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 cus-
tomer’s last statement, to prohibit certain recoveries, to 
change how trustees are appointed, and for other pur-
poses. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Equitable Treatment 
of Investors Act’’. 
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SEC. 2. SECURITIES INVESTOR PROTECTION ACT OF 1970 
AMENDMENTS. 
(a) NET EQUITY BASED ON LAST STATEMENT.— 
Section 16(11) of the Securities Investor Protection Act 
of 1970 (15 U.S.C. 78lll(11)) is amended to read as fol-
lows: 
‘‘(11) NET EQUITY.— 
‘‘(A) IN GENERAL.—The term ‘net equity’ 
means the dollar amount of the account or ac-
counts of a customer, to be determined by— 
‘‘(i) calculating the sum which would 
have been owed by the debtor to such cus-
tomer if the debtor had liquidated, by sale 
or purchase on the filing date— 
‘‘(I) all securities positions of 
such customer (other than customer 
name securities reclaimed by such 
customer); and 
‘‘(II) all positions in futures con-
tracts and options on futures con-
tracts held in a portfolio margining 
account carried as a securities account 
pursuant to a portfolio margining pro-
gram approved by the Commission, in-
cluding all property collateralizing 
such positions, to the extent that such 
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property is not otherwise included 
herein; minus 
‘‘(ii) any indebtedness of such cus-
tomer to the debtor on the filing date; plus 
‘‘(iii) any payment by such customer 
of such indebtedness to the debtor which is 
made with the approval of the trustee and 
within such period as the trustee may de-
termine (but in no event more than sixty 
days after the publication of notice under 
section 8(a)). 
‘‘(B) TREATMENT
OF
CERTAIN
COM-
MODITY FUTURES CONTRACTS.—A claim for a 
commodity futures contract received, acquired, 
or held in a portfolio margining account pursu-
ant to a portfolio margining program approved 
by the Commission or a claim for a security fu-
tures contract, shall be deemed to be a claim 
with respect to such contract as of the filing 
date, and such claim shall be treated as a claim 
for cash. 
‘‘(C) TREATMENT OF ACCOUNTS HELD BY 
A CUSTOMER IN SEPARATE CAPACITIES.—In de-
termining net equity under this paragraph, ac-
counts held by a customer in separate capac-
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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 
held by the debtor, and any indebtedness 
of the customer to the debtor, shall be de-
termined based on— 
‘‘(I) the information contained in 
the last statement received by the cus-
tomer from the debtor before the fil-
ing date; and 
‘‘(II) any additional specific con-
firmations of the customer’s positions, 
options, contracts, or indebtedness re-
ceived after such last statement but 
before the filing date. 
‘‘(ii) 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-
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spect to any customer of the debtor; 
or 
‘‘(II) was a person that— 
‘‘(aa) was, or was required 
to be, registered with the Securi-
ties and Exchange Commission 
under the securities laws (as such 
term is defined under section 
3(a) of the Securities Exchange 
Act of 1934 (15 U.S.C. 78c(a))); 
‘‘(bb) knew, or 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) PROHIBITION ON CERTAIN RECOVERIES.—Sec-
tion 8 of the Securities Investor Protection Act of 1970 
(15 U.S.C. 78fff–2) is amended by adding at the end the 
following new subsection: 
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‘‘(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; 
or 
‘‘(2) was a person that— 
‘‘(A) was, or was required to be, registered 
with the Securities and Exchange Commission 
under the securities laws (as such term is de-
fined under section 3(a) of the Securities Ex-
change Act of 1934 (15 U.S.C. 78c(a))); 
‘‘(B) knew, or should have known, that the 
debtor was involved in fraudulent activity with 
respect to any customer of the debtor; and 
‘‘(C) did not notify SIPC, the Commission, 
or law enforcement personnel that the debtor 
was involved in such fraudulent activity.’’. 
(c) 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: 
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‘‘(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 
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.—With re-
spect to a debtor and upon the court issuing a 
protective decree under paragraph (1), the 
Commission shall forthwith provide the court 
with a list of candidates for the position of 
trustee and attorney for the trustee for such 
debtor. 
‘‘(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 
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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-
tion 322 of title 11, United States Code.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall take effect with respect to 
trustees and attorneys appointed after the date of 
the enactment of this Act. 
SEC. 3. EFFECTIVE DATE. 
Except as provided under section 2(c)(2), the amend-
ments made by section 2 shall take effect with respect to 
a liquidation proceeding under the Securities Investor Pro-
tection Act of 1970 that— 
(1) was in progress on the date of the enact-
ment of this Act; or 
(2) is initiated after the date of the enactment 
of this Act. 
Æ 
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