An Act to provide greater protection for customers of registered brokers and dealers and members of national securities exchanges
PL 91-598 (H.R.19333), enacted 12/30/1970

84 STAT.] 
PUBLIC LAW 91-597-DEC. 29, 1970 
1635 
APPROPRIATIONS 
SEC. 27. Such sums as are necessary to carry out the provisions 
of this Act are hereby authorized to be appropriated. 
SEPARABILITY OF PROVISIONS 
SEC. 28. If any provision of this Act or the application thereof 
to any person or circumstances is held invalid, the validity of the 
remainder of the Act and of the application of such provision to other 
persons and circumstances shall not be affected thereby. 
EFFECTIVE DAY 
SEC. 29. The provisions of this Act with respect to egg products 
shall take effect six months after enactment. Otherwise, this Act shall 
take effect eighteen months after enactment. 
Approved December 29, 1970. 
47-348 O - 72 - 20 (Pt. 2) 
1636 
PUBLIC LAW 91-598-DEC. 30, 1970 
[84 STAT. 
Public Law 91-598 
December 30, 1970 
^ N 
A C T 
[H. R. 19333] 
To provide greater protection for cnstomers of registered brokers and dealers 
and members of national securities exchanges. 
Be it enacted hy the Senate and House of Representatives 
of the 
Securities In- 
United States of America in Congress assembled^ 
vestor Protection 
Act of 1970. 
SECTION 1. SHORT TITLE, ETC. 
(a) SHORT TITLE; TABLE OF CONTENT^.—This Act, with the follow-
ing table of contents, may be cited as the "Securities Investor Pro-
tection Act of 1970". 
TABLE OF CONTENTS 
Sec. 1. Short title, etc. 
(a) siiort title; table of contents. 
(b) Section headings. 
Sec*. 2. Application of Securities Exehangie Act of 1984, 
Sec. 3. Securities Investor Protection Corporation, 
(a) Creation. 
* 
' 
(b) Powers. 
(c) Board of Directors. 
(d) Meetings of Board. 
(e) Bylaws. 
(f) Other members. 
Sec, 4. SIPC Fund, 
(a) In general, 
(b) Initial required balance for fund. 
(c) Assessments. 
(d) Requirements respecting assessments and lines of cretlit. 
(e) Prior trusts; overpayments and underpayments. 
(f) Borrowing authority. 
(g) SEC loans to SIPC. 
(h) SEC notes issued to Treasury, 
(i) "Gross revenue" defined. 
Sec. ."). Protection of customers. 
(a) Determination of need of protection. 
(b) Court action. 
(c) SEC participation in proceedings. 
Sec. 6. Liquidation proceedings. 
(a) General purposes of liquidation proceeding, 
(b) Powers and duties of trustee, 
(e) Application of Bankruptcy Act. 
(d) Completion of open contractual commitments. 
(e) Notice. 
(f) SIPC advances to trustee. 
(g) Payments to customers; no proof of claim required, 
(h) Proof of claim by associates and others. 
(i) Reports by trustee to court. 
(j) E}ffect of Act on claims. 
Sec. 7. SEC functions. 
(a) Administrative procedure. 
(b) Enforcement of actions. 
(c) Examinations and reports. 
(d) Financial responsibility. 
Sec. 8. Examining authority functions. 
Sec. 9. Functions of self-regulatory organizations. 
(a) Collecting agent. 
(b) Immunity. 
(c) Inspections. 
(d) Reports. 
(e) Consultation. 
(f) Financial condition of members. 
Sec. 10. Prohibited acts. 
(a) Failure to pay assessment, etc. 
(b) Engaging in business after appointment of trustee. 
(c) Embezzlement, etc., of assets of SIPC. 
84 STAT. ] 
PUBLIC LAW 91^98-DEC. 30, 1970 
1637 
TABLE OF CONTENT hi—Continued 
Set-. 11. Miscellaneous provisions. 
(a) Public inspection of reix)rts. 
(b) Application of Act to foreign members. 
(c) Liability of members of SIl'C. 
( d) Liability of SIPC and Directors. 
(e) Advertising. 
(f) SIPC exempt from taxation. 
(g) Section 20 {a) of 1934 Act not to apply, 
(h) SEC study of unsafe or unsound practices. 
Sec. 12. Definitions. 
(b) SECTIOX HEADINGS.—Headings for sections and subsections, and 
the table of contents, are included only for convenience, and shall be 
given no legal effect. 
SEC. 2. APPLICATION OF SECURITIES EXCHANGE ACT OF 1934. 
Except as otherwise provided in this Act, the provisions of the 
Securities Exchange Act of 1934 (15 U.S.C., sec. 78a and fol,; herein-
after referred to as the "1934 Act") apply as if this Act constituted 
48 stat. ssi. 
an amendment to, and was included as a section of, such Act. 
SEC. 3. SECURITIES INVESTOR PROTECTION CORPORATION. 
(a) CREATION.—There is hereby established a body corporate to be 
known as "Securities Investor Protection Corporation"' (hereafter in 
this Act referred to as "SIPC"). SIPC shall be a nonprofit corpora-
tion and shall have succession until dissolved by act of the Con-
gress. SIPC shall— 
(1) not be an agency or establishment of the United States Gov-
ernment ; 
(2) be a membership corporation the members of which shall 
be— 
(A) all persons registered as brokers or dealers under sec-
tion 15(b) of the 1934 Act, and 
^ ulc 7J0.' 
(B) all persons who are members of a national securities 
exchange, 
other than persons whose business as a broker or dealer consists 
exclusively of (i) the distribution of shares of registered 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; and 
(3) 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 Corporation Act (D.C. Code, 
sec. 29-1001 and fol.). 
^e stat. 265. 
(b) POWERS.—In addition to the powers granted to SIPC elsewhere 
in this Act, SIPC shall have the power— 
(1) to sue and be sued, complain and defend, in its corporate 
name and through its own counsel, in any court. State, or Federal; 
(2) to adopt, alter, and use a corporate seal, which shall be 
judicially noticed; 
(3) subject to the provisions of this Act, to adopt, amend, and 
repeal, by its Board of Directors, bylaws and rules relating to 
the conduct of its business and the exercise of all other rights and 
powers granted to it by this Act; 
(4) to conduct its business (including the carrying on of opera-
tions and the maintenance of offices) and to exercise all other 
rights and powers granted to it by this Act in any State or other 
jurisdiction without regard to any qualification, licensing, or 
other statute in such State or other jurisdiction; 
1638 
PUBLIC LAW 91-598-DEC. 30, 1970 
[84 STAT. 
(5) to lease, purchase, accept gifts or donations of or otherwise 
acquire, to own, hold, improve, use, or otherwise deal in or 
with, and to sell, convey, mortgage, pledge, lease, exchange or 
otherwise dispose of, any property, real, personal or mixed, or 
any interest therein, wherever situated; 
(6) subject to the provisions of subsection (c), to elect or 
appoint such officers, attorneys, employees, and agents as may 
be required, to determine their qualifications, to define their duties, 
to fix their salaries, require bonds for them and fix the penalty 
thereof; 
(7) to enter into contracts, to execute instruments, to incur 
liabilities, and to do any and all other acts and things as may be 
necessary or incidental to the conduct of its business and the 
exercise of all other rights and powers granted to h>IPC by this 
Act; and 
(8) by bylaw, to establish its fiscal year. 
(c) BOARD or DIRECTORS.— 
(1) FUNCTIONS.—SIPC shall have a Board of Directors which, 
subject to the provisions of this Act, shall determine the policies 
which shall govern the operations of SIPC. 
(2) NUMBER AND APPOINTMENT.—The Board of Directors shall 
consist of seven persons as follows: 
(A) One director shall be appointed by the Secretary of 
the Treasury from among the officers and employees of the 
Department of the Treasury. 
(B) One director shall be appointed by the Federal Reserve 
Board from among the officers and employees of the Federal 
Reserve Board. 
(C) Five directors shall be appointed by the President, by 
and with the advice and consent of the Senate,, as follows— 
(i) three such directors shall be selected from among 
persons w^ho are associated with, and representative of 
different aspects of, the securities industry, not all of 
whom shall be from the same geographical area of the 
United States, and 
(ii) two such directors shall be selected from the gen-
eral public from among persons who are not associated 
with any broker or dealer, within the meaning of para-
graph (18) of section 3(a) of the 1934 Act, or similarly 
associated with a national securities exchange or other 
securities industry group and who have not had any such 
association during the two years preceding appointment. 
(3) CHAIRMAN AND VICE CHAIRMAN.—The President shall des-
ignate a Chairman and Vice Chairman from among those directors 
appointed under paragraph (2)(C)(ii) of this subsection. 
(4) 
TERMS.— 
(A) Except as provided in subparagraphs (B) and (C), 
each director shall be appointed for a term of three years. 
(B) Of 
the 
directors 
first 
appointed 
under 
para-
graph (2) — 
(i) tw^o shall hold office for a term expiring on Decem-
ber 31, 1971, 
(ii) two shall hold office for a term expiring on Decem-
ber 31,1972, and 
(iii) three shall hold office for a term expiring on 
December 31, 1973, 
as designated by the President at the time they take office. 
Such designation shall be made in a manner which will assure 
78 Stat. 56S. 
15 u s e 78c. 
84 STAT. ] 
PUBLIC LAW 91-598-DEC. 30,1970 
1639 
that no two pei-sons appointed under the authority of the 
same clause of paragraph (2) (C) shall have terms which 
expire simultaneously. 
(C) A vacancy in the Board shall be filled in the same 
manner as the original appointment was made. Any director 
appointed to fill a vacancy occurring prior to the expiration 
of the term for which his predecessor was appointed shall be 
appointed only for the remainder of such term. A director 
may serve after the expiration of his term until his successor 
has taken office. 
(5) COMPENSATION, ETC.—All matters relating to compensation 
of directors and the determination of dollar volume of trading on 
exchanges shall be as provided in the bylaws of SIPC. 
(d) MEETINGS OF BOARD.—The Board of Directors shall meet at the 
call of its Chairman, or as otherwise provided by the bylaws of SIPC. 
(e) BYLAWS.— 
(1) As soon as practicable but not later than forty-five days 
after the date of enactment of this Act, the Board of Directors 
shall adopt initial bylaws and rules relating to the conduct of the 
business of SIPC and the exercise of the rights and powers granted 
to it by this Act, and shall file a copy thereof with the Commission. 
Thereafter, the Board of Directors may alter, supplement, or 
repeal any existing bylaw^ or rule and may ardopt additional bylaws 
and rules, and in each such case shall file a copy thereof with the 
Commission. 
(2) Each such initial bylaw or rule, alteration, supplement, or 
repeal, and additional bylaw or rule shall take effect upon the 
thirtieth day (or such later date as SIPC may designate) after the 
filing of the copy thereof with the Commission or upon such earlier 
date as the Commission may determine, unless the Commission 
shall, by notice to SIPC setting forth the reasons therefor, dis-
approve the same, in whole or in part, as being contrary' to the 
public interest or contrary to the purposes of this Act. 
(3) The Commission may, by such rules or regulations as it 
determines to be necessary or appropriate in the public interest 
;.» or to effectuate the purposes of this Act, require the adoption, 
:^j'; amendment,- alteration of, supplement to or rescission of any 
• bylaw or rule by SIPC, whenever adopted. 
(f) 
OTHER MEMBERS.— 
(1) Any person who is a broker, dealer, or member of a national 
securities exchange and who is excluded from membership in 
SIPC under subsection (a) may become a member of SIPC under 
such conditions and upon such terms as SIPC shall require. 
(2) Notwithstanding anything contained in subsections (c) and 
(d) of section 4, any person who becomes a member of the corpora-
tion under this subsection shall be subject to such assessments as 
SIPC determines to be equitable. 
SEC. 4. SIPC FUND. 
(a) 
I N GENERAL.— 
(1) ESTABLISHMENT OF FUND.—SIPC shall establish a "SIPC 
Fund" (hereinafter in this Act referred to as the "fund"). All 
amounts received by SIPC (other than amounts paid directly 
to any lender pursuant to any pledge securing a borrow^ing by 
SIPC) shall be deposited in the fund, and all expenditures made 
by SIPC shall be made out of the fund. 
(2) BALANCE OF THE FUND.—The balance of the fund at any 
time shall consist of the aggregate at such time of the following-
items : 
1640 
PUBLIC LAW 91-598-DEC. 30, 1970 
[84 STAT. 
(A) Cash on hand or on deposit. 
(B) Amounts invested in United States Government or 
agency securities. 
(C) Confirmed lines of credit. 
(8) CONFIRMED LINES OF CREDIT.—For purposes of this section, 
the amount of confirmed lines of credit as of any time is the 
aggregate amount which SIPC at such time has the right to 
borrow from banks and other financial institutions under con-
firmed lines of credit or other written agreements which provide 
that moneys so borrowed are to be repayable by SIPC not less 
than one year from the time of such borrowings (including, for 
purposes of determining when such moneys are repayable, all 
rights of extension, refunding, or renewal at the election of SIPC). 
(b) INITIAL REQUIRED BALANCE FOR FUND.—Within one hundred 
and twenty days from the date of enactment of this Act, the balance 
of the fund shall aggregate not less than $75,000,000, less any amounts 
x
^ 
expended from the fund within that period. 
(c) ASSESSMENTS.— 
(1) INITIAL ASSESSMENTS.—Each member of SIPC shall pay to 
SIPC, or the collection agent for SIPC specified in section 9(a), 
on or before the one hundred and twentieth day following the 
date of enactment of this Act, an assessment equal to one-eighth of 
1 per centum of the gross revenues from the securities business of 
such member during the calendar year 1969, or if the Commission 
shall determine that, for purposes of assessment pursuant to this 
paragraph, a lesser percentage of gross revenues from the secu-
rities business is appropriate for any class or classes of members 
(taking into account relevant factors, including but not limited 
to types of business done and nature of securities sold), such lesser 
percentages as the Commission, by rule or regulation, shall 
establish for such class or classes, but in no event less than one-
sixteenth of 1 per centum for any such class. In no event shall any 
assessment upon a member pursuant to this paragraph be less 
than $150. 
(2) GENERAL ASSESSMENT AUTHORITY.—SIPC shall, by bylaw 
or rule, impose upon its members such assessments as, after con-
sultation with self-regulatory organizations, SIPC may deem 
necessary and appropriate to establish and maintain the fund 
and to repay any borrowings by SIPC. Any assessments so made 
shall be in conformity with contractual obligations made by SIPC 
in connection with any borrowing incurred by SIPC. Subject to 
paragraph (3) and subsection (d)(1)(A), any such assessment 
upon .the members, or any one or more classes thereof, may, in 
whole or in part, be based upon or measured by (A) the amount of 
their gross revenues from the securities business, or (B) all or 
any of the following factors: the amount or composition of their 
gross revenues from the securities business, the number or dollar 
volume of transactions effected by them, the number of customer 
accounts maintained by them or the amounts of cash and securi-
^ * ties in such accounts, their net capital, the nature of their activi-
/ 
ties (whether in the securities business or otherwise) and the 
,: 
consequent risks, or other relevant factors. 
(3) LIMITATIONS.—Notwithstanding any other provision of this 
. Act (other than section 3(f)) — 
(A) no assessment shall be made upon a member otherwise 
than pursuant to paragraph (1) or (*2) of this subsection, 
. , 
(B) an assessment may be made under paragraph (2) of 
this subsection at a rate in excess of one-half of one per centum 
84 STAT.] 
PUBLIC LAW 91-598-DEC. 30, 1970 
1641 
during any twelve-month period if SIPC determines, in 
accordance with a bylaw or rule, that such rate of assessment 
during such period will not have a material adverse effect on 
the financial condition of its members or their customers, 
except that no assessments shall be made pursuant to such 
paragraph upon a member which require payments during 
any such period which exceed in the aggregate one per centum 
of such member's gross revenues from the securities business 
for such period, and 
(C) no assessment shall include any charge based upon the 
member's activities (i) in the distribution of shares of regis-
tered open end investment companies or unit investment 
trusts, (ii) in the sale of variable annuities, (iii) in the busi-
ness of insurance, or (iv) in the business of rendering invest-
ment advisory services to one or more registered investment 
companies or insurance company separate accounts. 
(d) 
REQUIREMENTS 
RESPECTING 
ASSESSMENTS AND LINES 
or 
CREDIT.— 
(1) ASSESSMENTS.— 
(A) 3^ OF 1 PERCENT ASSESSMENT.—Subject to subsection 
(c)(3), SIPC shall impose upon each of its members an assess-
ment at a rate of not less than one-half of 1 per centum per 
annum of the gross revenues from the securities business of 
such member— 
(i) until the balance of the fund aggregates not less 
than $150,000,000 (or such other amount as the Commis-
sion may determine in the public interest), 
(ii) during any period when there is outstanding bor-
rowing by SIPC pursuant to subsection (f) or subsection 
(g) of this section, and 
(iii) whenever the balance of the fund (exclusive of 
confirmed lines of credit) is below $100,000,000 (or such 
other amount as the Commission may determine in the 
public interest). 
(B) 1^ OF 1 PERCENT ASSESSMENT.—During any period dur-
ing which— 
(i) the balance of the fund (exclusive of confirmed 
lines of credit) aggregates less than $150,000,000 (or such 
other amount as the Commission has determined under 
paragraph (2) (B)),or 
(ii) SIPC is required under paragraph (2) (B) to 
phase out of the fund all confirmed lines of credit, 
SIPC shall endeavor to make assessments in such a manner 
that the aggregate assessments payable by its members during 
such period shall not be less than one-fourth of 1 per centum 
per annum of the aggregate gross revenues from the secu-
rities business for such members during such period. 
(2) LINES or CREDIT.— 
(A) $50,000,000 LIMIT AFTER 1973.—After December 31, 
1973, confirmed lines of credit shall not constitute more than 
$50,000,000 of the balance of the fund. 
(B) PHASEOUT REQUIREMENT.—When the balance of the 
fund aggregates $150,000,000 (or such other amount as the 
Commission may determine in the public interest) SIPC 
shall phase out of the fund all confirmed lines of credit. 
(e) PRIOR TRUSTS; OVERPAYMENTS AND UNDERPAYMENTS.— 
(1) PRIOR TRUSTS.—There may be contributed and transferred 
at any time to SIPC any funds held by any trust established by a 
1642 
PUBLIC LAW 91-598-DEC. 30, 1970 
[84 STAT. 
self-regulatory organization prior to January 1, 1970, and the 
amounts so contributed and transferred shall be applied, as may 
be determined by SIPC with approval of the Commission, as a 
reduction in the amounts payable pursuant to assessments made 
or to be made by SIPC upon members of such self-regulatory 
organization pursuant to subsection (c)(2). No such reduction 
shall be made at any time when there is outstanding any borrow-
ing by SIPC pursuant to subsection (g) of this section or any 
borrowings under confirmed lines of credit. 
(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 not be recoverable except against 
future payments by such member in accordance with a bylaw or 
rule of SIPC. 
(3) UNDERPAYMENTS.—If a member fails to pay when due all 
or any part of an assessment made upon such member, the unpaid 
portion thereof shall bear interest at such rate as may be deter-
mined by SIPC by bylaw or rule. 
(f) BORROWING AUTHORITY.—SIPC shall have the power to bor-
row moneys and to evidence such borrowed moneys by the issuance of 
bonds, notes, or other evidences of indebtedness, all upon such terms 
and conditions as the Board of Directors may determine in the case 
of a borrowing other than pursuant to subsection (g) of this section, 
or as may be prescribed by the Commission in the case of a borrowing 
pursuant to subsection (g). The interest payable on a borrowing pur-
suant to subsection (g) shall be equal to the interest payable on the 
related notes or other obligations issued by the Commission to the 
Secretary of the Treasury. To secure the payment of the principal of, 
and interest and premium, if any, on, all bonds, notes, or other evi-
dences of indebtedness so issued, SIPC may make agreements with 
respect to the amount of future assessments to be made upon members 
and may pledge all or any part of the assets of SIPC and of the assess-
ments made or to be made upon members. Any such pledge of future 
assessments shall (subject to any prior pledge) be valid and binding 
from the time that it is made, and the assessments so pledged and 
thereafter received by SIPC, or any examining authority as collection 
agent for SIPC, shall immediately be subject to the lien of such pledge 
without any physical delivery thereof or further act, and the lien of 
such pledge shall be valid and binding against all parties having claims 
of any kind against SIPC or such collection agent whether pursuant 
to this Act, in tort, contract or otherwise, irrespective of whether such 
parties have notice thereof. During any period when a borrowing by 
SIPC pursuant to subsection (g) of this section is outstanding, no 
pledge of any assessment upon a member to secure any bonds, notes, 
or other evidences of indebtedness issued other than pursuant to sub-
section (g) of this section shall be effective as to the excess of the pay-
ments under the assessment on such member during any twelve-month 
period over one-fourth of 1 per centum of such member's gross rev-
enues from the securities business for such period. Neither the instru-
ment by which a pledge is authorized or created, nor any statement or 
other document relative thereto, need be filed or recorded in any State 
or other jurisdiction. The Commission may by rule or regulation pro-
vide for the filing of any instrument by which a pledge or borrowing 
is authorized or created, but the failure to make or any defect in any 
such filing shall not affect the validity of such pledge or borrowing. 
(g) SEC LOANS TO SIPC.—In the event that the fund is or may 
reasonably appear to be insufficient for the purposes of this Act, the 
Commission is authorized to make loans to SIPC. At the time of appli-
84 STAT. ] 
PUBLIC LAW 91-598-DEC. 30, 1970 
1643 
cation for, and as a condition to, any such loan, SI PC shall file with 
the Commission a statement with respect to the anticipated use of the 
proceeds of the loan. If the Commission determines that such loan is 
necessary for the protection of customers of brokers or dealers and 
the maintenance of confidence in the United States securities markets 
and that SIPC has submitted a plan which provides as reasonable an 
assurance of prompt repayment as may be feasible under the circum-
stances, then the Commission shall so certify to the Secretary of the 
Treasury, and issue notes or other obligations to the Secretary of the 
Treasury pursuant to subsection (h). If the Commission determines 
that the amount or time for payment of the assessments pursuant to 
such plan would not satisfactorily provide for the repayment of such 
loan, it may, by rules and regulations, impose upon the purchasers of 
equity securities in transactions on national securities exchanges and 
in the over-the-counter markets a transaction fee in such amount as at 
any time or from time to time it may determine to be appropriate, but 
not exceeding one-fiftieth of 1 per centum of the purchase price of the 
securities. No such fee shall be imposed on a transaction (as defined by 
rules or regulations of the Commission) of less than $'5,000. For the 
purposes of the next preceding sentence, (A) the fee shall be based 
upon the total dollar amount of each purchase; (B) 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 regis-
tered under section 15(b) of the 1934 Act or a member of a national 
^^ use JIO' 
securities exchange unless such purchase is for an investment account 
of such broker, dealer, or member (and for this purpose any transfer 
from a trading account to an investment account shall be deemed a 
purchase at fair market value) ; and (C) the Commission by rules 
and regulations may exempt any transaction in the over-the-counter 
markets in order to provide for the assessment of fees on purchasers in 
transactions in those markets on a basis comparable to the assessment 
of fees on purchasers in transactions on national securities exchanges. 
Such fee shall be collected by the broker or dealer effecting the transac-
tion for or with the purchaser and shall be paid to SIPC in the same 
manner as assessments imposed pursuant to subsection (c). 
(h) SEC NOTES ISSUED TO TREASURY.—To enable the Commission 
to make loans under subsection (g), the Commission is authorized to 
issue to the Secretary of the Treasury notes or other obligations in an 
aggregate amount of not to exceed $1,000,000,000, in such forms and 
denominations, bearing such maturities, and subject to such terms and 
conditions, as may be prescribed by the Secretary of the Treasury. 
Such notes or other obligations shall bear interest at a rat« determined 
by the Secretary of the Treasury, taking into consideration the cur-
rent average market yield on outstanding marketable obligations of 
the United States of comparable maturities during the month preced-
ing the issuance of the notes or other obligations. The Secretary of 
the Treasury may reduce the interest rate if he determines such reduc-
tion to be in the national interest. The Secretary of the Treasury is au-
thorized and directed to purchase any notes and other obligations 
issued hereunder and for that purpose he is authorized to use as a 
public debt transaction the proceeds from the sale of any securities 
issued under the Second Liberty Bond Act, as amended, and the pur- 
3° ^^^ ^f^-
poses for which securities may be issued under that Act, as amended, 
are extended to include any purchase of such notes and obligations. The 
Secretary of the Treasury may at any time sell any of the notes or 
other obligations acquired by him under this subsection. All redemp-
tions, purdhases, and sales by the Secretary of the Treasury of such 
1644 
PUBLIC LAW 91-598-DEC. 30, 1970 
[84 STAT. 
notes or other obligations shall be treated as i)nblic debt transactions 
ol' the L'nited States. 
(i) ''GROSS REVENUES" DEFINED.— 
(1) I N GENERAL,—For purposes of this Act, the tenn "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 dealers in connection with 
such transactions) and markups in respect of purchases or 
sales of securities as principal, 
(B) charges for executing or clearing transactions in secu-
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 par-
ticipation in the underwriting or distribution of securities, 
(E) interest earned on customers' securities accounts, 
(F) fees for investment advisory services (except when 
rendered to one or more registered investment companies or 
insurance company separate accounts) or account supervision 
in respect of 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 in 
respect of securities, 
(I) except as otherwise provided by rule or regulation of 
the Commission, dividends and interest received on securities 
in investment accounts of the broker or dealer, 
(J) fees in connection with put, call, and other option 
transactions in securities, and 
(K) fees and other income for all other investment bank-
ing services. 
Such term does not include revenues received by a broker or dealer 
in connection with the distribution of shares of a registered 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. 
(2) CONSOLIDATED GROUP.—Except as otherwise provided by 
SIPC by bylaw or rule, gross revenues from the securities busi-
ness of a broker or dealer shall be computed on a consolidated 
basis for such broker or dealer and all its subsidiaries, and the 
operations of a broker or dealer shall include those of any busi-
ness to which such broker or dealer has succeeded. 
(3) MEANING or TERMS NOT DEFINED.—SIPC may by bylaw or 
rule define all terms used in this subsection insofar as such 
definitions are not inconsistent wath the provisions of this sub-
section. 
SEC. 5. PROTECTION OF CUSTOMERS. 
(a) DETERMINATION OF NEED OF PROTECTION.— 
(1) NOTICE TO SIPC.—If the Commission or any self-regula-
tory organization is aware of facts which lead it to believe that 
any broker or dealer subject to its regulation is in Or is approach-
ing financial difficulty, it shall immediately notify SIPC, and, if 
such notification is by a self-regulatory organization, the Com-
mission. 
(2) ACTION BY SIPC.—If SIPC determines that any member 
has failed or is in danger of failing to meet its obligations to 
84 STAT. ] 
PUBLIC LAW 91-598-DEC. 30,1970 
1645 
customers and that there exists one or more of the conditions 
specified in subsection (b)(1)(A), SIPC, upon notice to such 
member, may apply to any court of competent jurisdiction speci-
fied in section 27 or 21 (e) of the 1934 Act for a decree adjudicating ^^^^^ ^tat. 902. 
that customers of such member are in need of the protection pro- 
1
5 use 78aa, 
vided by this Act, 
'^^"• 
(3) EFFECT OF OTHER PENDING ACTIONS.—An application under 
paragraph (2) — 
(A) with the consent of the Commission, may be combined 
with any action brought by the Commission including an 
action by it for a temporary receiver pending 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) 
COURT ACTION.— 
(1) 
ISSUANCE OF DECREE.— 
(A) FINDINGS BY COURT.—A court to which application is 
jnade pursuant to subsection (a) (2) shall grant the appli-
cation and issue a decree adjudicating that customers of the 
member named in the application are in need of protection 
under this Act if it finds that such member— 
(i) is insolvent within the meaning of section 1(19) 
of the Bankruptcy Act, or is unable to meet its obliga- 
^^ stat. 84i. 
tions as they mature, or 
(ii) has committed an act of bankruptcy within the 
meaning of section 3 of the Bankruptcy Act, or 
^stat^*' ^'^'^' 
(iii) is the subject of a proceeding pending in any court 
11 use 21*. 
or before any agency of the LTnited States or any State 
in which a receiver, trustee, or liquidator for such mem-
ber has been appointed, or 
(iv) is not in compliance with applicable requirements 
under the 1934 Act or rules or regulations of the Com- 
^^ use y^si" 
mission or any self-regulatory organization with respect 
to financial responsibility or hypothecation of customers' 
securities, or 
(v) is unable to make such computations as may be 
necessary to establish compliance with such financial 
responsibility or hypothecation rules or regulations. 
(B) UNCONTESTED, ETC., APPLICATIONS.—If within three 
business days after the filing of an application pursuant to 
subsection (a) (2), or such other period as the court may 
order, the debtor shall consent to or fail to contest such appli-
cation or shall fail to show facts sufficient to contorvert any 
material allegation of such application, the court shall forth-
with grant the application and issue a decree adjudicating 
that customers of the member named in the application are 
in need of protection under this Act. 
(2) EXCLUSIVE JURISDICTION OVER DEBTOR,—Upon the filing of 
an application pursuant to subsection (a) (2), the court to which 
application is made shall have exclusive jurisdiction of the 
debtor involved and its property wherever located with the pow-
ers, to the extent consistent with the purposes of this Act, of a 
court of bankruptcy and of a court in a proceeding under chapter 
X of the Bankruptcy Act. Pending an adjudication under para- 8o^stat^*i'2*7s^' 
80 Stat. 1278. 
11 u s e 501. 
52 Stat. 888 
11 use 558, 
1646 
PUBLIC LAW 91-598-DEC. 30, 1970 
[84 STAT. 
graph (1) such court shall stay, and upon appointment by it of 
a trustee as provided in paragraph (3) such court shall continue 
the stay of, any pending bankruptcy, mortgage foreclosure, equity 
receivership, or other proceeding to reorganize, conserve, or liqui-
date the debtor or its property and any other suit against any 
receiver, conservator, or trustee of the debtor or its property. 
Pending such adjudication and upon the appointment by it of 
such trustee, the court may stay any proceeding to enforce a lien 
against property of the debtor or any other suit against the debtor. 
Pending such adjudication, such court may appoint a temporary 
receiver. 
(3) APPOINTMENT OF TRUSTEE.—If the court grants an applica-
' 
tion and makes an adjudication under paragraph (1), the court 
shall forthwith appoint as trustee for the liquidation of the busi-
ness of the debtor in accordance with section 6, and as attorney 
for such trustee, such persons as SIPC shall specify. No person 
shall be appointed as such trustee or attorney if such person is 
not "disinterested" within the meaning of section 158 of the 
Bankruptcy Act. 
(4) DEBTOR AND FILING DATE DEFINED.—For purposes of this 
Act— 
(A) DEBTOR.—The term "debtor" means a member of 
SIPC in respect of whom an application has been filed pur-
suant to subsection (a)(2).. 
(B) FILING DATE.—The term "filing date" means the date 
on which an application with respect to any debtor is filed 
under subsection (a) (2); except that if— 
(i) a petition was filed before such date by or against 
30 Stat. 544. 
the debtor under the Bankruptcy Act, or 
(ii) the debtor is the subject oi 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 was appointed w^hich proceeding was com-
menced before the date on which such application was 
filed, 
then the term "filing date" means the date on which such 
petition was filed or such proceeding commenced, 
(c) SEC PARTICIPATION IN PROCEEDINGS.—The Commission may, 
on its own motion, file notice of its appearance in any proceeding under 
this Act and may thereafter participate as a party. 
SEC. 6. LIQUIDATION PROCEEDINGS. 
(a) GENERAL PURPOSES OF LIQUIDATION PROCEEDING.—The purposes 
of any proceeding in which a trustee has been appointed under section 
5(b) (3) (hereafter in this section referred to as a "liquidation pro-
ceeding") shall be: 
(1) as promptly as possible after such appointment and in 
accordance with the provisions of this section— 
(A) to return specifically identifiable property to the cus-
tomers of the debtor entitled thereto; 
(B) to distribute the single and separate fund, and (in 
advance thereof or concurrently therewith) pay to customers 
moneys advanced by SIPC, as provided in subsection (f); 
(2) to operate the business of the debtor in order to complete 
open contractual commitments of the debtor pursuant to subsec-
tion ( d ) ; 
(3) to enforce rights of subrogation as provided in this Act; 
and 
11 use 1 et seq. 
84 STAT.] 
PUBLIC LAW 91-^QS-DEC. 30,1970 
1647 
(4) to liquidate the business of the debtor. 
(b) POWERS AND DUTIES OF TRUSTEE,— 
(1) TRUSI^EE POWERS.—A trustee appointed under section 5(b) 
(3) (hereinafter referred to as "trustee") shall be vested with the 
same powers and title with respect to the debtor and the property 
of the debtor, and the same rights to avoid preferences, as a 
trustee in bankruptcy and a trustee under chapter X of the Bank-
ruptcy Act have with respect to a bankrupt and a chapter X 
^2 stat. 883; 
debtor. In addition, a trustee shall have the right— 
iTu^sc soV. 
(A) with the approval of SIPC, to hire and fix the com-
pensation of all personnel (including officers and employees 
of the debtor and of its examining authority) and other per-
sons (including but not limited to accountants) that are 
deemed by such trustee necessary for all or any purposes of 
the liquidation proceeding, and 
(B) to operate the business of the debtor in order to com-
plete open contractual commitments pursuant to subsection 
(d), 
and no approval of the court shall be required therefor. 
(2) TRUSTEE DUTIES.—Except as inconsistent with the provi-
sions of this Act or otherwise ordered by the court, a trustee shall 
be subject to the same duties as a trustee appointed under section 
44 of the Bankruptcy Act, except that a trustee may, but shall c/Ll*'^%^^°'' 
have no duty to, reduce to money any securities in the single and 
u use 72'. 
separate fund (provided under subsection (c) (2) (B)) or in the 
general estate of the debtor. 
(c) APPLICATION or BANKRUPTCY ACT.— 
(1) GENERAL PROVISIONS APPLK^ABLE.—Except as inconsistent 
with the provisions of this Act and except that in no event shall 
a plan of reorganization be formulated, a liquidation proceeding 
shall be conducted in accordance with, and as though it were being 
conducted under, the provisions of chapter X and such of the pro-
A^sions (other than section 60e) of chapters I to VII, inclusive, of 
^^ ^^^ ^^* 
the Bankruptcy Act as section 102 of chapter X would make appli- 
52 stat. 84o-
cable if an order of the court had been entered directing that bank- 
11 use 1-101. 
ruptcy be proceeded with pursuant to the provisions of such 
chapters I to VII, inclusive; except that the court may, for such 
period as may be appropriate, stay enforcement of, but shall not 
abrogate, the rights provided in section 68 of the Bankruptcy Act 
and the right to enforce a valid, non-preferential lien or pledge 
against the property of the debtor. For purposes of applying the 
Bankruptcy Act in carrying out this section, 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 (as defined in section 5(b) (4) (B)). 
(2) SPECIAL PROVISIONS.—The following subparagraphs of this 
paragraph shall apply to a liquidation proceeding in lieu of section 
60e of the Bankruptcy Act: 
(A) DEFINITIONS.—Except as otherwise expressly provided 
in this section, for purposes of this section and the application 
of the Bankruptcy Act to a liquidation proceeding— 
(i) "property" includes cash and securities, whether or 
not negotiable and all property of a similar character; 
(ii) "customers" of a debtor means persons (including 
persons with whom the debtor deals as principal or agent) 
who have claims on account of securities received, 
acquired, or held by the debtor from or for the account 
of such persons (I) for safekeeping, or (II) with a 
11 use 108. 
1648 
PUBLIC LAW 91-598-DEC. 30, 1970 
[84 STAT. 
view to sale, or (III) to cover consummated sales, or 
(IV) pursuant to purchases, or (V) as collateral security, 
or (VI) by way of loans of securities by such persons 
to the debtor, and shall include persons who have claims 
against the debtor arising out of sales or conversions 
of such securities, and shall include any person who 
has deposited cash with the debtor for the purpose of 
purchasing securities, but shall not include any person to 
the extent that such person has a claim for property 
which by contract, agreement, or understanding, or by 
operation of law, is part of the capital of the debtor or 
is subordinated to the claims of creditors of the debtor; 
(iii) "cash customer" means, with respect to any securi-
ties or cash, customers entitled to immediate possession of 
such securities or cash without the payment of any sum 
to the debtor, and for purposes of this clause, the same 
person may be a cash customer with reference to certain 
securities or cash and not a cash customer with reference 
to other securities or cash; 
(iv) "net equity" of a customer's account or accounts 
means the dollar amount thereof determined by giving 
effect to open contractual commitments completed as pro-
vided in subsection (d), by excluding any specifically 
identifiable property reclaimable by the customer, and by 
subtracting the indebtedness, if any, of the customer to 
the debtor from the sum which would have been owing 
by the debtor to the customer had the debtor liquidated, 
by sale or purchase on the filing date, all other securities 
and contractual commitments of the customer, and for 
purposes of this definition, accounts held by a customer 
in separate capacities shall be deemed to be accounts of 
separate customers; and 
(v) "securities" has the same meaning as such term 
52 Stan 870. 
j^^s uuder section 60e of the Bankruptcy Act. 
(B) SINGLE AND SEPARATE FUND.—All property at any time 
received, acquired, or held by or for the account of a debtor 
from or for the account of customers except cash customers 
who are able to identify specifically their property in the 
manner prescribed in subparagraph (C), and the proceeds 
of all customers' property transferred by the debtor, including 
""••' 
property unlawfully converted, shall constitute a single and 
' 
separate fund; and all customers except such cash customers 
V- 
shall constitute a single and separate class of creditors, 
entitled to share ratably in such fund on the basis of their 
respective net equities as of the filing date and in priority to 
all other payments, except that (i) there shall be repaid to 
SIPC, in priority to all other claims payable from such single 
and separate fund, the amount of all advances made by SIPC 
to the trustee to permit the completion of open contractual 
commitments pursuant to subsection (d), and (ii) to the 
extent that any other assets of the debtor may be available 
^ 
therefor or as otherwise ordered by the court, all costs and 
expenses specified in clauses (1) and (2) of section 64a of the 
81 Stat. 511. 
Bankruptcy Act shall be paid from such single and separate 
11 use 104. 
fund in priority to the claims of such single and separate 
class of creditors, and any moneys advanced by SIPC for such 
costs and expenses shall be recouped as such. If such single 
and separate fund shall not be sufficient to pay in full the 
84 STAT. ] 
PUBLIC LAW 91-598-DEC. 30,1970 
1649 
claims of such single and separate class of creditors, the 
creditors of such class shall be entitled, to the extent only of 
their respective unpaid balances, to share in the general estate 
with general creditors. In, or for the purpose of, distributing 
such fund, all property other than cash shall be valued as 
of the close of business on the filing date. To the greatest 
extent considered practicable by the trustee, the trustee shall 
deliver in payment of claims of customer's for their net equities 
based upon securities held on the filing date in their accounts 
(after giving effect to open contractual commitments com-
pleted as hereinafter provided), securities of the same class 
and series of an issuer ratably up to the respective amounts 
which were so held in such accounts. Any property remaining 
after the liquidation of a lien or pledge made by a debtor shall 
be apportioned between his general estate and the single and 
separate fund in the proportion in which the general property 
of the debtor and the property of his customers contributed 
to such lien or pledge. 
(C) 
SPECIFICALLY IDENTIFIABLE PROPERTY.—The trustee 
shall return specifically identifiable property to the customers 
of the debtor, entitled thereto. No cash or securities at any 
time received, acquired, or held by or for the account of a 
debtor from or for the accounts of customers shall for the 
purposes of this paragraph be deemed to be specifically iden-
tified, unless such property remained in its identical form 
in the debtor's possession until the filing date, or unless such 
property was allocated to or physically set aside for such 
customers on the filing date. In determining whether prop-
erty was allocated to or physically set aside for such cus-
tomers, it shall be sufficient that on the filing date: 
(i) securities are segregated individually, or in bulk 
for customers collectively; 
(ii) in the case of securities held for the account of 
the debtor as part of any central certificate service of any 
clearing corporation or any similar depositary— 
(I) the records of the debtor show or there is 
otherwise established to the satisfaction of the 
trustee that all or a specified part of the securities 
held by such clearing corporation or other similar 
depositary are held for specified customers, or for 
customers collectively, and 
(II) such records of the debtor also show or there 
is otherwise established to the satisfaction of the 
trustee the identities of the particular customers 
entitled to receive specified numbers or units of such 
securities so held for customers collectively; or 
(iii) such property is held for the account of customers 
of the debtor in such other manner as the Commission, 
for the protection of customers and other creditors on a 
fair and equitable basis, by rule or regulation shall have 
determined to be sufficiently identifiable as the property 
of such customers. 
If there is any shortage in securities of the same class and 
series of an issuer so segregated in bulk or otherwise held 
for customers pursuant to this subparagraph, as compared 
to the aggregate rights of particular customers to receive 
securities of such class and series, the respective interests of 
such customers in such securities of such class and series shall 
1650 
PUBLIC LAW 91-598-DEC. 30, 1970 
[84 STAT. 
be prorated, without prejudice, however, to the satisfaction 
of any claim for deficiencies as otherwise provided in this 
section. 
(D) Where such single and separate fund is not sufficient 
to pay in full the claims of such single and separate class 
of creditors, a transfer by a debtor of any property which, 
except for such transfer, would have been a part of such 
fund may be recovered by the trustee for the benefit of such 
fund, if such transfer is voidable or void under the pro-
30 Stat. 544. 
vislous of the Bankruptcy Act. For the purpose of such 
11 use 1 e( seq. 
rccovery, 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. Subject to the provisions of 
paragraph (D), if any securities received or acquired by 
a debtor from a cash customer are transferred by the debtor, 
such customer shall not have any specific interest in or specific 
right to any securities of like kind on hand on the filing date, 
but such securities of like kind or the proceeds thereof shall 
become part of such single and separate fund. 
(d) COMPLETION OF OPEN CONTRACTURAL COMMITMENTS.—The trus-
tee shall complete those contractual commitments of the debtor relat-
ing to transactions in securities which were made in the ordinary 
course of debtor's business and which were outstanding on the filing 
date— 
(1) in which a customer had an interest, except those commit-
ments the completion of which the Commission shall have deter-
mined by rule or regulation not to be in the public interest, or 
(2) in which a customer did not have an interest, to the extent 
that the Commission shall by rule or regulation have determined 
the completion of such commitments to be in the public interest. 
"Customer.'* 
YoY purposcs of this subsection (but not for any other purpose of this 
Act) (i) the term "customer" means any person other than a broker 
or dealer, and (ii) a customer shall be deemed to have had an interest 
in a transaction if a broker participating in the transaction was acting 
as agent for a customer, or if a dealer participating in the transaction 
held a customer's order which was to be executed as a part of the 
transaction. All property at any time received, acquired, or held by or 
for the account of the debtor (except for cash or securities that are 
specifically identifiable as the property of particular customers and 
are not the subject of an open contractual commitment), and all prop-
erty in the single and separate fund, shall be available to complete open 
contractual commitments pursuant to this subsection. Securities pur-
chased or cash received by the trustee upon completion of any such 
commitment shall constitute specifically identifiable property of a 
customer to the extent that such commitment was completed with 
property which constituted specifically identifiable property of such 
customer on the filing date, or was paid or delivered by or for the 
account of such customer to the debtor or the trustee after the filing 
date. 
(e) NOTICE.—Promptly after his appointment, the trustee shall 
cause notice of the commencement of proceedings under this section to 
be published in accordance with a designation of the court, made in 
ff usc^'s^i^^* 
accordance with the requirements of section 28 of the Bankruptcy Act, 
and at the same time shall cause to be mailed a copy of such notice to 
each of the customers of the debtor as their addresses shall appear 
from the debtor's books and records. Except as the trustee may other-
52 Stat. 866; 
76 Stat. 570. 
84 STAT. ] 
PUBLIC LAW 91^98-DEC. 30,1970 
1651 
wise permit, claims for specifically identifiable property (other than 
securities registered in the name of the claimant or segregated for him 
in his individual name) or claims payable from property in the single 
and separate fund or payable with moneys advanced by SIPC, shall 
not be paid other than from the general estate of the debtor unless filed 
within such period of time (not exceeding sixty days after such publi-
cation) as may be fixed by the court, and no claim shall be allowed 
after the time specified in section 57 of the Bankruptcy Act. Subject to 
the foregoing, and without limiting the powers and duties of the 
irusc^a! 
trustee to discharge promptly obligations as specified in this section, 
tlie court may make appropriate provision for proof and enforcement 
of all claims against tne debtor including those of any subrogee. 
(f) SIPC ADVANCES TO TRUSTEE.— 
(1) ADVANCES FOR CUSTOMERS' CLAIMS.—In order to provide for 
prompt payment and satisfaction of the net equities of customers 
of debtor, SIPC shall advance to the trustee such moneys as may 
be required to pay or otherwise satisfy claims in full of each cus-
tomer, but not to exceed $50,000 for such customer; except that— 
(A) insofar as all or any portion of the net equity of a cus-
tomer is a claim for cash, as distinct from securities, the 
amount advanced by reason of such claim to cash shall not 
exceed $20,000; 
(B) a customer who holds accounts with the debtor in 
separate capacities shall be deemed to be a different customer 
in each capacity ; 
(C) no such advance shall be made by SIPC to the trustee 
to pay or otherwise satisfy, directly or indirectly, any claims 
of any customer who is a general partner, officer, or director 
of the debtor, the beneficial owner of 5 per centum or more of 
any class of equity security of the debtor (other than a non-
convertible stock having fixed preferential dividend and 
liquidation rights) or limited partner with a participation 
of 5 per centum or more in the net assets or net profits of the 
debtor; and 
(D) no such advance shall be made by SIPC to the trustee 
to pay or otherwise satisfy claims 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 claims of such 
broker or dealer or bank against the debtor arise out of trans-
actions for customers of such broker or dealer or bank, 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 that moneys are advanced by SIPC to the trustee 
to pay the claims of customers, SIPC shall be subrogated to the 
claims of such customers with the rights and priorities provided 
in this section. 
(2) OTHER ADVANCES.—SIPC may advance to the trustee such 
moneys as may be required to effectuate subsection (b) (1) (A). 
SIPC shall advance to the trustee such moneys as (with those 
available pursuant to subsection (d)) may be required to 
effectuate subsection (d). 
(g) 
PAYMENTS TO CUSTOMERS ; No PROOF OF CLAIM REQUIRED.—It 
shall be the duty of the trustee to discharge promptly, in accordance 
with the provisions of this section, all obligations of the debtor to each 
of its customers relating to, or net equities based upon, securities or 
cash by the delivery of securities or the effecting of payments to such 
47-348 O - 72 - 21 (Pt. 2) 
1652 
PUBLIC LAW 91-598-DEC. 30, 1970 
[84 STAT. 
customer (subject to subsection (f) (1), to the extent that such pay-
ments are made out of advances from SIPC under such subsection) 
insofar as such obligations are ascertainable from the books and rec-
ords of the debtor or are otherwise established to the satisfaction of 
the trustee, whether or not such customer shall have filed formal proof 
of such claim. For that purpose the court among other things shall— 
(1) in respect of claims relating to securities or cash, authorize 
the trustee to make payment out of moneys made available to the 
trustee by SIPC notwithstanding the fact that there shall not 
have been any showing or determination that there are sufficient 
funds of the debtor available to make such payment; and 
(2) in respect of claims relating to, or net equities based upon, 
securities of a class and series of an issuer, which are ascertainable 
from the books and records of the debtor or are otherwise estab-
lished 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 determined by the trustee, appropriate receipts, supporting 
affidavits, and assignments, but shall be without prejudice to the right 
of any claimant to file formal proof of claim within the period specified 
in subsection (e) for any balance of securities or cash to which he may 
deem himself entitled. 
(h) PROOF OF CLAIM BY ASSOCIATES AND OTHERS.—The provisions of 
this section permitting discharge of obligations of the debtor to pay 
cash or to deliver securities without formal proof of claim shall not 
apply to any person "associated" with the debtor as defined in section 
78 Stat. 565. 
3(,a) (18) of the 1934 Act, to any beneficial owner of 5 per centum or 
15 use 78c. 
jnore of the voting stock of the debtor, or to any member of the immedi-
ate family of any of the foregoing. 
(i) KEPORTS BY TRUSTEE TO COURT.—All reports to the court by a 
trustee (other than reports required to be filed pursuant to section 
5 2 Stat. 890. 
167(3) of the Bankruptcy Act) shall be in such form and detail as, 
48 sta^.^8^7'; 
haviug due regard to the requirements of section 17 of the 1934 Act 
52 Stat. 1076.' 
and the rules and regulations thereunder and the magnitude of items 
15 use 78q. 
^^^ trausactions involved in connection with the operations of a broker 
or dealer, the Commission shall determine by rules and regulations to 
present fairly the results of such proceeding as at the dates or for the 
periods covered by such reports. 
(j) EFFECT OF ACT ON CLAIMS.—Except as otherwise provided in 
this section, nothing in this section shall limit the right of any person 
to establish by formal proof such claims as such person may have to 
payment, or to delivery of specific securities, without resort to moneys 
advanced by SIPC to the trustee. 
SEC. 7. SEC FUNCTIONS. 
(a) ADMINISTRATIVE PROCEDURE.—Determinations of the Commis-
sion, for purposes of making rules or regulations pursuant to section 
3(e) and section 9(f) shall be after appropriate notice and opportunity 
for a hearing, and for submission of views of interested persons, in 
accordance with the rulemaking procedures specified, in section 553 
80 Stat. 383. 
of title 5, United States Code, but the holding of a hearing shall 
not prevent adoption of any such rule or regulation upon expiration 
of the notice period specified in subsection (d) of such section and 
shall not be required to be on a record within the meaning of sub-
5 use 551. 
chapter I I of chapter 5 of such title. 
84 STAT. ] 
PUBLIC LAW 91-598-DEC. 30, 1970 
1653 
(b) ENFORCEMENT OF ACTIONS.—In the event of the refusal of SIPC 
to conunit its funds or otherwise to act for the protection of customers 
of any member of SIPC, the Commission may apply to the district 
court of the United States in which the principal office of SIPC is 
located for an order requiring SIPC to discharge its obligations under 
this Act and for such other relief as the court may deem appropriate 
to carry out the purposes of this Act. 
(c) EXAMINATIONS AND REPORTS.— 
(1) EXAMINATION OF SIPC, ETC.—The Commission may make 
such examinations and inspections of SIPC and require SIPC 
to furnish it with such reports and records or copies thereof as the 
Commission may consider necessary or appropriate in the public 
interest or to effectuate the purposes of this Act. 
(2) REPORTS FROM SIPC,—As soon as practicable after the close 
of each fiscal year, SIPC shall submit to the Commission a writ-
ten report relative to the conduct of its business, and the exercise 
of the other rights and powers granted by this Act, during such 
fiscal year. Such report shall include financial statements setting 
forth the financial position of SIPC at the end of such fiscal year 
and the results of its operations (including the source and applica-
tion of its funds) for such fiscal year. The financial statements so 
included shall be examined by an independent public accountant 
or firm of independent public accountants, selected by SIPC and 
satisfactory to the Commission, and shall be accompanied by the 
report thereon of such accountant or firm. The Commission shall 
Report, trans.. 
transmit such report to the President and the Congress with such ^nd congress. 
comment thereon as the Commission may deem appropriate. 
(d) FINANCIAL. RESPONSIBILITY.—^Section 15(c)(3) of the Secu-
rities Exchange Act of 1934 is amended to read as follows: 
5 2 stat. 1075. 
"(3) No broker or dealer shall make use of the mails or of any means 
or instrumentality of interstate commerce to effect any transaction in, 
or to induce or attempt to induce the purchase or sale of, any security 
(other than an exempted security or commercial paper, bankers' accept-
ances, or commercial bills) in contravention of such rules and regula-
tions as the Commission shall prescribe as necessary or appropriate 
in the public interest or for the protection of investors to provide safe-
guards with respect to the financial responsibility and related prac-
tices of brokers and dealers including, but not limited to, the 
acceptance of custody and use of customers' securities, and the carry-
ing and use of customers' deposits or credit balances. Such rules and 
regulations shall require the maintenance of reserves with respect to 
customers' deposits or credit balances, as determined by such rules and 
regulations." 
SEC. 8. EXAMINING AUTHORITY FUNCTIONS. 
Each member of SIPC shall file with such member's examining 
authority such information (including reports of, and information 
with respect to, the gross revenues from the securities business of such 
member, including the composition thereof, transactions in securities 
effected by such member, and other information with respect to such 
member's activities, whether in the securities business or otherwise, 
including customer accounts maintained, net capital employed, and 
activities conducted) as SIPC may determine to be necessary or appro-
priate for the purpose of making assessments under section 4. The 
examining authority shall file wdth SIPC all or such part of such infor-
mation (and such compilations and analyses thereof) as SIPC, by 
bylaw or rule, shall prescribe. No application, report, or document filed 
pursuant to this section shall be deemed to be filed pursuant to section 
18 of the 1934 Act. 
48 stat. 897. 
15 use 78r. 
1654 
PUBLIC LAW 91.598-DEC. 30, 1970 
[84 STAT. 
SEC. 9. FUNCTIONS OF SELF-REGULATORY ORGANIZATIONS. 
(a) COLLECTING AGENT.—Each self-regulatory organization shall 
act as collection agent for SIPC to collect the assessments payable by 
all members of SIPC for whom such self-regulatory organization is 
the examining authority, and members of SIPC who are not members 
of any self-regulatory organization shall make payment direct to 
SIPC. An examining authority shall be obligated to remit to SIPC 
assessments made under section 4 only to the extent that payments of 
such assessments are received by such examining authority. 
(b) IMMUNITY.—No self-regulatory organization shall have any 
liability to any person for any action taken or omitted in good faith 
pursuant to section 5(a)(1). 
(c) INSPECTIONS.—The self-regulatory organization of which a 
member of SIPC is a member shall inspect or examine such member 
for compliance with applicable financial responsibility rules, except 
that if a member of SIPC is a member of more than one self-regulatory 
organization, SIPC shall designate one of such self-regulatory organi-
zations to inspect or examine such member of SIPC for compliance 
with applicable financial responsibility rules. Such self-regulatory 
organization shall be selected by SIPC on the basis of regulatory pro-
cedures employed, availability of staff, convenience of location, and 
such other factors as SIPC may consider appropriate for the protec-
tion of customers of its members. 
(d) REPORTS.—There shall be filed with SIPC by the self-regulatory 
organizations such reports of inspections or examinations of the mem-
bers of SIPC (or copies thereof) as may be designated by SIPC by 
bylaw or rule. 
(e) CONSULTATION.—SIPC shall consult and cooperate with the 
self-regulatory organizations toward the end: 
(1) that there may be developed and carried into effect pro-
cedures reasonably designed to detect approaching 
financial 
difficulty upon the part of any member of SIPC; 
(2) that, as nearly as may be practicable, examinations to 
ascertain whether members of SIPC are in compliance with appli-
cable financial responsibility rules will be conducted by the self-
regulatory organizations under appropriate standards (both as 
to method and scope) and reports of such examinations will, where 
appropriate, be standard in form; and 
(3) that, as frequently as may be practicable under the circum-
stances, each member of SIPC will file financial information with, 
and be examined by, the self-regulatory organization which is 
the examining authority for such member. 
(f) FINANCIAL CONDITION or MEMBERS.—Notwithstanding the limi-
78^stat^s*74°.^°' 
tatious Contained in sections 15A and 19 of the 1934 Act and without 
48 Stat. 898; 
limiting its powers, under those or other sections of the 1934 Act, the 
82 Stat. 453. 
Commissiou may by such rules or regulations as it determines to be 
788. 
"" ' 
necessary or appropriate in the public interest and to effectuate the 
purposes of this Act— 
(1) require any self-regulatory organization to adopt any speci-
fiea alteration of or supplement to its rules, practices, and pro-
cedures with respect to the frequency and scope of inspections and 
examinations relating to the financial condition of members of 
such self-regulatory organization and the selection and qualifica-
tion of examiners; 
(2) require any self-regulatory organization to furnish SIPC 
and the Commission with reports and records or copies thereof 
relating to the financial condition of members of such self-regula-
tory organization; and 
84 STAT. ] 
PUBLIC LAW 91-598-DEC. 30,1970 
1655 
(3) require any self-regulatory organization to insj^ect or 
examine any members of such self-regulatory organization in rela-
tion to the financial condition of such members. In the case of a 
broker or dealer who is a member of more than one self-regulatory 
organization the Commission, to the extent practicable, shall avoid 
requiring duplication of examinations, inspections, and reports. 
SEC. 10. PROHIBITED ACTS. 
(a) FAILURE To PAY ASSESSMENT, ETC.—If a member of SIPC 
shall fail to file any report or information required pursuant to this 
Act, or shall fail to pay when due all or any part of an assessment 
made upon such member pursuant to this Act, and such failure shall 
not have been cured, by the filing of such report or information or by 
the making of such payment, together with interest thereon, within 
five days after receipt by such member of written notice of such failure 
given by or on behalf of SIPC, it shall be unlawful for such member, 
unless specifically authorized by the Commission, to engage in business 
as a broker or dealer. If such member denies that he owes all or any 
part of the amount specified in such notice, he may after payment of 
the full amount so specified commence an action against SIPC in the 
appropriate United States district court to recover the amount he 
denies owing. 
(b) ENGAGING IN BUSINESS AFTER APPOINTMENT OF TRUSTEE.—It 
shall be unlawful for any broker or dealer for whom a trustee has been 
appointed pursuant to this Act to engage thereafter in business as a 
broker or dealer, unless the Commission otherwise determines in the 
public interest. The Commission may by order bar or suspend for any 
period, any officer, director, general partner, owner of 10 per centum 
or more of the voting securities, or controlling person of any broker 
or dealer for whom a trustee has been appointed pursuant to this Act 
from being or becoming associated with a broker or dealer, if after 
appropriate notice and opportunity for hearing, the Commission shall 
determine such bar or suspension to be in the public interest. 
(c) EMBEZZLEMENT, ETC., or ASSETS OF SIPC.—Whoever steals, un-
lawfully abstracts, unlawfully and willfully converts to his own use 
or to the use of another, or embezzles any of the moneys, securities, or 
other assets of SIPC shall be fined not more than $50,000 or imprisoned 
not more than five years or both. 
SEC. 11. MISCELLANEOUS PROVISIONS. 
(a) PuBiJc INSPECTION OF REPORTS.—Any notice, report, or other 
document filed with SIPC pursuant to this Act shall be available for 
public inspection unless SIPC or the Commission shall determine that 
disclosure thereof is not in the public interest. Nothing herein shall act 
to deny documents or information to the Congress of the United States 
or the committees of either House having jurisdiction over financial 
institutions, securities regulation, or related matters under the rules 
of each body. Nor shall the Commission be denied any document or 
information which the Commission, in its judgment, needs. 
(b) APPLICATION OF ACT TO FOREIGN MEMBERS.—Except as other-
wise provided by rule or regulation of the Commission, if the head 
office of a member is located, and the member's principal business is 
conducted, outside the United States, the provisions of this Act shall 
apply" to such member only in respect of the business of such member 
conducted in the United States. 
(c) LIABILITY OF MEMBERS OF SIPC.—Except for such assessments 
as may be made upon such member pursuant to the provisions of sec-
tion 4, no member of SIPC shall have any liability under this Act 
as a member of SIPC for, or in connection with, any act or omission 
1656 
PUBLIC LAW 91-598-DEC. 30, 1970 
[84 STAT. 
of any other broker or dealer whether in connection with the conduct 
of the business or affairs of such broker or dealer or otherwise and, 
without limiting the generality of the foregoing, no member shall have 
any liability for or in respect of any indebtedness or other liability of 
SIPC. 
(d) LIABILITY or SIPC AND DIRECTORS.—Neither SIPC nor any of 
its Directors shall have any liability to any person for any action 
taken or omitted in good faith under or in connection with any matter 
contemplated by this Act. 
(e) ADVERTISING.—SIPC shall by bylaw or rule 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 
customers 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 and rules. 
(f) SIPC EXEMPT FROM TAXATION.—SIPC, its property, its fran-
chise, capital, reserves, surplus, and its income, shall be exempt from 
all taxation now or hereafter imposed by the United States or by any 
State or local taxing authority, except that any real property and 
any tangible personal property (other than cash and securities) of 
SIPC shall be subject to State and local taxation to the same extent 
according to its value as other real and tangible personal property 
is taxed. Assessments made upon a member of SIPC shall constitute 
ordinary and necessary expenses in carrying on the business of such 
member for the purpose of section 162(a) of the Internal Revenue 
7fi^l^l^q^'6^^' 
Code of 1954. The contribution and transfer to SIPC of funds or 
7o S t a t . y / b . 
•
•
i
i
T
i 
I T 
1 1 1 
-
1 
' • 
26 use 162. 
securities held by any trust established by a national securities exchange 
prior to January 1, 1970, for the purpose of providing assistance to 
customers of members of such exchange, shall not result in any 
taxable gain to such trust or give rise to any taxable income to any 
member of SIPC under any provision of the Internal Revenue Code 
of 1954, nor shall such contribution or transfer, or any reduction 
in assessments made pursuant to this Act, in any way affect the status, 
as ordinary and necessary expenses under section 162 (a) of the Internal 
Revenue Code of 1954, of any contributions made to such trust by 
such exchange at any time prior to such transfer. Upon dissolution 
of SIPC, none of its net assets shall inure to the benefit of any of 
its members. 
(g) SECTION 20(a) OF 1934 ACT NOT To APPLY.—The provisions 
of subsection (a) of section 20 of the 1934 Act shall not apply to any 
liability under or in connection with this Act. 
(h) SEC STUDY OF UNSAFE OR UNSOUND PRACTICES.—Not later 
than twelve months after the date of enactment of this Act, the Com-
mission shall compile a list of unsafe or unsound practices by mem-
c^g?es's!° 
^^^^ ^f SIPC in conducting their business and report to the Congress 
(1) the steps being taken under the authority of existing law to elimi-
nate those practices and (2) recommendations concerning additional 
legislation which may be needed to eliminate those unsafe or unsound 
practices. 
SEC. 12. DEFINITIONS. 
For purposes of this Act: 
(1) SELF-REIGULATORY ORGANIZATION.—The term "self-regula-
tory organization" means a national securities exchange or a 
national securities association registered pursuant to subsection 
52 Stat. 1070; 
(b) of sectiou 15A of the 1934 Act. 
78 Stat. 574. 
^ ^ 
15 use 78o-3. 
68A Stat. 3. 
26 u s e 1 et seq. 
48 Stat. 899 
15 u s e 78t. 
84 STAT. ] 
PUBLIC LAW 91-599-DEC. 30,1970 
1657 
(2) 
FINANCIAL RESPONSIBILTY RULES.—The term "financial 
responsibility rules" means the rules and regulations pertaining 
to financial responsibility and related practices which are appli-
cable to a broker or dealer, as prescribed by the Commission under 
subsection (c)(3) of section 15 of the 1934 Act or prescribed by a 
national securities exchange. 
(3) EXAMINING AUTHORITY.—The term "examining authority" 
means, with respect to any member of SIPC, the self-regulatory 
organization which inspects or examines such member of SIPC 
or the Commission if such member of SIPC is not a member of 
any self-regulatory organization. 
Approved December 30, 1970. 
Ante, p. 1653. 
Public Law 91-599 
AN ACT 
To authorize United States participation in increases in tlie resources of certain 
international financial institutions, to provide for an annual audit of the 
Exchange Stabilization Fund by the General Accounting OflEice, and for other 
purposes. 
Be it enacted iy the Senate and House of Representatives 
of the 
United States of America in Congress assen^hled^ 
Chapter 1.—INTERNATIONAL MONETARY FUND 
Sec. 
1. Amendment of Bretton Woods Agreements Act. 
2. Amendment of Special Drawing Rights Act. 
§ 1. Amendment of Bretton Woods Agreements Act 
The Bretton Woods Agreements Act (22 U.S.C. 286-286k-2) is 
amended by adding at the end thereof the following new sections: 
"SEC. 22. (a) The United States Governor of the Fund is autlior-
ized to consent to an increase of $1,540,000,000 in the quota of the 
United States in the Fund. 
"(b) In order to j)ay the increase in the United States quota in the 
Fund provided for in this section, there is hereby authorized to be 
appropriated $1,540,000,000, to remain available until expended. 
"SEC. 23. (a) The United States Governor of the Bank is authorized 
(1) to vote for an increase of $3,000,000,000 in the authorized capital 
stock of the Bank, and (2) if such increase becomes effective, to sub-
scribe on behalf of the United States to two thousand four hundred 
and sixty-one additional shares of the capital stock of the Bank. 
"(b) In order to pay for the increase in the United States subscrip-
tion to the Bank provided for in this section, there is hereby authorized 
to be appropriated $246,100,000 to remain available until expended." 
§ 2. Amendments of Special Drawing Rights Act 
Section 6 of the Special Drawing Rights Act (22 U.S.C. 286q) is 
amended to read as follows: 
"SEC. 6. Unless Congress by law authorizes such action, neither the 
President nor any person or agency shall on behalf of the United 
States vote to allocate in each basic period Special Drawing Rights 
under article XXIV, sections 2 and 3, of the Articles of Agreement of 
the Fund so that allocations to the United States in that period exceed 
an amount equal to the United States quota in the Fund as authorized 
under the Bretton Woods Agreements Act." 
December 30, 1970 
[H. R. 18306] 
International fi-
nancial institu-
tions. 
U.S. subscrip-
tions and quotas, 
increase. 
59 Stat. 512; 
79 Stat. 519. 
Appropriation. 
Appropriation. 
82 Stat. 189.