15 U.S.C. § 78fff-4 : US Code - Section 78FFF-4: Direct payment procedure

Search 15 U.S.C. § 78fff-4 : US Code - Section 78FFF-4: Direct payment procedure

(a) Determination regarding direct payments
If SIPC determines that -
(1) any member of SIPC (including a person who was a member
within one hundred eighty days prior to such determination) has
failed or is in danger of failing to meet its obligations to
customers;
(2) one or more of the conditions specified in section
78eee(b)(1) of this title exist with respect to such member;
(3) the claim of each customer of the member is within the
limits of protection provided in section 78fff-3(a) of this
title;
(4) the claims of all customers of the member aggregate less
than $250,000;
(5) the cost to SIPC of satisfying customer claims under this
section will be less than the cost under a liquidation
proceeding; and
(6) such member's registration as a broker-dealer under section
78o(b) of this title has been terminated, or such member has
consented to the use of the direct payment procedure set forth in
this section,
SIPC may, in its discretion, use the direct payment procedure set
forth in this section in lieu of instituting a liquidation
proceeding with respect to such member.
(b) Notice
Promptly after a determination under subsection (a) of this
section that the direct payment procedure is to be used with
respect to a member, SIPC shall cause notice of such direct payment
procedure to be published in one or more newspapers of general
circulation in a form and manner determined by SIPC, and at the
same time shall cause to be mailed a copy of such notice to each
person who appears, from the books and records of such member, to
have been a customer of the member with an open account within the
past twelve months, to the address of such person as it appears
from the books and records of such member. Such notice shall state
that SIPC will satisfy customer claims directly, without a
liquidation proceeding, and shall set forth the form and manner in
which claims may be presented. A direct payment procedure shall be
deemed to commence on the date of first publication under this
subsection and no claim by a customer shall be paid or otherwise
satisfied by SIPC unless received within the six-month period
beginning on such date, except that SIPC shall, upon application
within such period, and for cause shown, grant a reasonable, fixed
extension of time for the filing of a claim by the United States,
by a State or political subdivision thereof, or by an infant or
incompetent person without a guardian.
(c) Payments to customers
SIPC shall promptly satisfy all obligations of the member to each
of its customers relating to, or net equity claims based upon,
securities or cash by the delivery of securities or the effecting
of payments to such customer (subject to the provisions of section
78fff-2(d) of this title and section 78fff-3(a) of this title
insofar as such obligations are ascertainable from the books and
records of the member or are otherwise established to the
satisfaction of SIPC. For purposes of distributing securities to
customers, all securities shall be valued as of the close of
business on the date of publication under subsection (b) of this
section. Any payment or delivery of securities pursuant to this
section may be conditioned upon the execution and delivery, in a
form to be determined by SIPC, of appropriate receipts, supporting
affidavits, releases, and assignments. To the extent moneys of SIPC
are used to satisfy the claims of customers, in addition to all
other rights it may have at law or in equity, SIPC shall be
subrogated to the claims of such customers against the member.
(d) Effect on claims
Except as otherwise provided in this section, nothing in this
section shall limit the right of any person, including any
subrogee, to establish by formal proof or otherwise such claims as
such person may have against the member, including claims for the
payment of money and the delivery of specific securities, without
resort to moneys of SIPC.
(e) Jurisdiction of Bankruptcy Courts
After SIPC has published notice of the institution of a direct
payment procedure under this section, any person aggrieved by any
determination of SIPC with respect to his claim under subsection
(c) of this section may, within six months following mailing by
SIPC of its determination with respect to such claim, seek a final
adjudication of such claim. The courts of the United States having
jurisdiction over cases under title 11 shall have original and
exclusive jurisdiction of any civil action for the adjudication of
such claim, without regard to the citizenship of the parties or the
amount in controversy. Any such action shall be brought in the
judicial district where the head office of the debtor is located.
Any determination of the rights of a customer under subsection (c)
of this section shall not prejudice any other right or remedy of
the customer against the member.
(f) Discontinuance of direct payment procedures
If, at any time after the institution of a direct payment
procedure with respect to a member, SIPC determines, in its
discretion, that continuation of such direct payment procedure is
not appropriate, SIPC may cease such direct payment procedure and,
upon so doing, may seek a protective decree pursuant to section
78eee of this title. To the extent payments of cash, distributions
of securities, or determinations with respect to the validity of a
customer's claim are made under this section, such payments,
distributions, and determinations shall be recognized and given
full effect in the event of any subsequent liquidation proceeding.
Any action brought under subsection (e) of this section and pending
at the time of the appointment of a trustee under section
78eee(b)(3) of this title shall be permanently stayed by the court
at the time of such appointment, and the court shall enter an order
directing the transfer or removal to it of such suit. Upon such
removal or transfer the complaint in such action shall constitute
the plaintiff's claim in the liquidation proceeding, if
appropriate, and shall be deemed received by the trustee on the
date of his appointment regardless of the date of actual transfer
or removal of such action.
(g) References
For purposes of this section, any reference to the trustee in
sections 78fff-1(b)(1), 78fff-2(d), 78fff-2(f), 78fff-3(a),
78lll(5) and 78lll(12) of this title shall be deemed a reference to
SIPC, and any reference to the date of publication of notice under
section 78fff-2(a) of this title shall be deemed a reference to the
publication of notice under this section.