15 U.S.C. § 78lll — Definitions

This section defines words used throughout this chapter, including in bankruptcy liquidation cases under the Bankruptcy Act. (1) Commission. "Commission" means the Securities and Exchange Commission. (2) Customer. A "customer" of a debtor (a failed broker or dealer) is anyone who has a claim because the debtor received, got, or held their securities in the ordinary course of business — for safekeeping, to sell, to cover a completed sale, under a purchase, as collateral, or to transfer them. This includes anyone who deposited cash with the debtor to buy securities, anyone with a claim for cash, securities, futures contracts, or options on futures held in an approved portfolio margining account treated as a securities account, and anyone with a claim from the sale or conversion of such securities. But "customer" does not include someone whose claim comes from dealings with a foreign subsidiary of a SIPC member, or someone whose claim for cash or securities is, by agreement or by law, part of the debtor's own capital or is subordinated to other creditors' claims — even if there's some legal argument that agreement could be voided. (3) Customer name securities. These are securities that were held for a customer's account on the filing date, registered in the customer's name (or being registered that way on the debtor's instructions) — but not securities in the customer's name that were, by endorsement or otherwise, in a form that could be freely transferred (negotiable form). (4) Customer property. This means cash and securities (other than customer name securities that were delivered to the customer) that the debtor received or held from or for a customer's account, plus the proceeds of that property — including property that was unlawfully converted. It also includes: (A) securities held as the debtor's own property, to the extent the debtor can't meet customers' claims because it broke the rules under section 78o(c)(3); (B) money from using customers' debit cash balances and similar items, as the SEC defines them; (C) cash or securities apportioned to customer property under section 78fff(d); (D) futures contracts or options on futures held in an approved portfolio margining account and their proceeds; and (E) any other property that should have been set aside for customers under applicable law, unless the trustee decides adding it wouldn't meaningfully increase customer property. (5) Debtor. A "debtor" is a SIPC member for whom an application for a protective decree has been filed, or for whom a direct payment procedure has started. (6) Examining authority. This is either the self-regulatory organization that inspects a SIPC member, or the SEC itself if that member doesn't belong to any self-regulatory organization, or if the SEC has named itself the examining authority for that member. (7) Filing date. Usually this is the date a protective decree application is filed. But if a bankruptcy petition for the debtor was filed earlier, that earlier date counts instead. If a court or agency proceeding to appoint a receiver, trustee, or liquidator for the debtor started before the application was filed, that earlier date counts. And if the debtor is (or was) in a direct payment procedure, the filing date is when notice of that procedure was published. (8) Foreign subsidiary. This is any subsidiary of a SIPC member whose main place of business is in another country, or that is organized under another country's laws. (9) Gross revenues from the securities business. This adds up several kinds of income (without double-counting): commissions from executing customer securities trades (minus commissions paid to other brokers), and markups on securities the firm buys or sells for itself; charges for executing or clearing other brokers' trades; net gains from the firm's own trading; net profit from underwriting or distributing securities; interest earned on customer accounts; fees for investment advice or account supervision about securities (except for registered investment companies or insurance separate accounts); fees for soliciting proxies, tenders, or exchanges; income from service charges tied to securities; dividends and interest on the firm's own investment accounts (unless the SEC says otherwise); fees from options transactions; commissions from trading certificates of deposit and from short-term instruments like Treasury bills, bankers' acceptances, or commercial paper maturing within nine months (SIPC includes only a set percentage of these, based on its loss history); and fees from other categories SIPC adds by bylaw. It also includes revenue from an approved portfolio margining account. It does not include revenue from distributing shares of an open-end investment company or unit investment trust, or from selling variable annuities or doing insurance business. (10) Liquidation proceeding. This is a proceeding to liquidate a debtor under this chapter, once a trustee has been appointed. (11) Net equity. This is the dollar value of a customer's account, figured by: first, calculating what the debtor would have owed the customer if it had sold or bought, on the filing date, all the customer's securities positions (other than reclaimed customer name securities) and all futures and futures-option positions in an approved portfolio margining account, including collateral not already counted; then subtracting anything the customer owed the debtor on the filing date; then adding back any payment the customer made toward that debt with the trustee's approval, within a period the trustee sets (but no more than 60 days after the required notice is published). A claim for a commodity futures contract in an approved portfolio margining account, or for a security futures contract, is treated as a claim as of the filing date and counted as a cash claim. Accounts a customer holds in different capacities count as separate customers' accounts. (12) Persons registered as brokers or dealers. This includes anyone who is a member of a national securities exchange, except a government securities broker or dealer registered under section 78o–5(a)(1)(A). (13) Protective decree. This is a court decree, issued when SIPC applies for one, saying that a SIPC member's customers need the protections this chapter provides. (14) Security. This is a broad term covering notes, stock, treasury stock, bonds, debentures, evidence of debt, collateral trust certificates, pre-organization certificates or subscriptions, transferable shares, voting trust certificates, certificates of deposit (including for a security), security futures (as defined in section 78c(a)(55)(A)), investment contracts, and certificates of interest or participation in profit-sharing agreements or in oil, gas, or mineral royalties or leases (if registered with the SEC under the Securities Act of 1933), plus puts, calls, straddles, options, or privileges on a security or group or index of securities, or on foreign currency if traded on a national securities exchange, and any certificate of interest or participation in, or receipt, guarantee, warrant, or right to buy or sell, any of the above — and anything else commonly known as a security. It does not include currency, commodities or related contracts, futures contracts, or a warrant or right to buy or sell any of those excluded things.