15 U.S.C. § 78ccc — Securities Investor Protection Corporation

submitted 56 years ago by Pub. L. 91-598 to r/title-15-COMMERCE-AND-TRADE · 2,340 words · no verdicts yet

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This law creates the Securities Investor Protection Corporation, a nonprofit membership group for registered brokers and dealers. SIPC gets broad corporate powers and is run by a seven-member Board of Directors. The Commission oversees SIPC's bylaws and rules before they take effect.

(a) Creation and membership This section creates the Securities Investor Protection Corporation, called SIPC. SIPC is a nonprofit corporation. It exists until Congress dissolves it by law. SIPC is not part of the U.S. government. Except where this chapter says otherwise, SIPC has all the powers of a nonprofit corporation under the District of Columbia Nonprofit Corporation Act. SIPC's members are every broker or dealer registered under section 78o(b) — with three exceptions. First, SIPC can leave out a broker or dealer whose main business (counting its affiliates) is conducted outside the United States and its territories, if SIPC decides that's the case. Second, SIPC leaves out anyone whose broker-dealer business is limited to selling shares of open-end mutual funds or unit investment trusts, selling variable annuities, doing insurance business, or giving investment advice to registered investment companies or insurance company accounts. Third, SIPC leaves out anyone registered as a broker or dealer under section 78o(b)(11)(A). If SIPC decides someone is excluded under the first exception, it must file that decision with the Commission. The Commission then has 30 days — or up to 90 days if it explains why it needs more time — to approve, reverse, or change SIPC's decision. SIPC must also make a rule letting people excluded under that first exception join anyway, on terms SIPC sets. SIPC has to consider things like whether there's enough money available and whether a liquidation could actually happen. Finally, any broker or dealer excluded under the first exception must tell its U.S. and territory customers about the exclusion, following rules the Commission sets. (b) Powers Besides powers given elsewhere in this chapter, SIPC can: sue and be sued in its own name, in any court; have and use a corporate seal that courts must recognize; write, change, or cancel bylaws through its Board of Directors, including bylaws about how it runs its business and about protecting its directors, officers, and employees from personal liability when they acted in good faith and reasonably believed they were following this chapter's purposes; write, change, or cancel rules through its Board, including rules that define terms used in this chapter, set procedures for liquidating members and paying customers directly (including transferring accounts and distributing property), and cover any other rights and powers this chapter gives it; do business and keep offices in any state or jurisdiction without needing that state's licenses; buy, own, hold, improve, use, sell, or otherwise deal with any kind of property; hire officers, lawyers, employees, and agents, decide what they need to qualify, define their jobs, set their pay, and require bonds; sign contracts, take on debts, and do whatever else it needs to run its business; and set its own fiscal year by bylaw. (c) Board of Directors SIPC's Board of Directors decides the policies that govern how SIPC operates. The Board has seven members. The Secretary of the Treasury appoints one, from the Treasury Department's own staff. The Federal Reserve Board appoints one, from its own staff. The President appoints the other five, with the Senate's approval: three must come from the securities industry, representing different parts of it and not all from the same part of the country, and two must come from the general public — people with no ties to a broker, dealer, or exchange member, and none for the two years before their appointment. The President picks a Chairman and Vice Chairman from the two public-representative directors. Directors normally serve three-year terms. The first Board's terms were staggered: two directors' terms ended in 1971, two in 1972, and three in 1973, arranged so that no two directors appointed under the same category ended their terms at the same time. If a seat opens up early, the replacement is appointed the same way the original director was, and only for what's left of that term. A director can keep serving past the end of a term until a successor takes office. SIPC's bylaws set how directors are paid. (d) Meetings of Board The Board meets when the Chairman calls a meeting, or as the bylaws otherwise say. (e) Bylaws and rules Before a new bylaw or a change to a bylaw takes effect, SIPC's Board must file it with the Commission, along with a short explanation of why it's needed. It normally takes effect 30 days after filing — or later if SIPC wants, or earlier if the Commission allows it — unless the Commission blocks it. The Commission can block a bylaw change by telling SIPC, in writing, that it's against the public interest or against this chapter's purposes. Or, if the Commission decides the change is important enough that the public should get to comment on it, it can require SIPC to follow the same public-comment process used for rule changes, described next. For rule changes, SIPC's Board must file any new rule or rule change with the Commission, following the Commission's own filing rules, along with an explanation of why it's needed. The Commission then publishes notice of the filing and lets interested people submit written comments. A rule change can't take effect unless the Commission approves it or the law otherwise allows it. Within 35 days after the Commission publishes notice of a filed rule change — or up to 90 days if the Commission explains why it needs more time, or longer if SIPC agrees — the Commission must either approve the change by order, or start a formal process to decide whether to reject it. If the Commission starts that process, it must tell SIPC what grounds it's considering for rejection and give SIPC a chance for a hearing. The whole process must wrap up within 180 days of the original notice, ending with the Commission approving or rejecting the change by order. The Commission can extend that 180 days by up to 60 more days if it has good cause and explains why, or longer if SIPC agrees. The Commission must approve a rule change if it finds the change serves the public interest and fits this chapter's purposes — and once approved, the rule counts as if the Commission itself had written it. If the Commission can't make that finding, it must reject the change. And the Commission generally can't approve a change less than 30 days after the notice was published, unless it has good cause and explains why. There's an exception to all this waiting. A rule change can take effect right away — on the day it's filed — if SIPC says the change only covers matters that the Commission has decided, by rule, don't need the full review process. It can also take effect right away if the Commission sets an early date for good cause. Either way, the change still has to be filed and reviewed afterward under the normal process. And within 60 days after such a fast-track change takes effect, the Commission can cancel it and send it back for full review, if the Commission decides that's necessary or appropriate to protect the public interest or investors. Canceling the change this way doesn't undo what happened while the rule was in effect, and can't be challenged in court under section 78y or treated as a final decision under the federal Administrative Procedure Act. Separately, the Commission can order SIPC, by rule, to adopt, change, or repeal any of its bylaws or rules — whenever the Commission decides that's necessary or appropriate for the public interest or this chapter's purposes.

the actual law source: uscode.house.gov ↗public domain

(a) Creation and membership

(1) Creation

There is hereby established a body corporate to be known as the “Securities Investor Protection Corporation” (hereafter in this chapter referred to as “SIPC”). SIPC shall be a nonprofit corporation and shall have succession until dissolved by Act of the Congress. SIPC shall—

(A)

not be an agency or establishment of the United States Government; and

(B)

except as otherwise provided in this chapter, be subject to, and have all the powers conferred upon a nonprofit corporation by, the District of Columbia Nonprofit Corporation Act.

(2) Membership

(A) Members of SIPC

SIPC shall be a membership corporation the members of which shall be all persons registered as brokers or dealers under section 78o(b) of this title, other than—

(i)

persons whose principal business, in the determination of SIPC, taking into account business of affiliated entities, is conducted outside the United States and its territories and possessions;

(ii)

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

(iii)

persons who are registered as a broker or dealer pursuant to section 78o(b)(11)(A) of this title.

(B) Commission review

SIPC shall file with the Commission a copy of any determination made pursuant to subparagraph (A)(i). Within thirty days after the date of such filing, or within such longer period as the Commission may designate of not more than ninety days after such date if it finds such longer period to be appropriate and publishes its reasons for so finding, the Commission shall, consistent with the public interest and the purposes of this chapter, affirm, reverse, or amend any such determination of SIPC.

SIPC shall provide by rule that persons excluded from membership in SIPC under subparagraph (A)(i) may become members of SIPC under such conditions and upon such terms as SIPC shall require by rule, taking into account such matters as the availability of assets and the ability to conduct a liquidation if necessary.

(D) Disclosure

Any broker or dealer excluded from membership in SIPC under subparagraph (A)(i) shall, as required by the Commission by rule, make disclosures of its exclusion and other relevant information to the customers of such broker or dealer who are living in the United States or its territories and possessions.

(b) Powers

In addition to the powers granted to SIPC elsewhere in this chapter, 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 State, Federal, or other court;

(2)

to adopt, alter, and use a corporate seal, which shall be judicially noticed;

(3)

to adopt, amend, and repeal, by its Board of Directors, such bylaws as may be necessary or appropriate to carry out the purposes of this chapter, including bylaws relating to—

(A)

the conduct of its business; and

(B)

the indemnity of its directors, officers, and employees (including any such person acting as trustee or otherwise in connection with a liquidation proceeding) for liabilities and expenses actually and reasonably incurred by any such person in connection with the defense or settlement of an action or suit if such person acted in good faith and in a manner reasonably believed to be consistent with the purposes of this chapter.

(4)

to adopt, amend, and repeal, by its Board of Directors, such rules as may be necessary or appropriate to carry out the purposes of this chapter, including rules relating to—

(A)

the definition of terms used in this chapter, other than those terms for which a definition is provided in section 78lll of this title;

(B)

the procedures for the liquidation of members and direct payment procedures, including the transfer of customer accounts, the distribution of customer property, and the advance and payment of SIPC funds; and

(C)

the exercise of all other rights and powers granted to it by this chapter;

(5)

to conduct its business (including the carrying on of operations and the maintenance of offices) and to exercise all other rights and powers granted to it by this chapter in any State or other jurisdiction without regard to any qualification, licensing, or other statute in such State or other jurisdiction;

(6)

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;

(7)

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;

(8)

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 SIPC by this chapter; and

(9)

by bylaw, to establish its fiscal year.

(1) Functions

SIPC shall have a Board of Directors which, subject to the provisions of this chapter, 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 who 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 general public from among persons who are not associated with a broker or dealer or associated with a member of a national securities exchange, within the meaning of section 78c(a)(18) or section 78c(a)(21), respectively, of this title, or similarly associated with any self-regulatory organization 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 designate 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 paragraph (2)—

(i)

two shall hold office for a term expiring on December 31, 1971,

(ii)

two shall hold office for a term expiring on December 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 that no two persons 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

All matters relating to compensation of directors 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 and rules

(1) Proposed bylaw changes

The Board of Directors of SIPC shall file with the Commission a copy of any proposed bylaw or any proposed amendment to or repeal of any bylaw of SIPC (hereinafter in this paragraph collectively referred to as a “proposed bylaw change”), accompanied by a concise general statement of the basis and purpose of such proposed bylaw change. Each such proposed bylaw change shall take effect thirty days after the date of the filing of a copy thereof with the Commission, or upon such later date as SIPC may designate or such earlier date as the Commission may determine, unless—

(A)

the Commission, by notice to SIPC setting forth the reasons therefor, disapproves such proposed bylaw change as being contrary to the public interest or contrary to the purposes of this chapter; or

(B)

the Commission finds that such proposed bylaw change involves a matter of such significant public interest that public comment should be obtained, in which case it may, after notifying SIPC in writing of such finding, require that the procedures set forth in paragraph (2) be followed with respect to such proposed bylaw change, in the same manner as if such proposed bylaw change were a proposed rule change within the meaning of such paragraph.

(2) Proposed rule changes

(A) Filing of proposed rule changes

The Board of Directors of SIPC shall file with the Commission, in accordance with such rules as the Commission may prescribe, a copy of any proposed rule or any proposed amendment to or repeal of any rule of SIPC (hereinafter in this subsection collectively referred to as a “proposed rule change”), accompanied by a concise general statement of the basis and purpose of such proposed rule change. The Commission shall, upon the filing of any proposed rule change, publish notice thereof, together with the terms of substance of such proposed rule change or a description of the subjects and issues involved. The Commission shall give interested persons an opportunity to submit written data, views, and arguments with respect to such proposed rule change. No proposed rule change shall take effect unless approved by the Commission or otherwise permitted in accordance with the provisions of this paragraph.

(B) Action by the Commission

Within thirty-five days after the date of publication of notice of the filing of a proposed rule change, or within such longer period as the Commission may designate of not more than ninety days after such date if it finds such longer period to be appropriate and publishes its reasons for so finding, or as to which SIPC consents, the Commission shall—

(i)

by order approve such proposed rule change; or

(ii)

institute proceedings to determine whether such proposed rule change should be disapproved.

Proceedings instituted with respect to a proposed rule change pursuant to subparagraph (B)(ii) shall include notice of the grounds for disapproval under consideration and opportunity for hearing, and shall be concluded within one hundred eighty days after the date of publication of notice of the filing of such proposed rule change. At the conclusion of such proceedings, the Commission shall, by order, approve or disapprove such proposed rule change. The Commission may extend the time for conclusion of such proceedings for not more than sixty days if it finds good cause for such extension and publishes its reasons for so finding, or for such longer period as to which SIPC consents.

(D) Grounds for approval or disapproval

The Commission shall approve a proposed rule change if it finds that such proposed rule change is in the public interest and is consistent with the purposes of this chapter, and any proposed rule change so approved shall be given force and effect as if promulgated by the Commission. The Commission shall disapprove a proposed rule change if it does not make the finding referred to in the preceding sentence. The Commission shall not approve any proposed rule change prior to thirty days after the date of publication of notice of the filing thereof, unless the Commission finds good cause for so doing and publishes its reasons for so finding.

(E) Exception

Notwithstanding any other provision of this paragraph, a proposed rule change may take effect—

(i)

upon the date of filing with the Commission, if such proposed rule change is designated by SIPC as relating solely to matters which the Commission, consistent with the public interest and the purposes of this subsection, determines by rule do not require the procedures set forth in this paragraph; or

(ii)

upon such date as the Commission shall for good cause determine. Any proposed rule change which takes effect under this clause shall be filed promptly thereafter and reviewed in accordance with the provisions of subparagraph (A).

At any time within sixty days after the date of filing of any rule change which has taken effect pursuant to this subparagraph, the Commission may summarily abrogate such rule change and require that it be refiled and reviewed in accordance with the provisions of this paragraph, if the Commission finds that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this chapter. Any action of the Commission pursuant to the preceding sentence shall not affect the validity or force of a rule change during the period it was in effect and shall not be reviewable under section 78y of this title or deemed to be final agency action for purposes of section 704 of title 5.

(3) Action required by Commission

The Commission may, by such rules as it determines to be necessary or appropriate in the public interest or to carry out the purposes of this chapter, require SIPC to adopt, amend, or repeal any SIPC bylaw or rule, whenever adopted.

Source credit: (Pub. L. 91–598, § 3, Dec. 30, 1970, 84 Stat. 1637; Pub. L. 95–283, §§ 2–5, May 21, 1978, 92 Stat. 249–251; Pub. L. 106–554, § 1(a)(5) [title II, § 203(d)(2)], Dec. 21, 2000, 114 Stat. 2763, 2763A–424.)

history & why it existsrecord from the source credit

1970Enacted · Pub. L. 91-598 · 84 Stat. 1637
1978Amended · Pub. L. 95-283 · 92 Stat. 249
2000Amended · Pub. L. 106-554 · 114 Stat. 2763, 2763

A history note hasn’t been published yet. The record shows enactment by Pub. L. 91-598 on 1970-12-30.

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