ities shall be deemed to be accounts of separate 
customers. 
‘‘(D) RELIANCE
ON
FINAL
CUSTOMER 
STATEMENT.— 
‘‘(i) IN
GENERAL.—In determining 
net equity under this paragraph, the posi-
tions, options, and contracts of a customer 
reported to the customer as held by the 
debtor, and any indebtedness of the cus-
tomer to the debtor, shall be determined 
based on— 
‘‘(I) the information contained in 
the last statement issued by the debt-
or to the customer before the filing 
date; and 
‘‘(II) any additional written con-
firmations of the customer’s positions, 
options, contracts, or indebtedness re-
ceived after such last statement but 
before the filing date. 
‘‘(ii) EXCEPTION WHEN DEBTOR’S RE-
CORDERS INDICATE HIGHER VALUE.—Not-
withstanding clause (i), if the books and 
records of the debtor indicate that the net 
value of a customer’s positions, options, 
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and contracts reported to the customer as 
held by the debtor, and any indebtedness 
of the customer to the debtor, is greater 
than the net value of the customer as cal-
culated under clause (i) using the cus-
tomer’s last statement, then the determina-
tion of the net equity of the customer 
under this paragraph shall be done using 
the books and records of the debtor instead 
of the customer’s last statement. 
‘‘(iii) FRAUD EXCEPTION.—The provi-
sions of this subparagraph shall not apply 
to any customer that— 
‘‘(I) knew the debtor was in-
volved in fraudulent activity with re-
spect to any customer of the debtor 
which reasonably indicated a fraud 
adversely affecting a substantial num-
ber of customers; or 
‘‘(II) was a person that— 
‘‘(aa) was, or was required 
to be, registered— 
‘‘(AA) as a broker or 
dealer under the Securities 
Exchange Act of 1934; or 
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srobinson on DSK4SPTVN1PROD with
‘‘(BB) as an investment 
adviser under the Invest-
ment Advisers Act of 1940, 
or that would have been re-
quired to register as an in-
vestment adviser under the 
Investment Advisers Act of 
1940 but for section 203(m) 
of such Act; 
‘‘(bb) knew, or, due to the 
activities of such person causing 
such person to be described 
under item (aa), should have 
known, that the debtor was in-
volved in fraudulent activity with 
respect to any customer of the 
debtor; and 
‘‘(cc) did not notify SIPC, 
the Commission, or law enforce-
ment personnel that the debtor 
was involved in such fraudulent 
activity.’’. 
(b) ALLOCATION OF CUSTOMER PROPERTY TO CUS-
TOMERS.—Section 8(c) of the Securities Investor Protec-
tion Act of 1970 (15 U.S.C. 78fff–2(c)) is amended— 
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srobinson on DSK4SPTVN1PROD with
(1) in paragraph (1), by amending subpara-
graph (B) to read as follows: 
‘‘(B) second, to customers of such debtor, 
as described under paragraph (4);’’; and 
(2) by adding at the end the following: 
‘‘(4) ALLOCATION OF CUSTOMER PROPERTY TO 
CUSTOMERS.— 
‘‘(A) IN
GENERAL.—Allocations of cus-
tomer property to customers under paragraph 
(1)(B) shall be made such that customers share 
in customer property based on a methodology— 
‘‘(i) based on the net equity of a cus-
tomer, as determined using the last state-
ment issued by the debtor to the customer 
before the filing date; 
‘‘(ii) determined by the trustee, in 
consultation with the Commission; and 
‘‘(iii) approved by the court. 
‘‘(B) ALTERNATE METHODOLOGY.—If the 
trustee determines that allocating customer 
property in accordance with subparagraph (A) 
would be unfair and inequitable to a substantial 
segment of customers and would not fully serve 
the remedial purposes of this Act, allocations of 
customer property to customers under para-
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srobinson on DSK4SPTVN1PROD with
graph (1)(B) shall be made such that customers 
share in customer property based on a fair and 
reasonable methodology, with special consider-
ation for the typical, non-professional investor, 
that— 
‘‘(i) if the trustee determines that it is 
necessary in order to reach a fair and rea-
sonable result, is determined without re-
gard to section 16(11)(D); 
‘‘(ii) is determined by the trustee, in 
consultation with the Commission; and 
‘‘(iii) is approved by the court. 
‘‘(C) PUBLIC NOTICE AND COMMENT.—Be-
fore approving a proposed methodology under 
subparagraph (A)(ii) or subparagraph (B)(ii), 
the court shall— 
‘‘(i) notify customers and other inter-
ested parties that the court is considering 
the proposed methodology; and 
‘‘(ii) provide the customers and inter-
ested parties an opportunity to provide 
comments on the proposed methodology.’’. 
(c) PROHIBITION ON CERTAIN RECOVERIES.— 
(1) IN GENERAL.—Section 8 of the Securities 
Investor Protection Act of 1970 (15 U.S.C. 78fff–2) 
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srobinson on DSK4SPTVN1PROD with
is amended by adding at the end the following new 
subsection: 
‘‘(g) PROHIBITION ON CERTAIN RECOVERIES.—Not-
withstanding any other provision of this Act, a trustee 
may not recover any property transferred by the debtor 
to a customer before the filing date unless, at the time 
of such transfer, such customer— 
‘‘(1) knew the debtor was involved in fraudulent 
activity with respect to any customer of the debtor 
which reasonably indicated a fraud adversely affect-
ing a substantial number of customers; or 
‘‘(2) was a person that— 
‘‘(A) was, or was required to be, reg-
istered— 
‘‘(i) as a broker or dealer under the 
Securities Exchange Act of 1934; or 
‘‘(ii) as an investment adviser under 
the Investment Advisers Act of 1940, or 
that would have been required to register 
as an investment adviser under the Invest-
ment Advisers Act of 1940 but for section 
203(m) of such Act; 
‘‘(B) knew, or, due to the activities of such 
person causing such person to be described 
under subparagraph (A), should have known, 
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srobinson on DSK4SPTVN1PROD with
that the debtor was involved in fraudulent ac-
tivity with respect to any customer of the debt-
or; and 
‘‘(C) did not notify SIPC, the Commission, 
or law enforcement personnel that the debtor 
was involved in such fraudulent activity.’’. 
(2) CONSTRUCTION.—Nothing in this Act, or 
the amendments made by this Act, shall be con-
strued as prohibiting a trustee appointed under the 
Securities Investor Protection Act of 1970 from re-
covering property transferred by a debtor to a per-
son who is not a customer of the debtor. 
(d) APPOINTMENT OF TRUSTEES.— 
(1) IN GENERAL.—Section 5(b)(3) of the Secu-
rities Investor Protection Act of 1970 (15 U.S.C. 
78eee(b)(3)) is amended to read as follows: 
‘‘(3) APPOINTMENT OF TRUSTEE AND ATTOR-
NEY.— 
‘‘(A) IN GENERAL.—If the court issues a 
protective decree under paragraph (1), such 
court shall forthwith appoint, as trustee for the 
liquidation of the business of the debtor and as 
attorney for the trustee, such persons as the 
court determines best fit to serve as trustee and 
as attorney from among the persons selected by 
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srobinson on DSK4SPTVN1PROD with
the Commission pursuant to subparagraph (B). 
The persons appointed as trustee and as attor-
ney for the trustee may be associated with the 
same firm. 
‘‘(B) 
COMMISSION
CANDIDATES.—The 
Commission shall maintain a list of candidates 
for the position of trustee and attorney for the 
trustee for a debtor in a liquidation pro-
ceedings, and shall periodically update the list, 
as appropriate. With respect to a debtor and 
upon the court issuing a protective decree under 
paragraph (1), the Commission shall forthwith 
provide the court with such list. 
‘‘(C) DISINTEREST
REQUIREMENT.—No 
person may be appointed to serve as trustee or 
attorney for the trustee if such person is not 
disinterested within the meaning of paragraph 
(6), except that for any specified purpose other 
than to represent a trustee in conducting a liq-
uidation proceeding, the trustee may, with the 
approval of SIPC and the court, employ an at-
torney who is not disinterested. 
‘‘(D) 
QUALIFICATION.—A 
trustee 
ap-
pointed under this paragraph shall qualify by 
filing a bond in the manner prescribed by sec-
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srobinson on DSK4SPTVN1PROD with
tion 322 of title 11, United States Code, except 
that neither SIPC nor any employee of SIPC 
shall be required to file a bond when appointed 
as trustee. 
‘‘(E) PROHIBITION ON TRUSTEE SERVING 
IN
MULTIPLE
LIQUIDATIONS.—A trustee may 
not be appointed under this paragraph if the 
trustee is currently serving as trustee for the 
liquidation of the business of another debtor 
under this Act.’’. 
(2) COMPENSATION FOR TRUSTEE AND ATTOR-
NEY.—Section 5(b)(5) of the Securities Investor 
Protection Act of 1970 (15 U.S.C. 78eee(b)(5)) is 
amended— 
(A) in subparagraph (A), by adding at the 
end the following: ‘‘The court shall publicly dis-
close all such allowances that are granted.’’; 
(B) by amending subparagraph (C) to read 
as follows: 
‘‘(C) AWARDING OF ALLOWANCES.—When-
ever an application for allowances is filed pur-
suant to subparagraph (B), the court shall de-
termine the amount of allowances, giving due 
consideration to the nature, extent, and value of 
the services rendered.’’; and 
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srobinson on DSK4SPTVN1PROD with
(C) by adding at the end the following: 
‘‘(F) SIPC 
DISCLOSURES.—SIPC shall 
issue quarterly public reports on— 
‘‘(i) all payments made by SIPC to 
the trustee; and 
‘‘(ii) all other costs in connection with 
the liquidation proceeding, including legal 
and accounting costs.’’. 
(3) EFFECTIVE DATE.—The amendment made 
this subsection shall take effect with respect to 
trustees and attorneys appointed after the date of 
the enactment of this Act. 
(e) TIMING
OF
SIPC ADVANCES; RESULT
OF 
DELAY.—Section 9 of the Securities Investor Protection 
Act of 1970 (15 U.S.C. 78fff–3) is amended by adding 
at the end the following: 
‘‘(f) TIMING
OF
SIPC ADVANCES; RESULT
OF 
DELAY.— 
‘‘(1) IN
GENERAL.—SIPC advances made to 
satisfy customer claims pursuant to subsection (a) 
shall be made before the end of the 3-month period 
beginning on the date that is the end of the 6-month 
period described under section 8(a)(3), plus the 
amount of any extension granted under such para-
graph. 
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srobinson on DSK4SPTVN1PROD with
‘‘(2) RESULT
OF
DELAY.—If SIPC fails to 
make advances to the trustee in the period specified 
in paragraph (1), then for purposes of calculating a 
customer’s net equity under this Act, interest shall 
accrue beginning on the date that is the end of the 
3-month period specified in paragraph (1). 
‘‘(3) COURT DETERMINATION.—If the trustee 
determines that enough information has been pro-
vided to SIPC to make an advance pursuant to sub-
section (a), the trustee may petition the court to 
have the court direct SIPC to make such advance.’’. 
(f) TIMING OF PAYMENTS TO CUSTOMERS.—Section 
8(b) of the Securities Investor Protection Act of 1970 (15 
U.S.C. 78fff–2(b)) is amended— 
(1) in paragraph (1), by striking ‘‘and’’ at the 
end; 
(2) in paragraph (2), by striking the period at 
the end and inserting a semicolon; and 
(3) by inserting after paragraph (2) the fol-
lowing: 
‘‘(3) upon petition by a customer, order the 
trustee to carry out the obligations of the trustee 
under this subsection with respect to such customer; 
and 
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