I 

111TH CONGRESS 

2D SESSION H. R. 5032 

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 

APRIL 15, 2010 

Mr. ACKERMAN (for himself, Mr. MAFFEI, Mr. KING of New York, Mr. KLEIN

of Florida, Mr. PERLMUTTER, and Ms. SPEIER) 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 2010’’. 


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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 was either complicit or negligent in their participation 

7 in the Ponzi scheme. 

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

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

10 scheme investor if such investor has filed a lawsuit against 

11 the Ponzi scheme investor, the Ponzi scheme, or the trust12 ee in connection with the securities that are the basis of 

13 such claim. 

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

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

16 enactment of this section, such trustee shall make the de17 termination required under subsection (a) not later than 

18 30 days after such date of enactment, and only if such 

19 trustee makes a determination that the debtor is a Ponzi 

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

21 in the Ponzi scheme. 

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

23 Treasury makes a determination that claims under this 

24 section are not being considered in accordance with the 

25 timeline submitted to the Secretary under subsection 


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

2 made under this section to be made with interest. 

3 ‘‘(j) RULEMAKING.—SIPC shall issue regulations to 

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

5 (b) SIPC AUTHORITY TO ADVANCE FUNDS.—Sec6 tion 9 of such Act (15 U.S.C. 78fff–3) is amended by add7 ing at the end the following new subsection: 

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

9 SIPC shall advance to the trustee— 

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

11 claims made under section 8A; and 

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

13 out section 8A.’’. 

14 SEC. 3. SIPC FUND ASSESSMENT. 

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

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

17 regulations to modify the SIPC Fund assessment levels 

18 to ensure they are adequate to cover the anticipated costs 

19 to the SIPC Fund of carrying out the amendments made 

20 by this Act. 

21 SEC. 4. DEFINITIONS. 

22 Section 16 of the Securities Investor Protection Act 

23 of 1970 (15 U.S.C. 78lll) is amended by adding at the 

24 end the following new paragraph: 


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1 ‘‘(15) DEFINITIONS RELATED TO PONZI

2 SCHEMES.— 

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

4 scheme’ means any fraudulent investment oper5 ation which is managed in a manner that pro6 vides investors with returns (or purported re7 turns) derived substantially from investments 

8 made by other investors rather than from prof9 its. 

10 ‘‘(B) PONZI SCHEME INVESTOR.—The 

11 term ‘Ponzi scheme investor’ means a customer 

12 of a debtor, where the trustee of such debtor 

13 has determined the debtor to be a Ponzi 

14 scheme. 

15 ‘‘(C) INDIRECT PONZI SCHEME INVES16 TOR.—The term ‘indirect Ponzi scheme inves17 tor’ means any person (including any person 

18 with whom the Ponzi scheme investor deals as 

19 principal or agent) who is an investor in a 

20 Ponzi scheme investor and on whose behalf the 

21 Ponzi scheme investor has a claim on account 

22 of securities received, acquired, or held by the 

23 Ponzi scheme in the ordinary course of its busi24 ness as a broker or dealer from or for the secu25 rities accounts of such Ponzi scheme investor 


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1 for safekeeping, with a view to sale, to cover 

2 consummated sales, pursuant to purchases, as 

3 collateral, security, or for purposes of effecting 

4 transfer.’’. 

Æ 


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