I 

111TH CONGRESS 

2D SESSION H. R. 6531 

To amend the Securities Investor Protection Act of 1970 to determine a 

customer’s net equity based on the customer’s last statement, to prohibit 

certain recoveries, to change how trustees are appointed, and for other 

purposes. 

IN THE HOUSE OF REPRESENTATIVES 

DECEMBER 16, 2010 

Mr. GARRETT of New Jersey (for himself, Mr. KING of New York, and Ms. 

ROS-LEHTINEN) 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 determine a customer’s net equity based on the customer’s last statement, to prohibit certain recoveries, 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, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Equitable Treatment 

5 of Investors Act’’. 


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1 SEC. 2. SECURITIES INVESTOR PROTECTION ACT OF 1970 

2 AMENDMENTS. 

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

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

5 of 1970 (15 U.S.C. 78lll(11)) is amended to read as fol6 lows: 

7 ‘‘(11) NET EQUITY.— 

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

9 means the dollar amount of the account or ac10 counts of a customer, to be determined by— 

11 ‘‘(i) calculating the sum which would 

12 have been owed by the debtor to such cus13 tomer if the debtor had liquidated, by sale 

14 or purchase on the filing date— 

15 ‘‘(I) all securities positions of 

16 such customer (other than customer 

17 name securities reclaimed by such 

18 customer); and 

19 ‘‘(II) all positions in futures con20 tracts and options on futures con21 tracts held in a portfolio margining 

22 account carried as a securities account 

23 pursuant to a portfolio margining pro24 gram approved by the Commission, in25 cluding all property collateralizing 

26 such positions, to the extent that such 


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1 property is not otherwise included 

2 herein; minus 

3 ‘‘(ii) any indebtedness of such cus4 tomer to the debtor on the filing date; plus 

5 ‘‘(iii) any payment by such customer 

6 of such indebtedness to the debtor which is 

7 made with the approval of the trustee and 

8 within such period as the trustee may de9 termine (but in no event more than sixty 

10 days after the publication of notice under 

11 section 8(a)). 

12 ‘‘(B) TREATMENT OF CERTAIN COM13 MODITY FUTURES CONTRACTS.—A claim for a 

14 commodity futures contract received, acquired, 

15 or held in a portfolio margining account pursu16 ant to a portfolio margining program approved 

17 by the Commission or a claim for a security fu18 tures contract, shall be deemed to be a claim 

19 with respect to such contract as of the filing 

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

21 for cash. 

22 ‘‘(C) TREATMENT OF ACCOUNTS HELD BY

23 A CUSTOMER IN SEPARATE CAPACITIES.—In de24 termining net equity under this paragraph, ac25 counts held by a customer in separate capacVerDate Mar 15 2010 07:06 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H6531.IH H6531

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1 ities shall be deemed to be accounts of separate 

2 customers. 

3 ‘‘(D) RELIANCE ON FINAL CUSTOMER

4 STATEMENT.— 

5 ‘‘(i) IN GENERAL.—In determining 

6 net equity under this paragraph, the posi7 tions, options, and contracts of a customer 

8 held by the debtor, and any indebtedness 

9 of the customer to the debtor, shall be de10 termined based on— 

11 ‘‘(I) the information contained in 

12 the last statement received by the cus13 tomer from the debtor before the fil14 ing date; and 

15 ‘‘(II) any additional specific con16 firmations of the customer’s positions, 

17 options, contracts, or indebtedness re18 ceived after such last statement but 

19 before the filing date. 

20 ‘‘(ii) FRAUD EXCEPTION.—The provi21 sions of this subparagraph shall not apply 

22 to any customer that— 

23 ‘‘(I) knew the debtor was in24 volved in fraudulent activity with reVerDate Mar 15 2010 07:06 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H6531.IH H6531

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1 spect to any customer of the debtor; 

2 or 

3 ‘‘(II) was a person that— 

4 ‘‘(aa) was, or was required 

5 to be, registered with the Securi6 ties and Exchange Commission 

7 under the securities laws (as such 

8 term is defined under section 

9 3(a) of the Securities Exchange 

10 Act of 1934 (15 U.S.C. 78c(a))); 

11 ‘‘(bb) knew, or should have 

12 known, that the debtor was in13 volved in fraudulent activity with 

14 respect to any customer of the 

15 debtor; and 

16 ‘‘(cc) did not notify SIPC, 

17 the Commission, or law enforce18 ment personnel that the debtor 

19 was involved in such fraudulent 

20 activity.’’. 

21 (b) PROHIBITION ON CERTAIN RECOVERIES.—Sec22 tion 8 of the Securities Investor Protection Act of 1970 

23 (15 U.S.C. 78fff–2) is amended by adding at the end the 

24 following new subsection: 


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1 ‘‘(g) PROHIBITION ON CERTAIN RECOVERIES.—Not2 withstanding any other provision of this Act, a trustee 

3 may not recover any property transferred by the debtor 

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

5 of such transfer, such customer— 

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

7 activity with respect to any customer of the debtor; 

8 or 

9 ‘‘(2) was a person that— 

10 ‘‘(A) was, or was required to be, registered 

11 with the Securities and Exchange Commission 

12 under the securities laws (as such term is de13 fined under section 3(a) of the Securities Ex14 change Act of 1934 (15 U.S.C. 78c(a))); 

15 ‘‘(B) knew, or should have known, that the 

16 debtor was involved in fraudulent activity with 

17 respect to any customer of the debtor; and 

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

19 or law enforcement personnel that the debtor 

20 was involved in such fraudulent activity.’’. 

21 (c) APPOINTMENT OF TRUSTEES.— 

22 (1) IN GENERAL.—Section 5(b)(3) of the Secu23 rities Investor Protection Act of 1970 (15 U.S.C. 

24 78eee(b)(3)) is amended to read as follows: 


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1 ‘‘(3) APPOINTMENT OF TRUSTEE AND ATTOR2 NEY.— 

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

4 protective decree under paragraph (1), such 

5 court shall forthwith appoint, as trustee for the 

6 liquidation of the business of the debtor and as 

7 attorney for the trustee, such persons as the 

8 court determines best fit to serve as trustee and 

9 as attorney from among the persons selected by 

10 the Commission pursuant to subparagraph (B). 

11 The persons appointed as trustee and as attor12 ney for the trustee may be associated with the 

13 same firm. 

14 ‘‘(B) COMMISSION CANDIDATES.—With re15 spect to a debtor and upon the court issuing a 

16 protective decree under paragraph (1), the 

17 Commission shall forthwith provide the court 

18 with a list of candidates for the position of 

19 trustee and attorney for the trustee for such 

20 debtor. 

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.’’. 

9 (2) EFFECTIVE DATE.—The amendment made 

10 by paragraph (1) shall take effect with respect to 

11 trustees and attorneys appointed after the date of 

12 the enactment of this Act. 

13 SEC. 3. EFFECTIVE DATE. 

14 Except as provided under section 2(c)(2), the amend15 ments made by section 2 shall take effect with respect to 

16 a liquidation proceeding under the Securities Investor Pro17 tection Act of 1970 that— 

18 (1) was in progress on the date of the enact19 ment of this Act; or 

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

21 of this Act. 

Æ 


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