15 U.S.C. § 78fff — General provisions of a liquidation proceeding

(a) Goals of a liquidation proceeding This section lists what a liquidation proceeding is supposed to accomplish: (1) as fast as possible after a trustee is appointed, and following this chapter's rules — (A) hand over "customer name securities" (securities registered in the customer's own name) to the customers entitled to them, as described in section 78fff–2(c)(2), and (B) distribute customer property, and otherwise pay customers' net equity claims, to the extent this chapter allows, either beforehand or at the same time; (2) sell or transfer the broker's offices and other working parts of its business; (3) enforce SIPC's right to step into customers' shoes (subrogation) as this chapter allows; and (4) wind down the broker's business. (b) Using bankruptcy law As much as this chapter allows, a liquidation proceeding follows the same rules as chapters 1, 3, and 5, and subchapters I and II of chapter 7, of the federal Bankruptcy Code (title 11). Wherever bankruptcy law refers to "the date the petition was filed," that means the filing date under this chapter instead. (c) Deciding who counts as a customer Sometimes someone deals in cash or securities with the broker after the official filing date, in a way that would have made them a "customer" if it had happened before that date. If the trustee is satisfied this was done in good faith, before a trustee was appointed, then for figuring out that person's net equity, the date they took that action counts as the filing date. (d) Splitting property between the general estate and customers If cash or securities are left over after paying off a lien or pledge the broker made, they get divided between the broker's general estate and customer property — in proportion to how much each side (the broker's own property, versus customers' cash and securities) contributed to that lien or pledge in the first place. Securities that end up on the general-estate side of this split are then subject to the rules in section 78lll(5)(A). (e) Who pays administrative costs The broker's general estate pays all costs of running the estate and the liquidation proceeding, as far as it has money to do so, following the same priority order as section 726 of title 11. These costs include payments under sections 78fff–2(e) and 78fff–3(c)(1) — to the extent those payments recovered securities that had been assigned to the general estate under subsection (d) — plus the cost of any SIPC employees the trustee uses under section 78fff–1(a)(2). If SIPC advances money to the trustee to cover these costs, that money gets paid back from the general estate under section 507(a)(2) of title 11.