Securities Investor Protection Act Amendments
PL 95-283 (H.R.8331), enacted 05/21/1978

PUBLIC LAW 95-283—MAY 21, 1978 
92 STAT. 249 
Public Law 95-283 
95th Congress 
An Act 
To amend the Securities Investor Protection Act of 1970. 
Be it enacted hy the Senate and House of Representatives of the 
United States of America in Congress assembled, 
SHORT TITLE 
SECTION 1. This Act may be cited as tlie "Securities Investor Protec-
tion Act Amendments of 1978". 
MEMBERSHIP OF SIPC 
May 21, 1978 
[H.R. 8331] 
Securities 
Investor 
Protection Ad; 
Amendments of 
1978. 
15 u s e 78aaa 
note. 
SEC. 2. (a) Section 3(a) of the Securities Investor Protection Act 
of 1970 (15 IJ.S.C. 78ccc(a)) is amended to read as follows: 
" ( a ) 
C R E A T I O N AND M E M B E R S H I P . — 
"(1) CREATION.—There is hereby established a body corporate 
to be known as the 'Securities Investor Protection Corporation' 
(hereafter in this Act referred to as 'SIPC'). SIPC shall be a 
nonprofit corporation and shall have succession until dissolved 
by Act of the Congress. SIPC shall— 
"(A) not be an agency or establishment of the United 
States Government; and 
"(B) except as otherwise provided in this Act, be subject 
to, and have all the powers conferred upon a nonprofit 
corporation by, the District of Columbia Nonprofit Corpora-
tion Act (D.C. Code, section 29-1001 and fol.). 
"(2) MEMBERSHIP.— 
"(A) MEMBERS OF SIPC.—SIPC shall be a membership 
corporation the members of which shall be all persons regis-
tered as brokers or dealers under section 15(b) of the 1934 15 USC 78o. 
Act, other than— 
" (i) persons whose principal business, in the determi-
nation of SIPC, taking into account business of affiliated 
entities, is conducted outside the United States and its 
territories and possessions; and 
"(ii) persons whose business as a broker or dealer con-
sists exclusively of (I) the distribution of shares of regis-
tered open end investment companies or unit investment 
trusts, (II) the sale of variable annuities, (III) the 
business of insurance, or (IV) the business of rendering 
investment advisory services to one or more registered 
investment companies or insurance company separate 
accounts. 
"(B) COMMISSION REVIEW.—SIPC shall file with the 
Commission a copy of any determination made pursuant to 
subparagraph (A) (i). Within thirty days after the date of 
such filing, or within such longer period as the Commission 
may designate of not more than ninety days after such date 
if it finds such longer period to be appropriate and publishes 
its reasons for so finding, the Commission shall, consistent 
92 STAT. 250 
PUBLIC LAW 95-283—MAY 21, 1978 
with the public interest and the purposes of this Act, affirm, 
reverse, or amend any such determination of SIPC. 
"(C) ADDITIONAL MEMBERS.—SIPC shall provide by rule 
that persons excluded from membership in SIPC under sub-
paragraph (A) (i) may become members of SIPC under such 
conditions and upon such terms as SIPC shall require by rule, 
taking into account such mattei's as the availability of assets 
and the ability to conduct a liquidation if necessary. 
"(D) DISCLOSURE.—Any broker or dealer excluded from 
membership in SIPC under subparagraph (A) (i) shall, as 
required by the Commission by rule, make disclosures of its 
exclusion and other relevant information to the customers 
of such broker or dealer who are living in the United States 
or its territories and possessions.". 
Repeal. 
(b) Section 3(f) of such Act (15 U.S.C. 78ccc(f)) is repealed. 
POWERS OF SIPC 
SEC. 3. Section 3(b) of such Act (15 U.S.C. 78ccc(b)) is amended— 
(1) in paragraph (1), by striking out "court, State, or Federal" 
and inserting "State, Federal, or other court" in lieu thereof; and 
(2) by striking out paragraph (3), redesignating paragraphs 
(4) through (8) as paragraphs (6) through (9), respectively, and 
inserting immediately after paragraph (2) the following new 
paragraphs: 
"(3) to adopt, amend, and repeal, by its Board of Directors, 
such bylaws as may be necessary or appropriate to carry out the 
purposes of this Act, including bylaws relating to— 
" (A^ the conduct of its business; and 
"(B) the indemnity of its directors, officers, and employees 
(including any such person acting as trustee or otherwise in 
connection with a liquidation proceeding) for liabilities and 
expenses actually and reasonably incurred by any such person 
in connection with the defense or settlement of an action 
or suit if such person acted in good faith and in a manner 
reasonably believed to be consistent with the purposes of 
this Act. 
"(4) to adopt, amend, and repeal, by its Board of Directors, 
such rules as may be necessary or appropriate to carry oiit the 
purposes of this Act, including rules relating to— 
" (A) the definition of terms used in this Act, other than 
Post, p. 260. 
those terms for which a definition is provided in section 16; 
"(B) the procedures for the liquidation of members and 
direct payment procedures, including the transfer of cus-
tomer accounts, the distribution of customer property, and 
the advance and payment of SIPC funds; and 
"(C) the exercise of all other rights and powers granted 
to it by this Act;". 
BOARD OF D I R E C T O R S 
SEC. 4. (a) Section 3(c) (2) (C) (ii) of such Act (15 U.S.C. 78ccc 
(c) (2) (C) (ii)) is amended by striking out "associated with any" 
and all that follows through "group" and inserting in lieu thereof 
"associated with a broker or dealer or associated with a member of a 
national securities exchange, within the meaning of section 3(a) (18) 
PUBLIC LAW 95-283—MAY 21, 1978 
92 STAT. 251 
or section 3(a) (21), respectively, of the 1934 Act, or similarly 
associated with any self-re^latory organization or other securities 
industry group,". 
(b) Section 3(c)(5) of such Act (15 U.S.C. 78ccc(c)(5)) is 
amended to read as follows: 
"(5) COMPENSATION.—All matters relating to compensation of 
directors shall be as provided in the bylaws of S I P C " . 
15 use 78c. 
BYLAWS AND KULES 
SEC. 5. Section 3(e) of such Act (15 U.S.C. 78ccc(e)) is amended 
to read as follows: 
"(e) BYLAWS AND RULES.— 
"(1) PROPOSED BYLAW CHANGES.—The Board of Directors of 
S I P C shall file with the Commission a copy of any proposed 
bylaw or any proposed amendment to or repeal of any l>ylaw of 
J S I P C (hereinafter in this paragraph collectively referred to as a 
•proposed bylaw change'), accompanied by a concise general 
•statement of the basis and purpose of such proposed bylaw change. 
Each such proposed bylaw change shall take effect thirty days 
after the date of the filing of a copy thereof with the Commission, 
or upon such later date as S I P C may designate or such earlier 
date as the Commission may determine, unless— 
"(A) the Commission, by notice to S I P C setting forth the 
reasons therefor, disapproves such proposed bylaw change as 
being contrary to the public interest or contrary to the pur-
poses of this Act; or 
"(B) the Commission finds that such proposed bylaw 
change involves a matter of such significant public interest 
that public comment should be obtained, in which case it may, 
after notifying S I P C in writing of such finding, require that 
the procedures set forth in paragraph (2) be followed with 
respect to such proposed bylaw change, in the same manner 
as if such proposed bylaw change were a proposed rule 
change within the meaning of such paragraph. 
"(2) PROPOSED RULE CHANGES.— 
" ( A ) 
FILING OF PROPOSED RULE CHANGES.—The Board 
of Directors of S I P C shall file with the Commission, 
in accordance with such rules as the Commission may 
prescribe, a copy of any propased rule or any proposed 
amendment to or repeal of any rule of S I P C (hereinafter in 
this subsection collectively referred to as a 'proposed rule 
change'), accompanied by a concise general statement of 
the basis and purpose of such proposed I'ule change. The Notice. 
Commission shall, upon the filing of any proposed rule 
change, publish notice thereof, together with the terms of 
substance of such proposed rule change or a description of 
the subjects and issues involved. The Commission shall give 
interested persons an opportunity to submit written data, 
views, and arguments with respect to such proposed rule 
change. No proposed rule change shall take effect unless 
approved by the Commission or otherwise permitted in 
accordance with the provisions of this paragraph. 
" ( B ) ACTION BY THE COMMISSION.—Within thirty-five days 
after the date of publication of notice of the filing of a 
proposed rule change, or within such longer period as the 
39-194 O—SO—pt. 1 
20 : QL3 
92 STAT. 252 
PUBLIC LAW 95-283—MAY 21, 1978 
Notice. 
Hearing. 
Commission may designate of not more than ninety days 
after such date if it finds such longer period to be appropriate 
and publishes its reasons for so finding, or as to which SIPC 
consents, the Commission shall— 
"(i) by order approve such proposed rule change; or 
" (ii) institute proceedings to determine whether such 
proposed rule change should be disapproved. 
"(C) PROCEEDINGS.—Proceedings instituted with respect 
to a proposed rule change pursuant to subparagraph (B) (ii) 
shall include notice of the grounds for disapproval under 
consideration and opportunity for hearing, and shall be 
concluded within one hundred eighty days after the date of 
publication of notice of the filing of such proposed rule 
change. At the conclusion of such proceedings, the Com-
mission shall, by order, approve or disapprove such proposed 
rule change. The Commission may extend the time for con-
clusion of such proceedings for not more than sixty days if 
it finds good cause for such extension and publishes its reasons 
for so finding, or for such longer period as to which SIPC 
consents. 
"(D) GROUNDS FOR APPROVAL OR DISAPPROVAL.—The Com-
mission shall approve a proposed rule change if it finds that 
such proposed rule change is in the public interest and is 
consistent with the purposes of this Act, and any proposed 
rule change so approved shall be given force and effect as 
if promulgated by the Commission. The Commission shall 
disapprove a proposed rule change if it does not make the 
finding referred to in the preceding sentence. The Commis-
sion shall not approve any proposed rule change prior to 
thirty days after the date of publication of notice of the filing 
thereof, unless the Commission finds good cause for so doing 
and pulalishes its reasons for so finding. 
"(E) EXCEPTION.—Notwithstanding any other provision 
of this paragraph, a proposed rule change may take effect-— 
"(i) upon the date of filing with the Commission, if 
such proposed rule change is designated by SIPC as 
relating solely to matters which the Commission, 
consistent with the public interest and the purposes of 
this subsection, determines by rule do not require the 
procedures set forth in this paragraph; or 
"(ii) upon such date as the Commission shall for 
good cause determine. Any proposed rule change which 
takes effect under this clause shall be filed promptly 
thereafter 
and 
reviewed 
in 
accordance with 
the 
provisions of subparagraph (A). 
At any time within sixty days after the date of filing of 
any rule change which has taken effect pursuant to this 
subparagraph, the Commission may summarily abrogate 
such rule change and require that it be refiled and reviewed 
in accordance with the provisions of this paragraph, if 
the Commission finds that such action is necessary or 
appropriate in the public interest, for the protection of 
investors, or otherwise in furtherance of the purposes of 
this Act. Any action of the Commission pursuant to the 
preceding sentence shall not affect the validity or force of 
PUBLIC LAW 95-283—MAY 21, 1978 
92 STAT. 253 
a rule change during the period it was in effect and shall 
not be reviewable under section 25 of the 1934 Act or deemed 
15 USC 78y. 
to be final agency action for purposes of section 704 of 
title 5, United States Code. 
"(3) ACTION REQUIRED BY COMMISSION.—The Commission may, 
by such rules as it determines to be necessary or appropriate in the 
public interest or to carry out the purposes of this Act, require 
S I P C to adopt, amend, or repeal any S I P C bylaw or rule, when-
ever adopted.". 
SIPC FUND 
SEC. 6. (a) Section 4(a) such Act (15 U.S.C. 78ddd(a)) is 
amended— 
(1) in paragraph (2), by striking out "The" and inserting 
in lieu thereof "Except as otherwise provided in this section, 
the"; 
(2) by amending paragraph (2) (C) to read as follows: 
"(C) Such confirmed lines of credit as S I P C may from 
time to time 
maintain, 
other 
than 
those 
maintained 
pursuant to paragraph (4)."; and 
(3) by adding at the end thereof the following new paragraph: 
"(4) OTHER LINES.—SIPC may maintain such other confirmed 
lines of credit as it considers necessary or appropriate, and such 
other confirmed lines of credit shall not be included in the 
balance of the fund, but amounts received from such lines of 
credit may be disbursed by S I P C under this Act as though 
such amounts were part of the fund.". 
(b) Section 4(c) of such Act (15 U.S.C. 78ddd(c)) is amended— 
(1) by striking out "or rule" each place it appears; and 
(2) in paragraph (3), by striking out "(other than section 
3(f))". 
(c) Section 4(d)(1) of such Act (15 U.S.C. 78ddd(d)(l)) is 
amended by adding at the end thereof 
the following new 
subparagraph: 
"(C) 
M I N I M U M ASSESSMENT.—The minimum 
assessment 
imposed upon each member of S I P C shall be $25 per annum 
through the year ending December 31, 1979, and thereafter 
shall be the amount from time to time set by S I P C bylaw, 
but in no event shall the minimum assessment be greater 
than $150 per annum.", 
(d) Section 4(e) of such Act (15 U.S.C. 78ddd(e)) is amended— 
(1) by amending paragraph (2) to read as follows: 
"(2) 
OVERPAYMENTS.—To the extent that any payment by 
a member exceeds the maximum rate permitted by subsection (c) 
of this section, the excess shall be recoverable only against future 
payments by such member, except as otherwise provided by S I P C 
bylaw."; and 
(2) by amending paragraph (3) to read as follows: 
"(3) UNDERPAYMENTS.—If a member fails to pay when due Penalty charge, 
all or any part of an assessment made upon such member, the 
unpaid portion thereof shall bear interest at such rate as may be 
determined by S I P C bylaw and, in addition to such interest, 
S I P C may impose such penalty charge as may be determined by 
S I P C bylaw. Any such penalty charge imposed upon a S I P C 
member shall not exceed 25 per centum of any unpaid portion of 
92 STAT. 254 
PUBLIC LAW 95-283—MAY 21, 1978 
Waiver. 
Loans. 
Transaction fee. 
15 use 78o. 
the assessment. S I P C may waive such penalty charge in whole 
or in part in circumstances where it considers such waiver 
appropriate.". 
(e) Section 4(f) of such Act (15 U.S.C. 78ddd(f)) is amended 
by striking out "examining authority as". 
(f) Section 4(g) of such Act (15 U.S.C. 78ddd(g)) is amended 
by striking out the last two sentences and inserting in lieu thereof the 
following: "For the purposes of the next preceding sentence, (1) the 
fee shall be based upon the total dollar amount of each purchase; (2) 
the fee shall not apply to any purchase on a national securities 
exchange or in an over-the-counter market by or for the account of a 
broker or dealer registered under section 15(b) of the 1934 Act 
unless such purchase is for an investment account of such broker 
or dealer (and for this purpose any transfer from a trading account 
to an investment account shall be deemed a purchase at fair market 
value); and (3) the Commission may, by rule, exempt any transaction 
in the over-the-counter markets or on any national securities exchange 
where necessary to provide for the assessment of fees on purchasers m 
transactions in such markets and exchanges on a comparable basis. 
Such fee shall be collected by the broker or dealer effecting the trans-
action for or with the purchaser, or by such other person as provided 
by the Commission by rule, and shall be paid to S I P C in the same 
manner as assessments impose^ pursuant to subsection (c) but without 
regard to the limits on such assessments, or in such other manner as 
the Commission may by rule provide.". 
(g) Section 4(i) of such Act (16 U.S.C. 78ddd(i)) is amended 
to read as follows: 
"(i) 
CoNsoLroATED GROUP.—Except as otherwise provided by 
S I P C bylaw, gross revenues from the securities business of a member 
of S I P C shall be computed on a consolidated basis for such member 
and all its subsidiaries (other than the foreign subsidiaries of such 
member), and the operations of a member of S I P C shall include those 
of any business to which such member has succeeded.". 
PROTECTION OF INVESTORS 
SEC. 7. (a) Section 5(a) of such Act (15 U.S.C. 78eee(a)) is 
amended by striking out paragraphs (2) and (3) and inserting in lieu 
thereof the following new paragraphs: 
"(2) 
ACTION BY SELF-REGUI^ATORY ORGANIZATION.—If a self-
regulatory organization has given notice to S I P C pursuant to 
subsection (a) (1) with respect to a broker or dealer, and such 
broker or dealer undertakes to liquidate or reduce its business 
either pursuant to the direction of a self-regulatory organization 
•or voluntarily, such self-regulatory organization may render such 
assistance or oversight to such broker or dealer as it considers 
appropriate to protect the interests of customers of such broker 
or dealer. The assistance or oversight by a self-regulatory organi-
zation shall not be deemed the assumption or adoption by such 
self-regulatory organization of any obligation or liability to cus-
tomers, other creditors, shareholders, or partners of the broker 
or dealer, and shall not prevent or act as a bar to any action by 
SIPC. 
"(3) ACTION BY SIPC.—If S I P C determines that— 
" ( A ) any member of S I P C (including any person who 
PUBLIC LAW 95-283—MAY 21, 1978 
92 STAT. 255 
was a member within one hundred eighty days prior to such 
determination) has failed or is in danger of failing to meet 
its obligations to customers; and 
"(B) one or more of the conditions specified in subsection 
(b)(1) exist with respect to such member, 
S I P C may, upon notice to such member, file an application for a 
protective decree with any court of competent jurisdiction speci-
fied in section 21(e) or 27 of the 1934 Act, except that no such 
15 USC 78u, 
application shall be filed with respect to a member the only cus- ^^^^• 
tomers of which are persons whose claims could not be satisfied 
by S I P C advances pursuant to section 9. 
15 USC 78iii. 
"(4) EFFECT OF OTHER PENDING ACTIONS.—An application with 
respect to a member of S I P C filed with a court under paragraph 
( 3 ) -
" ( A ) may, with the consent of the Commission, be com-
bined with any action brought by the Commission, including 
an action by the Commission for a temporary receiver pend-
ing an appointment of a trustee under subsection ( b ) ( 3 ) ; and 
" ( B ) may be filed notwithstanding the pendency in the 
same or any other court of any bankruptcy, mortgage fore-
closure, or equity receivership proceeding or any proceeding 
to reorganize, conserve, or liquidate such member or its prop-
erty, or any proceeding to enforce a lien against property of 
such member.", 
(b) Section 5(b) of such Act (15 L^.S.C. 78eee(b)) is amended to 
read as follows: 
"(b) COURT ACTION.— 
"(1) ISSUANCE OF PROTECTIVE DECREE.—Upon receipt of an 
application by S I P C under subsection (a)(3), the court shall 
forthwith issue a protective decree if the debtor consents thereto, 
if the debtor fails to contest such application, or if the court finds 
that such debtor— 
" ( A ) is insolvent within the meaning of the Bankruptcy 
Act, or is unable to meet its obligations as they mature; 
Post, p. 2549. 
"(B) has committed an act of bankruptcy within the mean-
ing of the Bankruptcy Act; 
' 
"(C) is the subject of a proceeding pending in any court 
or before any agency of the United States or any State in 
which a receiver, trustee, or liquidator for such debtor has 
been appointed; 
" ( D ) is not in compliance with applicable requirements 
under the 1934 Act or rules of the Commission or any self- 
15 USC 78a. 
regulatory organization with respect to financial responsi-
bility or hypothecation of customers' securities; or 
" ( E ) is unable to make such computations as may be 
necessary to establish 
compliance 
with 
such 
financial 
responsibility or hypothecation rules. 
Unless the debtor consents to the issuance of a protective decree, 
the application shall be heard three business days after the date 
on which it is filed, or at such other time as the court shall deter-
mine, taking into consideration the urgency which the cir-
cumstances require. 
" (2) JURISDICTION AND POWERS OF COURT.— 
" ( A ) EXCLUSIVE JURISDICTION.—Upon the 
filing 
of 
an 
92 STAT. 256 
PUBLIC LAW 95-283—MAY 21, 1978 
application with a court for a protective decree with respect 
to a debtor, such court— 
"(i) shall have exclusive jurisdiction of such debtor 
and its property wherever located (including property 
located outside the territorial limits of such court and 
property held by any other person as security for a debt 
or subject to a lien); 
"(ii) shall have exclusive jurisdiction of any suit 
against the trustee with respect to a liquidation proceed-
ing; and 
"(iii) except as inconsistent with the provisions of this 
Act, shall have the jurisdiction, powers, and duties con-
ferred upon a court of bankruptcy by the Bankruptcy 
Act, together with such other jurisdiction, powers, and 
duties as are prescribed by this Act. 
" ( B ) 
STAY OF PENDING ACTIONS.—Pending the issuance 
of a protective decree under paragraph (1), the court with 
which an application has been filed— 
"(i) shall stay any pending bankruptcy, mortgage 
foreclosure, equity receivership, or other proceeding to 
reorganize, conserve, or liquidate the debtor or its prop-
erty and any other suit against any receiver, conservator, 
or trustee of the debtor or its property, and shall continue 
such stay upon appointment of a trustee pursuant to 
paragraph ( 3 ) ; 
" (ii) may stay any proceeding to enforce a lien against 
property of the debtor or any other suit against the 
debtor, including a suit by stockholders of the debtor 
which interferes with prosecution by the trustee of 
claims against former directors, officers, or employees 
of the debtor, and may continue such stay upon, appoint-
ment of a trustee pursuant to paragraph (3) ; 
"(iii) may stay enforcement of, and upon appoint-
ment of a trustee pursuant to paragraph (3), may con-
tinue the stay for such period of time as may be 
appropriate, but shall not abrogate, the right of setoff 
Post, p. 2549. 
provided in section 68 of the Bankruptcy Act, and the 
right to enforce a valid, nonpreferential lien or pledge 
against the property of the debtor; and 
"(iv) may appoint a temporary receiver. 
"(3) APPOINTMENT OF TRUSTEE AND ATTORNEY.—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 
S I P C , in its sole discretion, specifies. The persons appointed as 
trustee and as attorney for the trustee may be associated with 
the same firm. S I P C may, in its sole discretion, specify itself or 
one of its employees as trustee in any case in which S I P C has 
determined that the liabilities of the debtor to unsecured general 
creditors and to subordinated lenders appear to aggregate less 
than $750,000 and that there appear to be fewer than five hun-
dred customers of such debtor. 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 
PUBLIC LAW 95-283—MAY 2 1 , 1978 
92 STAT. 257 
conducting a liquidation proceeding, the trustee may, with the 
approval of S I P C and the court, employ an attorney who is not 
disinterested. A trustee appointed under this paragraph shall 
qualify by filing a bond in the manner prescribed by the applica-
ble provisions of the Bankruptcy Act, except that neither S I P C 
Post, p. 2549. 
nor any employee of S I P C shall be required to file a bond when 
appointed as trustee. 
"(4) REFERENCE TO REFEREE IN BANKRUPTCY.—If the court 
issues a protective decree and appoints a trustee under this 
section, such court may, at any stage of the proceeding, refer the 
proceeding to a referee in bankruptcy to hear and determine any 
or all matters, or to a referee in bankruptcy as special master to 
hear and report generally or upon specified matters. Only under 
special circumstances shall a reference be made to a special master 
Avho is not a referee in bankruptcy. 
"(5) COMPENSATION 
FOR SERVICES AND REIMBURSEMENT OF 
EXPENSES. 
" ( A ) 
ALLOWANCES I N GENERAL.—The court shall grant 
reasonable compensation for services rendered and reimburse-
ment for proper costs and expenses incurred (hereinafter in 
this paragraph referred to as 'allowances') by a trustee, and 
by the attorney for such a trustee, in connection with a 
liquidation proceeding. No allowances (other than reim-
bursement for proper costs and expenses incurred) shall be 
granted to S I P C or any employee of S I P C for serving as 
trustee. Allow^ances may be granted on an interim basis dur-
ing the course of the liquidation proceeding at such times and 
in such amounts as the court considers appropriate. 
" ( B ) 
ALLOWANCES TO REFEREE IN BANKRUPTCY OR SPECIAL 
MASTER.—In the event a proceeding has been referred to a 
referee in bankruptcy or special master, the district judge 
may grant reasonable allowances to such referee in bank-
ruptcy or a special master, in the manner provided for in a 
case filed under chapter X of the Bankruptcy Act, as now in 
effect or as amended from time to time. 
"(C) APPLICATION FOR ALLOWANCES.—Any person seeking 
allowances shall file with the court an application which 
complies in form and content with the provisions of the 
Bankruptcy Act governing applications for allowances under 
such Act. A copy of such api^lication shall be served upon 
S I P C when filed. The court shall fix a time for a hearing 
on such application, and notice of such hearing shall be 
given to the applicant, the trustee, the debtor, the creditors, 
SIPC, and such other persons as the court may designate, 
except that notice need not be given to customers whose claims 
have been or will be satisfied in full or to creditors who cannot 
reasonably be expected to receive any distribution during the 
course of the liquidation proceeding. 
" ( D ) RECOMMENDATIONS OF SIPC AND AWARDING OF ALLOW-
ANCES.—Whenever an application for allowances is filed 
pursuant to subparagraph (C), S I P C shall file its recom-
mendation with respect to such allowances with the court 
prior to the hearing on such application and shall, if it so 
requests, be allowed a reasonable time after such hearing 
within which to file a further recommendation. In any case 
Hearing. 
Notice. 
92 STAT. 258 
PUBLIC LAW 95-283—MAY 21, 1978 
Post, p. 2549. 
Notice, 
publication. 
in which such allowances are to be paid by S I P C without 
reasonable expectation of recoupment thereof as provided in 
this Act and there is no difference between the amounts 
requested and the amounts recommended by SIPC, the court 
shall award the amounts recommended by SIPC. In deter-
mining the amount of allowances in all other cases, the court 
shall give due consideration to the nature, extent, and value 
of the services rendered, and shall place considerable reliance 
on the recommendation of SIPC. 
"(E) APPLICABLE RESTRICTIOXS.—The restrictions on shar-
ing of compensation set forth in the Bankruptcy Act shall 
apply to allowances. 
" ( F ) CHARGE AGAINST ESTATE.—Allowances granted by the 
court, including interim allowances, shall be charged against 
the general estate of the debtor as a cost and expense of admin-
istration. If the general estate is insufficient to pay allowances 
in whole or in part, S I P C shall advance such funds as are 
necessary for such payment. 
(6) DISINTERESTEDNESS.— 
"(A) STANDARDS.—For purposes of paragraph (3), a per-
son shall not be deemed disinterested if— 
"(i) such person is a creditor (including a customer), 
stockholder, or partner of the debtor; 
"(ii) such person is or was an underwriter of any of 
the outstanding securities of the debtor or within five 
years prior to the filing date was the underwriter of any 
securities of the debtor; 
"(iii) such person is, or was within two years prior 
to the filing date, a director, partner, officer, or employee 
of the debtor or such an underwriter, or an attorney for 
the debtor or such an underwriter; or 
" (iv) it appeal's that such person has, by reason of any 
other direct or indirect relationship to, connection with, 
or interest in the debtor or such an underwriter, or for 
any other reason, an interest materially adverse to the 
interests of any class of creditors (including customers) 
or stockholders, 
except that S I P C shall in all cases be deemed disinterested. 
and an employee of S I P C shall be deemed disinterested if 
such employee would, except for his association with SIPC, 
meet the standards set forth in this subparagraph. 
" ( B ) HEARING.—The court shall fix a time for a hearing 
on disinterestedness, to be held promptly after the appoint-
ment of a trustee. Notice of such hearing shall be mailed at 
least ten days prior thereto to each person who, from the 
books and records of the debtor, appears to have been a cus-
tomer of the debtor with an open account within the past 
twelve months, to the address of such person as it appears 
from the books and records of the debtor, and to the creditors 
and stockholders of the debtor, to SIPC, and to such other 
persons as the court may designate. The court may, in its 
discretion, also require that notice be given by publication in 
such newspaper or newspapers of general circulation as it 
may designate. At such hearing, at any adjournment thereof, 
or upon application, the court shall hear objections to the 
PUBLIC LAW 95-283—MAY 21, 1978 
92 STAT. 259 
retention in office of a trustee or attorney for a trustee on the 
grounds that such person is not disinterested.", 
(c) Section 5 of such Act (15 U.S.C. 78eee) is amended by adding at 
the end thereof the following new subsection: 
"(d) SIPC PARTICIPATIOX.—SIPC shall be deemed to be a party 
in interest as to all matters arising in a liquidation proceeding, with the 
right to be heard on all such matters, and shall be deemed to have 
intervened with respect to all such matters with the same force and 
effect as if a petition for such purpose had been allowed by the 
court.". 
GENERAL PROVISIONS OF A LIQUIDATIOX PROCEEDIXG 
SEC. 8. Section 6 of such Act (15 U.S.C. 78fff) is amended to read 
as follows: 
"SEC. 6. GENERAL PROVISIONS OF A LIQUIDATION PROCEEDING. 
"(a) PURPOSES.—The purposes of a liquidation proceeding under 
this Act shall be— 
"(1) as promptly as possible after the appointment of a trustee 
in such liquidation proceeding, and in accordance with the pro-
visions of this Act— 
"(A) to deliver customer name securities to or on behalf 
of the customers of the debtor entitled thereto as provided in 
section 8(c) (2) ; and 
Post, p. 261. 
"(B) to distribute customer propert}^ and (in advance 
thereof or concurrently therewith) otherwise satisfy net 
equity claims of customers to the extent provided in this 
section; 
"(2) to sell or transfer offices and other productive units of the 
business of the debtor ; 
"(3) to enforce rights of subrogation as provided in this Act; 
and 
" (4) to liquidate the business of the debtor. 
"(b) APPLICATION OF BANKRUPTCY ACT.—To the extent consistent Post, p. 2549. 
with the j^rovisions of this Act, a liquidation proceeding shall be con-
ducted in accordance with, and as though it were being conducted 
under, the Bankruptcy Act. For purposes of applying the Bankruptcy 
Act to this Act, any reference in the Bankruptcy Act to the date of 
commencement of proceedings under the Bankruptcy Act shall be 
deemed to be a reference to the filing date under this Act. 
"(c) DETERMINATION OF CUSTOMER STATUS.—In a liquidation pro-
ceeding under this Act, whenever a person has acted with respect to cash 
or securities with the debtor after the filing date and in a manner which 
would have given him the status of a customer with respect to such 
cash or securities had the action occurred prior to the filing date, 
and the trustee is satisfied that such action was taken by the customer 
in good faith and prior to the appointment of the trustee, the date on 
which such action was taken shall be deemed to be the filing date for 
purposes of determining the net equity of such customer with respect 
to such cash or securities. 
"(d) APPORTIONMENT.—In a liquidation proceeding under this Act, 
any cash or securities remaining after the liquidation of a lien or 
pledge made by a debtor shall be apportioned between his general 
estate and customer property in the proportion in which the general 
property of the debtor and the cash and securities of the customers of 
such debtor contributed to such lien or pledge. Securities apportioned 
92 STAT. 260 
PUBLIC LAW 95-283—MAY 21, 1978 
to the general estate under this subsection shall be subject to the provi-
Post, p. 271. 
sions of section 16(5)(A). 
"(e) 
COSTS AXD EXPEXSES OF ADMINISTRATIOX.—All costs 
and 
expenses of administration of the estate of the debtor and of the 
liquidation proceeding shall be borne by the general estate of the 
deotor to the extent it is sufficient therefor, and the priorities of dis-
tribution from the general estate shall be as provided in the Bank-
Post, p. 2549. 
ruptcy Act. Costs and expenses of administration shall include 
Post, p. 261. 
payments pursuant to section 8(e) and section 9(c) (1) (to the extent 
such payments recovered securities which were apportioned to the 
general estate pursuant to subsection (d)) and costs and expenses of 
Infra. 
S I P C employees utilized by the trustee pursuant to section 7(a) (2). 
All funds advanced by S I P C to a trustee for such costs and expenses 
of administration shall be recouped from the general estate as a first 
priority under the Bankruptcy Act.". 
XEW 
SECTIOXS o r THE SECURITIES IXVESTOR PROTECTIOX ACT OF 1970 
15 use 78o, 
SEC. 9. The Securities Investor Protection Act of 1970 (15 U.S.C. 
'78ggg-78W/. 
78aaa et seq.) is amended by redesignating sections 7 through 12 as 
sections 11 through 16, respectively, and by inserting immediately 
after section 6 the following new sections: 
15 use 78fff-l. 
"SEC. 7. POWERS AND DUTIES OF A TRUSTEE. 
"(a) TRUSTEE POWERS.—A trustee shall be vested with the same 
powers and title with respect to the debtor and the property of the 
debtor, including the same rights to avoid preferences, as a trustee 
in bankruptcj' under the Bankruptcy Act has with respect to a bank-
rupt and the property of a bankrupt. In addition, a trustee may, with 
the approval of S I P C but without any need for court approval— 
"(1) hire and fix the compensation of all personnel (including 
officers and employees of the debtor and of its examining 
authority) and other persons (including accountants) that are 
deemed by the trustee necessary for all or any purposes of the 
liquidation proceeding; 
"(2) utilize S I P C employees for all or any purposes of a 
liquidation proceeding; and 
"'(3) margin and maintain customer accounts of the debtor for 
the purposes of section 8(f). 
"(b) 
TRUSTEE DUTIES.—To the extent consistent with the pro-
visions of this Act or as otherwise ordered by the court, a trustee shall 
be subject to the same duties as a trustee in bankruptcy, except that a 
trustee may, but shall have no duty to, reduce to money any securities 
constituting customer property or in the general estate of the debtor. 
In addition, the trustee shall— 
"(1) deliver securities to or on behalf of customers to the 
maximum extent practicable in satisfaction of customer claims for 
securities of the same class and series of an issuer; and 
"(2) subject to the prior approval of S I P C but without any 
need for court approval, pay or guarantee all or any part of the 
indebtedness of the debtor to a bank, lender, or other person if 
the trustee determines that the aggregate market value of securities 
to be made available to the trustee upon the payment or guarantee 
of such indebtedness does not appear to be less than the total 
amount of such payment or guarantee. 
PUBLIC LAW 95-283—MAY 21, 1978 
92 STAT. 261 
"(c) 
REPORTS BY TRUSTEE TO COURT.—The trustee shall make to 
the court and to S I P C such written reports as may be required by tlie 
Bankruptcy Act, and shall include in such reports information with 
Post p. 2549. 
respect to the progress made in distributing cash and securities to 
customers. Such reports shall be in such form and detail as the Com-
mission determines by rule to present fairly the results of the liquida-
tion proceeding as of the date of or for the period covered by such 
reports, having due regard for the requirements of section 17 of the 
1934 Act and the rules prescribed under such section and the magni- 
15 USC 78q. 
tude of items and transactions involved in connection with the opera-
tions of a broker or dealer. 
"(d) IxvESTiOATioxs.—The trustee shall— 
"(1) as soon as j^racticable, investigate the acts, conduct, prop-
erty, liabilities, and financial condition of the debtor, the opera-
tion of its business, and any other matter, to the extent relevant 
to the liquidation proceeding, and report thereon to the court; 
"(2) examine, by deposition or otherwise, the directors and 
officers of tlie debtor and any other witnesses concerning any of 
the matters referred to in paragraph (1) ; 
"(3) report to the court any facts ascertained by the trustee 
with res]:)ect to fraud, misconduct, mismanagement, and irregu-
larities, and to any causes of action available to the estate; and 
"(4) as soon as practicable, prepare and submit, to S I P C and 
such other persons as the court designates and in^such form and 
manner as the court directs, a statement of his investigation of 
matters referred to in paragraph (1). 
"SEC. 8. SPECIAL PROVISIONS OF A LIQUIDATION PROCEEDING. 
15 USC 78fff-2. 
"(a) XoTicE AXD CLAIMS.— 
"(1) XoTiCE OF PROCEEDiXGS.—Promptly after the appointment 
Publication, 
of the trustee, such trustee shall cause notice of the commencement 
of proceedings under this section to be published in one or more 
newspapers of general circulation in the form and manner deter-
mined by the court, and at the same time shall cause a copy of 
such notice to be mailed to each person who, from the books and 
records of the debtor, appears to have been a customer of the 
debtor Avith an open account Avithin the past twelve months, to 
the address of such pereon as it ai3peai*s from the books and records 
of the debtor. Notice to creditors other than customers shall be 
given in the manner prescribed by the Bankruptcy Act, except that 
such notice shall be given by the trustee. 
"(2) 
STATEMENT OF CLAIM.—A customer shall file Avith the 
trustee a written statement of claim but need not file a foniial 
proof of claim, except that no obligation of the debtor to any 
person associated with the debtor within the meaning of section 3 
(a) (18) or section 3(a) (21) of the 1934 Act, any beneficial owner 
15 USC 78c. 
of 5 per centum or more of the voting stock of the debtor, or any 
member of the immediate family of any sucli person or owner 
may be satisfied without formal proof of claim. 
"(3) TIME LIMITATIOXS.—Xo claim of a customer or other cred-
itor of the debtor which is received by the trustee after the expira-
tion of the six-month period beginning on the date of publication 
of notice under paragraph (1) shall be allowed, except that the 
court may, upon application within such period and for cause 
shown, grant a reasonable, fixed extension of time for the filing 
of a claim by the United States, by a State or political subdivision 
92 STAT. 262 
PUBLIC LAW 95-283—MAY 21, 1978 
thereof, or by an infant or incompetent person without a guard-
ian. Any claim of a customer for net equity which is received by 
the trustee after the expiration of such period of time as may be 
fixed by the court (not exceeding sixty days after the date of 
publication of notice under paragraph (1)) need not be paid or 
satisfied in whole or in part out of customer property, and, to the 
extent such claim is satisfied from moneys advanced by SIPC, it 
shall be satisfied in cash or securities (or both) as the trustee 
determines is most economical to the estate. 
"(4) EFFECT ON CLAIMS.—Except as otherwise provided in this 
sciction, and without limiting the powers and duties of the trustee 
to discharge obligations promptly as specified in this section, 
nothing in this section shall limit the right of any person, including 
any subrogee, to establish by formal proof or otherwise as the 
court may provide such claims as such person may have against 
the debtor, including claims for the payment of money and the 
delivery of specific securities, without resort to moneys advanced 
by S I P C to the trustee. 
" (b) PAYMENTS TO CUSTOMERS.—After receipt of a written statement 
of claim pursuant to subsection (a) (2), the trustee shall promptly dis-
charge, in accordance with the provisions of this section, all obligations 
of the debtor to a customer relating to, or net equity claims based upon, 
securities or cash, by the delivery of securities or the making of pay-
ments to or for the account of such customer (subject to the provisions 
of subsection (d) and section 9(a)) insofar as such obligations are 
ascertainable from the books and records of the debtor or are other-
wise established to the satisfaction of the trustee. For purposes of dis-
tributing securities to customers, all securities shall be valued as of the 
close of business on the filing date. For purposes of this subsection, 
the court shall, among other things— 
"(1) with respect to net equity claims, authorize the trustee to 
satisfy claims out of moneys made available to the trustee by 
S I P C notwithstanding the fact that there has not been any show-
ing or determination that there are sufficient funds of the debtor 
available to satisfy such claims; and 
"(2) with respect to claims relating to, or net equities based 
upon, securities of a class and series of an issuer which are ascer-
tainable from the books and records of the debtor or are otherwise 
established to the satisfaction of the trustee, authorize the trustee 
to deliver securities of such class and series if and to the extent 
available to satisfy such claims in whole or in part, with partial 
deliveries to be made pro rata to the greatest extent considered 
practicable by the trustee. 
Any payment or delivery of property pursuant to this subsection may 
be conditioned upon the trustee requiring claimants to execute, in a 
form to be detcnnined by the trustee, appropriate receipts, supporting 
affidavits, releases, and assignments, but shall be without prejudice to 
any right of a claimant to file formal proof of claim within the period 
specified in subsection (a) (3) for any balance of securities or cash 
to which such claimant considers himself entitled. 
"(c) CUSTOMER RELATED PROPERTY.— 
" (1) ALLOCATION OF CUSTOMER PROPERTY.—The trustee shall allo-
cate customer property of the debtor as follows: 
" ( A ) first, to S I P C in repayment of advances made by 
S I P C pursuant to section 9(c)(1), to the extent such 
PUBLIC LAW 95-283—MAY 21, 1978 
92 STAT. 263 
advances recovered securities wliich were apportioned to 
customer property pursuant to section 6 ( d ) ; 
^nte, p. 259. 
" ( B ) second, to customers of such debtor, who shall share 
ratably in such customer property on the basis and to the 
extent of their respective net equities ; 
"(C) 
third, to S I P C as subrogee for the claims of 
customers; 
" ( D ) fourth, to S I P C in repayment of advances made by 
S I P C pursuant to section 9(c) (2). 
Any customer property remaining after allocation in accordance 
with this jjaragraph shall become part of the general estate of 
the debtor. To the extent customer property and S I P C advances 
pursuant to section 9(a) are not sufficient to pay or otherwise 
satisfy in full the net equity claims of customers, such customers 
shall be entitled, to the extent only of their respective unsatisfied 
net equities, to participate in the general estate as unsecured 
creditors. For purposes of allocating customer property under 
this paragraph, securities to be delivered in payment of net equity 
claims for securities of the same class and series of an issuer 
shall be valued as of the close of business on the filing date. 
"(2) 
DELIVERY OF CUSTOMER XAME SECURITIES.—The trustee 
shall deliver customer name securities to or on behalf of a cus-
tomer of the debtor entitled thereto if the customer is not indebted 
to the debtor. If the customer is so indebted, such customer may, 
with the approval of the trustee, reclaim customer name securities 
upon payment to the trustee, within such period of time as the 
trustee determines, of all indebtedness of such customer to the 
debtor. 
"(3) RECOVERY OF TRANSFERS.—Whenever customer property 
is not sufficient to pay in full the claims set forth in subparagraphs 
(A) through (D) of paragraph (1), the trustee may recover 
any proj^erty transferred by the debtor which, except for such 
transfer, would liave been customer property if and to the extent 
that such transfer is voidable or void under the provisions of the 
Bankruptcy Act. Such recovered property shall be treated as Post, p. 2549. 
customer j^roperty. For purposes of such recovery, the property 
so transferred shall be deemed to have been the property of the 
debtor and, if such transfer was made to a customer or for his 
benefit, such customer shall be deemed to have been a creditor, 
the laws of any State to the contrary notwithstanding. 
"(d) PURCHASE OF SECURITIES.—The trustee shall, to the extent that 
securities can be purchased in a fair and orderly market, purchase 
securities as necessary for the delivery of securities to customers in 
satisfaction of their claims for net equities based on securities under 
section 7(b) (1) and for the transfer of customer accounts under sub-
section (f), in order to restore the accounts of such customers as of the 
filing date. To the extent consistent with subsection (c), customer 
property and moneys advanced by S I P C may be used by the trustee to 
paj for securities so purchased. Moneys advanced by S I P C for each 
account of a separate customer may not be used to purchase securities 
to the extent that the aggregate value of such securities on the filing 
date exceeded the amount permitted to be advanced by S I P C under 
the provisions of section 9(a). 
92 STAT. 264 
PUBLIC LAW 95-283—MAY 21, 1978 
"(e) CLOSEOUTS.— 
" (1) I N GENERAL.—Any contract of the debtor for the purchase 
or sale of securities in the ordinary course of its business with 
other brokers or dealers which is wholly executory on the filing 
date shall not be completed by the trustee, except to the extent 
permitted by S I P C rule. Upon the adoption by S I P C of rules 
with respect to the closeout of such a contract but prior to the 
adoption of rules with respect to the completion of such a con-
tract, the other broker or dealer shall close out such contract, 
without unnecessary delay, in the best available market and pur-
suant to such S I P C rules. Until such time as S I P C adopts rules 
with respect to the completion or closeout of such a contract, such 
a contract shall be closed out in accordance with Commission Rule 
S6(d)-1 as in effect on the date of enactment of this section, or 
any comparable rule of the Commission subsequently adopted, to 
the extent not inconsistent with the provisions of this subsection. 
" (2) NET PROFIT OR LOSS.—A broker or dealer shall net all profits 
and losses on all contracts closed out under this subsection and— 
"(A) if such broker or dealer shows a net profit on such 
contracts, he shall pay such net profit to the trustee; and 
" ( B ) if such broker or deader sustains a net l o ^ on such 
contracts, he shall be entitled to file a claim against the debtor 
with the trustee in the amount of such net loss. 
To the extent that a net loss sustained by a broker or dealer arises 
from contracts pursuant to which such broker or dealer was acting 
for its own customer, such broker or dealer shall be entitled to 
receive funds advanced by S I P C to the trustee in the amount of 
such loss, except that such broker or dealer may not n>ceive more 
than $40,000 for each separate customer with respect to whom it 
sustained a loss. With respect to a net loss which is not payable 
under the preceding sentence from funds advanced by SIPU, the 
broker or dealer shall be entitled to participate in the general 
estate as an unsecured creditor. 
"(3) 
REGISTERED CLEARING AGENCIES.—Neither 
a 
registered 
clearing agency which by its rules has an established procedure 
for the closeout of open contracts between an insolvent broker 
or dealer and its participants, nor its participants to the extent 
such participants' claims are or may be processed within the 
registered clearing agency, shall be entitled to receive S I P C 
funds in payment of any losses on such contracts, except as S I P C 
may otherwise provide by rule. If such registered clearing agency 
or its participants sustain a net loss on the closeout of such con-
tracts with the debtor, they shall have the right to participate in 
the general estate as unsecured creditors to the extent of such 
loss. Any funds or other property owed to the debtor, after the 
closeout of such contracts, shall be promptly paid to the trustee. 
Rules adopted by S I P C under this paragraph shall provide that 
in no case may a registered clearing agency or its participants, 
to the extent such participants' claims are or may be processed 
within the registered clearing agency, be entitled to receive funds 
advanced by S I P C in an amount greater, in the aggregate, than 
could be received by the participants if such participants pro-
ceeded individually under paragraphs (1) and (2). 
"(4) DEFINITION.—For purposes of this subsection, the term 
'customer' does not include any person who— 
PUBLIC LAW 95-283—MAY 21, 1978 
92 STAT. 265 
"(A) is a broker or dealer; 
"(B) had a claim for cash or securities which by contract, 
agreement, or understanding, or by operation of law, was 
part of the capital of the claiming broker or dealer or was 
subordinated to the claims of any or all creditors of such 
broker or dealer; or 
"(C) had a relationship of the kind specified in section 
9(a)(5) with the debtor. 
A claiming broker or dealer shall be deemed to have been acting 
on behalf of its customer if it acted as agent for such customer 
or if it held such customer's order which was to be executed as a 
part of its contract with the debtor. 
"(f) TRANSFER OF CUSTOMER ACCOUNTS.—In order to facilitate the 
prompt satisfaction of customer claims and the orderly liquidation of 
the debtor, the trustee may, pursuant to terms satisfactory to him and 
subject to the prior approval of SIPC, sell or otherwise transfer to 
another member of SIPC, without consent of any customer, all or any 
part of the account of a customer of the debtor. In connection witn 
any such sale or transfer to another member of SIPC and subject to 
the prior approval of SIPC, the trustee may— 
"(1) waive or modify the need to file a written statement of 
claim pursuant to subsection (a) (2); and 
"(2) enter into such agreements as the trustee considers appro-
priate under the circumstances to indemnify an^ such member 
of SIPC against shortages of cash or securities m the customer 
accounts sold or transferred. 
The funds of SIPC may be made available to guarantee or secure any 
indemnification under paragraph (2). The prior approval of SIPC 
to such indemnification shall be conditioned, among such other stand-
ards as SIPC may determine, upon a determination by SIPC that the 
probable cost of any such indemnification can reasonably be expected 
not to exceed the cost to SIPC of proceeding under section 9(a) and 
section 9(b). 
"SEC. 9. SIPC ADVANCES. 
15 USC 78£ff-3. 
"(a) ADVANCES FOR CUSTOMERS' CLAIMS.—In order to provide for 
prompt payment and satisfaction of net equity claims of customers 
of the debtor, SIPC shall advance to the trustee such moneys, not 
to exceed $100,000 for each customer, as may be required to pay or 
otherwise satisfy claims for the amount by which the net equity of 
each customer exceeds his ratable share of customer property, except 
that— 
"(1) if all or any portion of the net equity claim of a customer 
in excess of his ratable share of customer property is a claim for 
cash, as distinct from a claim for securities, the amount advanced 
to satisfy such claim for cash shall not exceed $40,000 for each 
such customer; 
" (2) a customer who holds accounts with the debtor in separate 
capacities shall be deemed to be a different customer in each 
capacity; 
"(3) if all or any portion of the net equity claim of a customer 
in excess of his ratable share of customer property is satisfied 
by the delivery of securities purchased by the trustee pursuant 
to section 8(d), the securities so purchased shall be valued as 
of the filing date for purposes of applying the dollar limitations 
of this subsection; 
92 STAT. 266 
PUBLIC LAW 95-283—MAY 21, 1978 
" (4) no advance shall be made by SIPC to the trustee to pay 
or otherwise satisfy, directly or indirectly, any net equity claim 
of a customer who is a general partner, officer, or director of 
the debtor, a beneficial owner of five per centum or more of any 
class of equity security of the debtor (other than a nonconvertible 
stock having fixed preferential dividend and liquidation rights), 
a limited partner with a participation of five per centum or more 
in the net assets or net profits of the debtor, or a person who, 
directly or indirectly and through agreement or otherwise, 
exercised or had the power to exercise a controlling influence 
over the management or policies of the debtor; and 
"(5) no advance shall be made by SIPC to the trustee to pay 
or otherwise satisfy any net equity claim of any customer who 
is a broker or dealer or bank, other than to the extent that it 
shall be established to the satisfaction of the trustee, from the 
books and records of the debtor or from the books and records 
of a broker or dealer or bank, or otherwise, that the net equity 
claim of such broker or dealer or bank against the debtor arose 
out of transactions for customers of such broker or dealer or 
bank (which customers are not themselves a broker or dealer or 
bank or a person described in paragraph (4)), in which event 
each such customer of such broker or dealer or bank shall be 
deemed a separate customer of the debtor. 
To the extent moneys are advanced by SIPC to the trustee to pay 
or otherwise satisfy the claims of customers, in addition to all other 
rights it may have at law or in equity, SIPC shall be subrogated to 
the claims of such customers with the rights and priorities provided 
in this Act, except that SIPC as subrogee may assert no claim against 
customer property until after the allocation thereof to customers as 
provided in section 8(c). 
"(b) OTHER ADVANCES.—SIPC shall advance to the trustee— 
"(1) such moneys as may be required to carry out section 
8(e); and 
"(2) to the extent the general estate of the debtor is not 
sufficient to pay any and all costs and expenses of administration 
of the estate of the debtor and of the liquidation proceeding, the 
amount of such costs and expenses. 
"(c) DISCRETIONARY ADVANCES.—SIPC may advance to the trustee 
such moneys as may be required to— 
"(1) pay or guarantee indebtedness of the debtor to a bank, 
lender, or other person under section 7 (b) (2); 
" (2) guarantee or secure any indemnity under section 8(f); and 
" (3) purchase securities under section 8(d). 
15 use 78fff-4. 
"SEC. 10. DIRECT PAYMENT PROCEDURE. 
"(a) DETERMINATION REGARDING DIRECT PAYMENTS.—If SIPC 
determines that— 
" (1) any member of SIPC (including a person who was a mem-
ber within one hundred eighty days prior to such determination) 
has failed or is in danger of failing to meet its obligations to 
customers; 
15 use 78eee. 
"(2) one or more of the conditions specified in section 5(b) (1) 
exist with respect to such member; 
"(3) the claim of each customer of the member is within the 
limits of protection provided in section 9 (a) ; 
PUBLIC LAW 95-283—MAY 21, 1978 
92 STAT. 2(57 
"(4) the claims of all customers of the member aggregate less 
than $250,000; 
"(5) the cost to SIPC of satisfying customer claims under this 
section will be less than the cost under a liquidation proceeding; 
and 
"(6) such member's registration as a broker-dealer under sec-
tion 15(b) of the 1934 Act has been terminated, or such member 15 USC 78o. 
has consented to the use of the direct payment procedure set forth 
in this section, 
SIPC may, in its discretion, use the direct payment procedure set forth 
in this section in lieii of instituting a liquidation proceeding with 
respect to such member. 
"(b) NOTICE.—Promptly after a determination under subsection Publication, 
(a) that the direct payment procedure is to be used with respect to a 
member, SIPC shall cause notice of such direct payment procedure to 
be published in one or more newspapers of general circulation in a 
form and manner detenmined by SIPC, and at the same time shall 
cause to be mailed a copy of such notice to each person who appears, 
from the books and records of such member, to have been a customer 
j* 
-
of the member with an open account within the past twelve months, to 
the address of such person as it appears from the books and records of 
such member. Such notice shall state that SIPC will satisfy customer 
claims directly, without a liquidation proceeding, and shall set forth 
the form and manner in which claims may be presented. A direct pay-
ment procedure shall be deemed to commence on the date of fii"st pub-
lication under this subsection and no claim by a customer shall be paid 
or otherwise satisfied by SIPC unless received within the six-month 
period beginning on such date, except that SIPC shall, upon applica-
tion within such period, and for cause shown, grant a reasonable, fixed 
extension of time for the filing of a claim by the United States, by a 
State or political subdivision thereof, or by an infant or incompetent 
person without a guardian. 
"(c) PAYMENTS TO CUSTOMERS.—SIPC shall promptly satisfy all 
•-, ,j 
obligations of the member to each of it customers relating to, or net 
etjuity claims based upon, securities or cash by the delivery of securi-
ties or the effecting of payments to such customer (subject to the 
provisions of section 8(d) and section 9(a)) insofar as such obliga-
tions are ascertainable from the books and records of the member or 
are otherwise established to the satisfaction of SIPC. For purposes 
of distributing securities to customers, all securities shall be valued 
as of the close of business on the date of publication under subsection 
(b). Any payment or delivery of securities pursuant to this section 
may be conditioned upon the execution and delivery, in a form to be 
determined by SIPC, of appropriate receipts, supporting affidavits, 
releases, and assignments. To the extent moneys of SIPC are used to 
satisfy the claims of customers, in addition to all other rights it may 
have at law or in equity, SIPC shall be subrogated to the claims of 
such customers against the member. 
"(d) EFFECT ON CLAIMS.—Except as otherwise provided in this sec-
tion, nothing in this section shall limit the right of any person, includ-
ing any subrogee, to establish h^ formal proof or otherwise such claims 
as such person may have agamst the member, including claims for 
the payment of money and the delivery of specific securities, without 
resort to moneys of SIPC. 
39-194 O—80—pt. 1 
21 : QL3 
92 STAT. 268 
PUBLIC LAW 95-283—MAY 21, 1978 
"(e) JURISDICTION OF DISTRICT COURTS.—After S I P C has published 
notice of the institution of a direct payment procedure under this 
section, any person aggrieved by any determination of S I P C with 
respect to his claim under subsection (c) may, within six months 
following mailing by S I P C of its determination with respect to such 
claim, seek a final adjudication of such claim. The district courts of 
the I'nited States shall have original and exclusive jurisdiction of 
any civil action for the adjudication of such claim, without regard 
to the citizenship of the parties or the amount in controversy. Any 
such action shall be brought in the judicial district where the head office 
of the debtor is located. Any determination of the rights of a customer 
under subsection (c) shall not prejudice any other right or remedy 
•"* 
of the customer against the member. 
"(f) DiscoxTixuAXCE OF DiRECT PAYMEXT PROCEDURES.—If, at any 
time after the institution of a direct payment procedure with respect 
to a member, S I P C determines, in its discretion, that continuation of 
such direct payment procedure is not appropriate, S I P C may cease 
such direct payment procedure and. uix)n so doing, may seek a protec-
15 use 78eee. 
five decree pursuant to section 5. To the extent payments of cash, dis-
tributions of securities, or determinations with respect to the validity 
of a customer's claim are made under this section, such payments, dis-
tributions, and determinations shall be recognized and given full 
eifect in the event of any subsequent liquidation proceeding. Any action 
brought under subsection (e) and pending at the time of the appoint-
ment of a trustee under section 5(b) (3) shall be permanently stayed 
by the court at the time of such appointment, and the court shall enter 
an order directing the transfer or removal to it of such suit. Upon 
such removal or transfer the complaint in such action shall constitute 
> the plaintiff's claim in the liquidation proceeding, if appropriate, and 
shall be deemed received by the trustee on the date of his appointment 
regardless of the date of actual transfer or removal of such action. 
"(g) 
REFERENCES.—For purposes of this section, anv reference 
Post, p. 271. 
to the trustee in sections 7(b) (1). 8(d), 8(f), 9(a). 16(5)^and 16(12) 
shall be deemed a reference to SIPC. and any reference to the date 
of publication of notice under section 8(a) shall be deemed a reference 
to the publication of notice under this section.". 
COMMISSION FUNCTIONS 
SEC. 10. Section 11(a) of such Act (15 U.S.C. 78ggg(a)), as redes-
ignated by this Act, is amended by striking out "or regulations pursu-
ant to section 3(e) and section 9 ( f ) " and inserting "pursuant to 
section 3(e) (3) and section 13(f)*'. 
EXAMINING AUTHORITY FUNCTIONS 
SEC. 11. Section 12 of such Act (15 U.S.C. 78hhh), as redesignated 
by this Act, is amended— 
(1) by inserting ", or collection agent if a collection agent has 
been designated pursuant to section 13(a)," immediately after 
"examining authority" the first place it appears; and 
(2) by inserting "or collection agent" immediately 
after 
\ 
"examining authority" the second place it appears. 
PUBLIC LAW 95-283—MAY 21, 1978 
92 STAT. 269 
f 
., 
FlTNCTIOXS o r SELF-REGULATORY ORGANIZATIONS 
SEC. 12. Section 13(a) of such Act (15 U.S.C. 78iii(a)), as redesig-
nated by this Act, is amended to read as follows: 
"(a) COLLECTION AGENT.—Each self-regulatory organization shall 
act as collection agent for SI PC to collect the assessments payable 
by all members of S I P C for whom such self-regulatory organization 
is the examining authority, unless S I P C designates a self-regulatory 
organization other than the examining authority to act as collection 
agent for any member of S I P C who is a member of or participant in 
more than one self-regulatory organization. If the only self-regulatory 
organization of which a member of S I P C is a member or in which 
it is a participant is a registered clearing agency that is not the 
examining authority for the member, S I P C may, nevertheless, desig-
nate such registered clearing agency as collection agent for the member 
or may require that payments be made directly to SIPC. The collection 
agent shall be obligated to remit to S I P C assessments made under 
section 4 only to the extent that payments of such assessment are 15 USC 78ddd. 
received by such collection agent. Members of S I P C who are not 
members of or ^Participants in a self-regulatory organization shall 
make payments directly to S I P C " . 
(b) Section 13(b) of such Act (15 U.S.C. 78iii(b)), as redesignated 
by this Act, is amended by inserting "and section 5(a) (2)" immedi-
ately after "section 5 (a) (1)". 
(c) Section 13(c) of such Act (15 U.S.C. 78iii(c)), as redesignated 
by this Act, is amended to read as follows: 
"(c) INSPECTIONS.—The self-regulatory organization of which a 
member of S I P C is a member or in which it is a participant shall 
inspect or examine such member for compliance with applicable finan-
cial responsibility rules, except that— 
"(1) if the self-regulatory organization is a registered clearing 
agency, the Commission may designate itself as responsible for 
the examination of such member for compliance with applicable 
financial responsibility rules; and 
"(2) if a member of S I P C is a member of or participant in 
more than one self-regulatory organization, the Commission, pur-
suant to section 17(d) of the 1934 Act, shall designate one of such 
15 USC 78q, 
self-regulatory organizations or itself as responsible for the exam-
ination of such member for compliance with applicable financial 
responsibility rules.". 
(d) Section 13(f) of such Act (15 U.S.C. 78iii(f)), as redesignated 
by this Act, is amended to read as follows: 
"(f) FINANCIAL CONDITION OF MEMBERS.—The Commission may, by 
Rules, 
such rules as it determines necessary or appropriate in the public inter- 
Reports. 
est and to carry out the purposes of this Act, require any self-regula-
tory organization to furnish S I P C with reports and records (or copies 
thereof) relating to the financial condition of members of or partici-
pants in such self-regulatory organization.". 
PROHIBITED ACTS 
SEC. 13. (a) Section 14(a) of such Act (15 U.S.C. 78jjj(a)), as 
redesignated by this Act, is amended— 
(1) by inserting "and penalty" immediately after "interest"; 
and 
92 STAT. 270 
PUBLIC LAW 95-283—MAY 21, 1978 
(2) by striking out "he" each place it appears and inserting "it" 
in lieu thereof. 
(b) Section 14(b) of such Act (15 U.S.C. 78jjj ( b ) ) , as redesignated 
by this Act, is amended— 
(1) by inserting "or for whom a direct payment procedure has 
been initiated" immediately after "Act" each place it appears; 
and 
(2) in the subsection heading, by inserting "OR INITIATION OF 
DIRECT PAYMENT PROCEDURE" immediately after "TRUSTEE". 
(c) Section 14(c) of such Act (15 U.S.C. 78]]](c)), as redesig-
nated by this Act, is amended to read as follows: 
"(c) 
CONCEALMENT OP ASSETS; F A I ^ E STATEMENTS OR CLAIMS.— 
"(1) SPECIFIC PROHIBITED ACTS.—Any person who, directly or 
indirectly, in connection with or in contemplation of any liquida-
tion proceeding or direct payment procedure— 
"(A) employs any device, scheme, or artifice to defraud; 
"(B) engages in any act, practice, or course of business 
which operates or would operate as a fraud or deceit upon any 
person; or 
"(C) fraudulently or with intent to defeat this Act— 
"(i) conceals or transfers any property belonging to 
the estate of a debtor; 
"(ii) makes a false statement or account; 
"(iii) presents or uses any false claim for proof 
against the estate of a debtor; 
"(iv) receives any material amount of property from 
a debtor; 
"(v) gives, offers, receives, transfers, or obtains any 
money or property, remuneration, compensation, reward, 
advantage, other consideration, or promise thereof, for 
acting or forebearing to act; 
"(vi) conceals, destroys, mutilates, falsifies, makes a 
false entry in, or otherwise falsifies any document affect-
ing or relating to the property or affairs of a debtor; or 
"(vii) withholds, from any person entitled to its pos-
session, any document affecting or relating to the prop-
erty or affairs of a debtor, 
shall be fined not more than $50,000 or imprisoned for not more 
than five years, or both. 
"(2) 
FRAUDULENT CONVERSION.—Any person who, directly or 
indirectly steals, embezzles, or fraudulently, or with intent to 
defeat this Act, abstracts or converts to his own use or to the 
use of another any of the moneys, securities, or other assets of 
SIPC, or otherwise defrauds or attempts to defraud S I P C or a 
trustee by any means, shall be fined not more than $50,000 or 
imprisoned not more than five years, or both.". 
LIABILITY, ADVERTISING, AND OTHER MISCELLANEOUS PROVISIONS 
SEC. 14. (a) Section 15(d) of such Act (15 U.S.C. 78kkk(d)), as 
redesignated by this Act, is amended— 
(1) by inserting ", officers, or employees" immediately after 
"Directors"; and 
(2) in the subsection heading, by inserting ", OFFICERS, OR 
EMPLOYEES" immediately after "DIRECTORS". 
.i}&'' 
'-j' 
?'?.'] cl 
PUBLIC LAW 95-283—MAY 21, 1978 
92 STAT. 271 
(b) Section 15 (e) of such Act (15 U.S.C. 78kkk(e)), as redesignated 
by this Act, is amended to read as follows: 
"(e) ADVERTISIXG.—SIPC shall by bylaw prescribe the manner 
in which a member of SIPC may display any sign or signs (or include 
in any advertisement a statement) relating to the protection to cus-
tomers and their accounts, or any other protections, afforded under 
this Act. No member may display any such sign, or include in an 
advertisement any such statement, except in accordance with such 
bylaws. SIPC may also by bylaw prescribe such minimal require-
ments as it considers necessary and appropriate to require a member 
of SIPC to i^rovide public notice of its membership in SIPC". 
(c) Section 15(b) of such Act of (15 U.S.C. 78kkk(b)), as redes- Repeal. 
ignated by this Act, is repealed, and subsections (c) through (h) of 
section 15 are redesignated as subsections 
(b) 
through 
(g), 
respectively. 
DEFINITIONS 
SEC. 15. Section 16 of such Act (15 U.S.C. 78111), as redesignated 
by this Act, is amended to read as follows: 
"SEC. 16. DEFINITIONS. 
"For purposes of this Act. including the application of the Bank-
ruptcy Act to a liquidation proceeding: 
"(1) BANKRUPTCY ACT.—The term 'Bankruptcy Act' means, 
except where the context indicates otherwise, those provisions of 
the Bankruptcy Act relating to ordinary bankruptcy (chapters 
I through VII) as now in effect or as amended from time to time, 
r r 
and includes the rules of bankruptcy procedure promulgated 
' 
with respect to such provisions, but does not include the provi-
sions of section 60e of the Bankruptcy Act, relating to stock- fo^'> p- 2549 
broker bankruptcies. 
"(2) COMMISSION.—The term 'Commission' means the Securi-
ties and Exchange Commission. 
"(3) CUSTOMER.—The term 'customer' of a debtor means any 
person (including any person with whom the debtor deals as 
principal or agent) who has a claim on account of securities 
received, acquired, or held by the debtor in the ordinary course 
of its business as a broker or dealer from or for the securities 
accounts of such person for safekeeping, with a view to sale, to 
cover consummated sales, pursuant to purchases, as collateral 
security, or for purposes of effecting transfer. The term 'customer' 
includes any person who has a claim against the debtor arising out 
of sales or conversions of such securities, and any person who has 
deposited cash with the debtor for the purpose of purchasing 
securities, but does not include— 
" (A) any person to the extent that the claim of such person 
arises out of transactions with a foreign subsidiary of a 
member of SIPC; or 
"(B) any person to the extent that such person has a claim 
- 
^ 
for (msh or securities which bj' contract, agreement, oi- under-
standing, or by operation of law, is part of the capital of the 
debtor, or is subordinated to the claims of any or all creditors 
of the debtor, notwithstanding that some ground exists for 
declaring such contract, agreement, or understanding void or 
voidable in a suit between the claimant and the debtor. 
92 STAT. 272 
PUBLIC LAW 95-283—MAY 21, 1978 
"(4) CUSTOMER XAME SECURITIES.—The term 'customer name 
securities' means securities which were held for the account of 
a customer on the filing date by or on behalf of the debtor and 
which on the filing date were registered in the name of the cus-
tomer, or were in the process of being so registered pursuant to 
instructions from the debtor, but does not include securities regis-
tered in the name of the customer which, by endorsement or 
otherwise, were in negotiable form. 
"(5) 
CUSTOMER PROPERTY.—The term 'customer property' 
means cash and securities (except customer name securities deliv-
ered to the customer) at any time received, acquired, or held by 
or for the account of a debtor from or for the securities accounts 
of a customer, and the proceeds of any such property transferred 
by the debtor, including property unlawfully converted. The term 
'customer property' includes— 
" (A) securities held as property of the debtor to the extent 
that the inability of the debtor to meet its obligations to 
• 
customers for their net equity claims based on securities of 
the same class and series of an issuer is attributable to the 
debtor's noncompliance with the requirements of section 15 
15 use 78o. 
(c) (3) of the 1934 Act and the rules prescribed under such 
section; 
"(B) resources provided through the use or realization of 
customers' debit cash balances and other customer-related 
debit items as defined by the Commission by rule; 
"(C) any cash or securities apportioned to customer prop-
Ante, p. 259. 
eity pursuant to section 6(d); and 
"(D) any other property of the debtor which, upon compli-
ance with applicable laws, rules, and regulations, would have 
been set aside or held for the benefit of customers, unless 
the trustee determines that including such property within 
the meaning of such term would not significantly increase 
customer property, 
" (6) DEBTOR.—The term 'debtor' means a member of SIPC with 
respect to whom an application for a protective decree has been 
Ante, p. 254. 
filed 
under section 5(a)(3) or a direct payment procedure has been 
Ante, p. 266. 
instituted under section 10 (b). 
"(7) ExAMixiXG AUTHORITY.—The term 'examining authority" 
means, with respect to any member of SIPC (A) the self-regula-
tory organization which inspects or examines such member of 
SIPC, or (B) the Commission if such member of SIPC is not a 
member of or participant in any self-regulatory organization or 
if the Commission has designated itself examining authority for 
such member pursuant to section 13 (c). 
"(8) FiLixcr DATE.—The term 'filing date' means the date on 
which an application for a protective decree is filed under section 
5(a) (3), except that— 
"(A) if a petition was filed before such date by or against 
Post, p. 2549. 
the debtor under the Bankruptcy Act, or under chapter X or 
XI of such Act. as now in eft'ect or as amended from time to 
time, the term 'filing date' means the date on which such 
petition was filed; 
"(B) if the debtor is the subject of a proceeding pending 
in any court or before any agency of the United States or any 
State in which a receiver, tnistee, or liquidator for such debtor 
PUBLIC LAW 95-283—MAY 21, 1978 
92 STAT. 273 
has been appointed and such proceeding was commenced 
before the date on which such application was filed, the term 
'filing date' means the date on which such proceeding was 
commenced; or 
"(C) if the debtor is the subject of a direct payment pro-
cedure or was the subject of a direct payment procedure 
discontinued by SIPC pursuant to section 10(f), the term Ante, p. 266. 
'filing date' means the date on which notice of such direct 
payment procedure was published imder section 10(b). 
" (9) P'oREiGN SUBSIDIARY.—The term 'foreign subsidiary' means 
any subsidiary of a member of SIPC which has its principal place 
of business in a foreign country or which is organized under the 
laws of a foreign country. 
"(10) 
GROSS REVENUES ITIOM: THE SECURITIES BUSINESS.—The 
term 'gross revenues from the securities business' means the sum 
of (but without duplication) — 
"(A) commissions earned in connection with transactions 
in securities effected for customers as agent (net of commis-
sions paid to other brokers and dealei-s in connection with such 
transactions) and markups with lespect to purchases or sales 
of securities as principal ; 
"(B) charges for executing or clearing transactions in secu- 
> ,v\' 
rities for other brokers and dealers; 
"(C) the net realized gain, if any, from principal transac-
tions in securities in trading accounts; 
"(D) the net profit, if any, from the management of or 
participation in th& underwriting or distribution of securities; 
"(E) interest earned on customers' securities accounts; 
"(F) fees for investment advisory services (except when 
rendered to one or moi'e registered investment companies 
or insurance company separate accounts) or account super- 
- 
, 
. 
vision with respect to securities; 
"(G) fees for the solicitation of proxies with respect to, 
or tenders or exchanges of, securities; 
"(H) income from service charges or other surcharges 
with respect to securities; 
"(I) except as otherwise provided by rule of the Commis-
sion, dividends and interest received on securities in invest-
ment accounts of the broker or dealer; 
"(J) fees in connection with put, call, and other option 
transactions in securities ; 
"(K) commissions earned from transactions in (i) certifi- 
-<:'> 
'••'•'•1?.'' 
cates of deposit, and (ii) Treasury bills, bankers acceptances, 
or commercial paper which have a matuiity at the time of 
issuance of not exceeding nine months, exclusive of days of 
grace, or any renewal thereof, the maturity of which is like-
wise limited, except that SIPC shall by bylaw include in the 
aggregate of gross levenues only an appropriate percentage 
of such commissions based on SIPC's loss experience with 
respect to such instruments over at least the preceding five 
years; and 
" (L) fees and other income from such other categories of 
the securities business as SIPC shall provide by bylaw. 
Such term does not include revenues received by a broker or 
dealer in connection with the distribution of shares of a resdstered 
92 STAT. 274 
PUBLIC LAW 95-283—MAY 21, 1978 
open end investment company or unit investment trust or revenues 
derived by a broker or dealer from the sale of variable annuities 
or from the conduct of the business of insurance. 
"(11) LIQUIDATION PROCEEDING.—The term'liquidation proceed-
ing' means any proceeding for the liquidation of a debtor under 
this Act in which a trustee has been appointed under section 
^rafe, p. 254. 
5(b)(3), 
"(12) NET EQUITY,—The term 'net equity' means the dollar 
amount of the account or accounts of a customer, to be determined 
b y -
"(A) calculating the sum which would have been owed 
by the debtor to such customer if the debtor had liquidated, 
by sale or purchase on the filing date, all securities positions 
of such customer (other than customer name securities 
reclaimed by such customer); minus 
"(B) any indebtedness of such customer to the debtor on 
the filing date: plus 
"(C) 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 determine (but 
in no event more than sixty days after the publication of 
Ante, p. 261. 
notice under section 8(a)). 
In determining net equity under this paragraph, accounts held 
by a customer in separate capacities shall be deemed to be accounts 
of separate customers, 
"(13) PERSONS REGISTERED AS BROKERS OR DEALERS.—The term 
'persons registered as brokers or dealers' includes any person who 
is a member of a national securities exchange. 
"(14) PROTECTIVE DECREE.—The term 'protective decree' means 
a decree, issued by a court upon application of SIPC under section 
15 use 78eee. 
5(a) (3), that the customers of a member of SIPC are in need of 
the protection provided under this Act, 
"(15) SECURITY.—The term 'security' means any note, stock, 
treasury stock, bond, debenture, evidence of indebtedness, any 
collateral trust certificate, preorganization certificate or subscrip-
tion, transferable share, voting trust certificate, certificate of 
deposit, certificate of deposit for a security, any investment con-
tract or certificate of interest or participation in any profit-sharing 
agreement or in any oil, gas, or mineral royalty or lease (if such 
investment contract or interest is the subject of a registration 
statement with the Commission pursuant to the provisions of 
15 use 77a. 
the Securities Act of 1933), any certificate of interest or participa-
tion in, temporary or interim certificate for, receipt for, guarantee 
of, or warrant or right to subscribe to or purchase or sell any of 
the foregoing, and any other instrument commonly known as a 
security. The term 'security' does not include any currency, or any 
commodity or related contract or futures contract, or any warrant 
or right to subscribe to or purchase or sell any of the foregoing,". 
AMENDMENT TO THE SECURITIES EXCHANGE ACT OF 1934 
SEC, 16 Section 3(a) of the Securities Exchange Act of 1934 (15 
U,S,C, 78c(a)) is amended by adding at the end thereof the follow-
ing new paragraph: 
PUBLIC LAW 95-283—MAY 21, 1978 
92 STAT. 275 
"(40) The term 'financial responsibility rules' means the rules 
and regulations of the Commission or the rules and regulations 
prescribed by any self-regulatory organization relating to finan-
cial responsibility and related practices which are designated by 
the Commission, by rule or regulation, to be financial responsi-
bility rules.". 
TABLE OF CONTENTS 
SEC. 17. The table of contents of the Securities Investor Protection 
Act of 1970 (15 U.S.C. 78aaa et seq.) is amended to read as follows: 
"TABLE OF CONTENTS 
"Sec. 1. Short title. 
•'Sec. 2. Application of Securities Exchange Act of 1934. 
"Sec. 3. Securities Investor Protection Corporation, 
"Sec. 4. SIPC Fund. 
•'Sec. 5. Protection of customers. 
"Sec. 6. General provisions of a liquidation proceeding. 
"Sec. 7. Powers and duties of trustee. 
"Sec. 8. Special provisions of a liquidation proceeding. 
"Sec. 9. SIPC advances. 
"Sec. 10. Direct payment procedure. 
"Sec. 11. SEC functions. 
"Sec. 12. Examining authority functions. 
"Sec. 13. Functions of self-regulatory organizations. 
"Sec. 14. Prohibited acts. 
"Sec. 15, Miscellaneous provisions. 
"Sec. 16. Definitions.". 
"Financial 
responsibility 
rules." 
SMALL ISSUE EXEMPTION 
SEC. 18. Section 3(b) of the Securities Act of 1933 (15 U.S.C. 
77c(b)) is amended by striking out "$500,000" and inserting in lieu 
thereof "$1,500,000". 
AMENDMENT TO THE SECURITIES EXCHANGE ACT OF 1934 
SEC. 18. (a) Section 11(a)(3) of the Securities Exchange Act of 
1934 (15 U.S.C. 78k(a)(3)) is amended by striking out "May 1, 
1975" and inserting in lieu thereof "February 1,1978" and by striking 
out "May 1, 1978" each place it appears and inserting in lieu thereof 
"February 1, 1979". 
(b) The amendment made by subsection (a) of this section shall 
be effective as of May 1,1978. 
Approved May 21, 1978. 
LEGISLATIVE HISTORY: 
HOUSE REPORT No. 95-746 (Comm. on Interstate and Foreign Commerce). 
SENATE REPORT No. 95-763 (Comm. on Banking, Housing, and Urban Affairs). 
CONGRESSIONAL RECORD: 
Vol. 123 (1977): Nov. 1, considered and passed House. 
Vol. 124 (1978): Apr. 26, considered and passed Senate, amended. 
May 2, House agreed to certain Senate amendments; disagreed 
to Senate amendment No. 8; and disagreed to Senate amend-
ment No. 9 with an amendment. 
May 4, Senate insisted on its amendment No. 8; agreed to 
House amendment of No. 9 with an amendment. 
May 9, House agreed to Senate amendment No. 9; concurred in 
Senate amendment of No. 8 with an amendment. 
May 10, Senate concurred on House amendment of No. 8. 
Effective date. 
15 u s e 78k note.