CITE

    15 USC Sec. 78fff-4                                         01/08/2008

EXPCITE

    TITLE 15 - COMMERCE AND TRADE
    CHAPTER 2B091 - SECURITIES INVESTOR PROTECTION

HEAD

    Sec. 78fff-4. Direct payment procedure

STATUTE

    (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.

SOURCE

    (Pub. L. 91-598, Sec. 10, as added Pub. L. 95-283, Sec. 9, May 21,
    1978, 92 Stat. 266; amended Pub. L. 95-598, title III, Sec. 308(n),
    Nov. 6, 1978, 92 Stat. 2675.)

PRIOR PROVISIONS

      A prior section 10 of Pub. L. 91-598 was renumbered section 14
    and is classified to section 78jjj of this title.
                                AMENDMENTS
      1978 - Subsec. (e). Pub. L. 95-598 substituted in heading
    "Bankruptcy Courts" for "District Courts" and in text "courts of
    the United States having jurisdiction over cases under title 11"
    for "district courts of the United States" and struck out ",
    without regard to the citizenship of the parties or the amount in
    controversy" after "adjudication of such claim".
                     EFFECTIVE DATE OF 1978 AMENDMENT
      Amendment by Pub. L. 95-598 effective Oct. 1, 1979, see section
    402(a) of Pub. L. 95-598, set out as an Effective Date note
    preceding section 101 of Title 11, Bankruptcy.