15 U.S.C. § 78ddd : US Code - Section 78DDD: SIPC Fund

Search 15 U.S.C. § 78ddd : US Code - Section 78DDD: SIPC Fund

(a) In general
(1) Establishment of fund
SIPC shall establish a "SIPC Fund" (hereinafter in this chapter
referred to as the "fund"). All amounts received by SIPC (other
than amounts paid directly to any lender pursuant to any pledge
securing a borrowing 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
Except as otherwise provided in this section, the balance of
the fund at any time shall consist of the aggregate at such time
of the following items:
(A) Cash on hand or on deposit.
(B) Amounts invested in United States Government or agency
securities.
(C) Such confirmed lines of credit as SIPC may from time to
time maintain, other than those maintained pursuant to
paragraph (4).
(3) 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 confirmed 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).
(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 SIPC under this chapter as though such amounts were part of
the fund.
(b) Initial required balance for fund
Within one hundred and twenty days from December 30, 1970, the
balance of the fund shall aggregate not less than $75,000,000, less
any amounts 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 78iii(a) of this title, on or
before the one hundred and twentieth day following December 30,
1970, 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 securities 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, impose upon its members such assessments
as, after consultation 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) of this section, 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 securities in such accounts, their net capital, the
nature of their activities (whether in the securities business or
otherwise) and the consequent risks, or other relevant factors.
(3) Limitations
Notwithstanding any other provision of this chapter -
(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
during any twelve-month period if SIPC determines, in
accordance with a bylaw, 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
registered open end investment companies or unit investment
trusts, (ii) in the sale of variable annuities, (iii) in the
business of insurance, or (iv) in the business of rendering
investment advisory services to one or more registered
investment companies or insurance company separate accounts.
(d) Requirements respecting assessments and lines of credit
(1) Assessments
(A) 1/2 of 1 percent assessment
Subject to subsection (c)(3) of this section, SIPC shall
impose upon each of its members an assessment 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 Commission may
determine in the public interest),
(ii) during any period when there is outstanding borrowing
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) 1/4 of 1 percent assessment
During any period during 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 securities
business for such members during such period.
(C) Minimum assessment
The minimum assessment imposed upon each member of SIPC shall
be $25 per annum through the year ending December 31, 1979, and
thereafter shall be the amount from time to time set by SIPC
bylaw, but in no event shall the minimum assessment be greater
than $150 per annum.
(2) Lines of 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 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) of this section. No
such reduction shall be made at any time when there is
outstanding any borrowing 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 be recoverable only against future payments by such member,
except as otherwise provided by SIPC bylaw.
(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 determined by SIPC
bylaw and, in addition to such interest, SIPC may impose such
penalty charge as may be determined by SIPC bylaw. Any such
penalty charge imposed upon a SIPC member shall not exceed 25 per
centum of any unpaid portion of the assessment. SIPC may waive
such penalty charge in whole or in part in circumstances where it
considers such waiver appropriate.
(f) Borrowing authority
SIPC shall have the power to borrow 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) of this section. The interest payable on a borrowing pursuant
to subsection (g) of this section 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 evidences 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 assessments 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 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 chapter, 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
subsection (g) of this section shall be effective as to the excess
of the payments under the assessment on such member during any
twelve-month period over one-fourth of 1 per centum of such
member's gross revenues from the securities business for such
period. Neither the instrument 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 provide 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 chapter, the Commission is
authorized to make loans to SIPC. At the time of application for,
and as a condition to, any such loan, SIPC 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 the SIPC has submitted a plan which provides as
reasonable an assurance of prompt repayment as may be feasible
under the circumstances, 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) of this
section. 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, (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
78o(b) of this title 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 in transactions in such markets
and exchanges on a comparable basis. Such fee shall be collected by
the broker or dealer effecting the transaction for or with the
purchaser, or by such other person as provided by the Commission by
rule, and shall be paid to SIPC in the same manner as assessments
imposed pursuant to subsection (c) of this section but without
regard to the limits on such assessments, or in such other manner
as the Commission may by rule provide.
(h) SEC notes issued to Treasury
To enable the Commission to make loans under subsection (g) of
this section, 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
rate determined by the Secretary of the Treasury, taking into
consideration the current average market yield on outstanding
marketable obligations of the United States of comparable
maturities during the month preceding the issuance of the notes or
other obligations. The Secretary of the Treasury may reduce the
interest rate if he determines such reduction to be in the national
interest. The Secretary of the Treasury is authorized 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 chapter 31 of title 31, and the purposes for which securities
may be issued under that chapter 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 redemptions, purchases,
and sales by the Secretary of the Treasury of such notes or other
obligations shall be treated as public debt transactions of the
United States.
(i) Consolidated group
Except as otherwise provided by SIPC bylaw, gross revenues from
the securities business of a member of SIPC 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 SIPC shall include those of any business to which
such member has succeeded.