before the end of the 3-month period 


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1 beginning on the date that is the end of the 6-month 

2 period described under section 8(a)(3), plus the 

3 amount of any extension granted under such para4 graph. 

5 ‘‘(2) RESULT OF DELAY.—If SIPC fails to 

6 make advances to the trustee in the period specified 

7 in paragraph (1), then for purposes of calculating a 

8 customer’s net equity under this Act, interest shall 

9 accrue beginning on the date that is the end of the 

10 3-month period specified in paragraph (1). 

11 ‘‘(3) COURT DETERMINATION.—If the trustee 

12 determines that enough information has been pro13 vided to SIPC to make an advance pursuant to sub14 section (a), the trustee may petition the court to 

15 have the court direct SIPC to make such advance.’’. 

16 (h) TIMING OF PAYMENTS TO CUSTOMERS.—Section 

17 8(b) of the Securities Investor Protection Act of 1970 (15 

18 U.S.C. 78fff–2(b)) is amended— 

19 (1) in paragraph (1), by striking ‘‘and’’ at the 

20 end; 

21 (2) in paragraph (2), by striking the period at 

22 the end and inserting a semicolon; and 

23 (3) by inserting after paragraph (2) the fol24 lowing: 


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1 ‘‘(3) upon petition by a customer, order the 

2 trustee to carry out the obligations of the trustee 

3 under this subsection with respect to such customer; 

4 and 

5 ‘‘(4) if the court determines that the trustee 

6 has improperly delayed carrying out the obligations 

7 of the trustee under this subsection, impose financial 

8 sanctions on the trustee.’’. 

9 (i) COMMISSION AUTHORITY TO REQUIRE SIPC AC10 TION.—Section 11(b) of the Securities Investor Protection 

11 Act of 1970 (15 U.S.C. 78ggg(b)) is amended to read as 

12 follows: 

13 ‘‘(b) COMMISSION AUTHORITY TO REQUIRE SIPC 

14 ACTION.—In the event of the refusal of SIPC to commit 

15 its funds or otherwise to act for the protection of cus16 tomers of any member of SIPC, the Commission may re17 quire SIPC to discharge its obligations under this Act 

18 without court approval.’’. 

19 (j) LIMITATION ON SEC LOANS TO SIPC.—Section 

20 4(g) of the Securities Investor Protection Act of 1970 (15 

21 U.S.C. 78ddd(g)) is amended by inserting after ‘‘this Act’’ 

22 the following: ‘‘and the Commission, in consultation with 

23 the Secretary of the Treasury, determines that SIPC is 

24 unable to borrow in the public debt markets at reasonable 

25 terms (both as to yield and maturity)’’. 


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1 (k) INSPECTION OF SIPC MEMBERS BY SEC AND

2 SELF-REGULATORY ORGANIZATIONS.— 

3 (1) IN GENERAL.—The Securities Investor Pro4 tection Act of 1970 (15 U.S.C. 78aaa et seq.) is 

5 amended— 

6 (A) in section 11, by adding at the end the 

7 following: 

8 ‘‘(e) INSPECTION OF SIPC MEMBERS BY SEC.—The 

9 Commission shall carry out periodic inspections of SIPC 

10 members to ensure that the information such members 

11 provide to customers, including information contained in 

12 account statements and transaction confirmations, is ac13 curate.’’; and 

14 (B) in section 13(c)— 

15 (i) by redesignating paragraphs (1) 

16 and (2) as subparagraphs (A) and (B), re17 spectively, and moving such subparagraphs 

18 2 ems to the right; 

19 (ii) by striking ‘‘The self-regulatory 

20 organization’’ and inserting the following: 

21 ‘‘(1) IN GENERAL.—The self-regulatory organi22 zation’’; and 

23 (iii) by adding at the end the fol24 lowing: 


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1 ‘‘(2) INSPECTION OF INFORMATION PROVIDED

2 TO CUSTOMERS.—Under such regulations as the 

3 Commission may prescribe, the self-regulatory orga4 nization of which a member of SIPC is a member 

5 or in which it is a participant shall inspect or exam6 ine such member to— 

7 ‘‘(A) assess the financial stability of such 

8 member; and 

9 ‘‘(B) ensure that the information such 

10 member provides to customers, including infor11 mation contained in account statements and 

12 transaction confirmations, is accurate.’’. 

13 (2) REPORT.—Not later than the end of the 1- 

14 year period beginning on the date of the enactment 

15 of this Act, the Securities and Exchange Commis16 sion shall issue a report to the Committee on Finan17 cial Services of the House of Representatives and 

18 the Committee on Banking, Housing, and Urban Af19 fairs of the Senate on the implementation of the 

20 amendments made by this subsection. 

21 SEC. 3. EFFECTIVE DATE. 

22 Except as provided under section 2(d)(3), the amend23 ments made by section 2 shall take effect with respect to 

24 a liquidation proceeding under the Securities Investor Pro25 tection Act of 1970 that— 


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1 (1) was in progress on the date of the enact2 ment of this Act; or 

3 (2) is initiated after the date of the enactment 

4 of this Act. 

Æ 


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