15 U.S.C. § 78fff–2 — Special provisions of a liquidation proceeding

(a) Notice and claims (1) Notice of proceedings — Soon after a trustee is appointed, the trustee must publish notice that the proceeding has started, in one or more general-circulation newspapers, in whatever form the court sets. At the same time, the trustee must mail that notice to everyone who looks, from the broker's books and records, like they had an open customer account within the past 12 months, at the address shown in those records. Creditors who aren't customers get notice the way title 11 requires, except the trustee (not someone else) has to send it. (2) Statement of claim — A customer must file a written statement of claim with the trustee, but doesn't need a full formal proof of claim — except that claims owed to people closely tied to the broker (insiders defined in sections 78c(a)(18) and 78c(a)(21)), anyone owning 5% or more of the broker's voting stock, or their immediate family, do need formal proof. (3) Time limits — A claim from a customer or other creditor is barred if the trustee receives it more than six months after the notice was published — except the court can grant a reasonable, fixed extension, for good cause and if requested within that six months, for claims from the United States, a state or local government, or a minor or incompetent person without a guardian. A customer's net-equity claim that arrives after a shorter deadline the court sets (no more than 60 days after the notice was published) doesn't have to be paid from customer property at all; if it's paid using SIPC's advanced money instead, the trustee decides whether to pay it in cash, securities, or both, whichever is most economical for the estate. (4) Effect on other claims — Except as this section says otherwise, and without limiting the trustee's normal duty to pay claims promptly, nothing here stops anyone — including someone stepping into another's legal shoes (a subrogee) — from proving up their own claims against the broker in whatever way the court allows, including claims for money or specific securities, without relying on SIPC's advanced funds. (b) Paying customers After getting a customer's written claim under (a)(2), the trustee must promptly pay or deliver whatever the broker owes that customer — securities or cash — as far as the broker's own books and records show it, or as far as it's otherwise proven to the trustee's satisfaction (subject to subsection (d) and section 78fff–3(a)). Securities get valued as of the close of business on the filing date. The court must, among other things: (1) let the trustee pay net-equity claims out of SIPC's advanced money even without first proving the broker itself has enough funds; and (2) let the trustee deliver securities of a given class and series to satisfy claims, to the extent available, splitting deliveries proportionally where practical. Any payment or delivery can be made conditional on the customer signing receipts, affidavits, releases, or assignments the trustee requires — but that doesn't stop the customer from later filing a formal claim, within the deadline in subsection (a)(3), for any balance still owed. (c) Customer property (1) How customer property gets divided — The trustee splits customer property, in this order: (A) first, repaying SIPC for advances it made under section 78fff–3(c)(1), to the extent those advances recovered securities that had been assigned to customer property under section 78fff(d); (B) second, to customers, who share proportionally based on their net equities; (C) third, to SIPC as subrogee standing in customers' shoes; (D) fourth, repaying SIPC for advances under section 78fff–3(c)(2). Anything left over becomes part of the broker's general estate. If customer property and SIPC's advances still aren't enough to fully pay customers' net-equity claims, those customers can claim the unpaid balance as ordinary unsecured creditors of the general estate. For this division, securities owed for net-equity claims are valued as of the close of business on the filing date. (2) Customer name securities — The trustee must hand "customer name securities" — securities registered in the customer's own name — back to the customer entitled to them, if that customer doesn't owe the broker money. If the customer does owe money, they can reclaim those securities, with the trustee's approval, by paying off that debt within a deadline the trustee sets. (3) Recovering earlier transfers — If customer property isn't enough to pay the claims in (1)(A)-(D), the trustee can recover property the broker transferred away earlier — property that would have counted as customer property if not for that transfer — as long as the transfer is voidable or void under title 11. Recovered property becomes customer property. For this purpose, the transferred property is treated as if it had stayed the broker's, and if it went to a customer, that customer is treated as a creditor — no matter what state law would otherwise say. (d) Buying replacement securities As far as securities can be bought in a fair, orderly market, the trustee must buy securities needed to deliver to customers whose net-equity claims are based on securities under section 78fff–1(b)(1), or to restore transferred customer accounts under subsection (f), to put those accounts back where they stood on the filing date. Customer property and SIPC's advanced money can be used to pay for these purchases, consistent with subsection (c). But SIPC's money for any one customer's account can't be used to buy securities worth, in total, more than what SIPC was allowed to advance that customer under section 78fff–3(a). (e) Closing out open contracts (1) In general — Any ordinary-course contract between the broker and other brokers or dealers to buy or sell securities, still fully unperformed on the filing date, isn't completed by the trustee, except as SIPC rules allow. Once SIPC adopts rules on closing out such contracts (but before it adopts rules on completing them), the other broker or dealer must close the contract out promptly, in the best market available, under SIPC's rules. Until SIPC adopts such rules, contracts get closed out under old SEC Rule S6(d)-1 (as it stood on May 21, 1978) or any later comparable SEC rule, as far as that's consistent with this subsection. (2) Net profit or loss — A broker or dealer must net all profits and losses on contracts closed out this way. If they show a net profit, they must pay it to the trustee. If they show a net loss, they can file a claim against the broker with the trustee for that loss. If the loss came from contracts where the broker or dealer was acting for its own customer, it can get paid from SIPC's advanced funds for that loss — but no more than $40,000 for each separate customer it lost money on. Any loss not covered by SIPC funds can be claimed as an unsecured creditor against the general estate. (3) Registered clearing agencies — A registered clearing agency with its own established close-out procedures for open contracts between an insolvent broker and its participants — and its participants, to the extent their claims are handled inside that clearing agency — generally can't get SIPC funds for losses on those contracts, unless SIPC rules say otherwise. If they still take a net loss on closing out contracts with the broker, they can claim it as unsecured creditors of the general estate. Any money or property still owed to the broker after closeout must be paid promptly to the trustee. SIPC's rules must ensure a clearing agency or its participants never get more from SIPC, in total, than they would have gotten by proceeding individually under (1) and (2) above. (4) Who counts as a "customer" here — For this subsection, "customer" does not include anyone who: (A) is a broker or dealer; (B) had a cash or securities claim that, by agreement or by law, counted as part of the claiming broker's capital, or was subordinated to other creditors' claims; or (C) had the kind of relationship described in section 78fff–3(a)(5) with the broker. A broker or dealer counts as acting for its customer if it acted as the customer's agent, or held the customer's order to be executed as part of its own contract with the debtor broker. (f) Transferring customer accounts To help pay customer claims quickly and wind the broker down in an orderly way, the trustee can — on terms it's satisfied with, and with SIPC's prior approval — sell or transfer all or part of a customer's account to another SIPC member, without needing that customer's consent. In doing so, with SIPC's approval, the trustee can: (1) waive or change the requirement to file a written claim under subsection (a)(2); and (2) agree to protect the receiving SIPC member against shortages of cash or securities in the accounts being transferred. SIPC's own funds can back up that protection. SIPC will only approve this kind of indemnity if it decides, among other things, that its likely cost won't exceed what SIPC would otherwise spend under sections 78fff–3(a) and 78fff–3(b).