§78ccc — Title 15 Commerce and Trade | U.S. Code

Summary

Creates the Securities Investor Protection Corporation (SIPC) as a nonprofit that is not a U.S. government agency. All brokers or dealers registered under section 78o(b) are SIPC members unless SIPC says their main business is done outside the United States, their broker/dealer work is only certain kinds of fund, annuity, insurance, or advisory sales, or they are registered under section 78o(b)(11)(A). SIPC must tell the Commission when it excludes someone for doing business outside the U.S. The Commission has 30 days (or up to 90 days if it explains why) to agree, change, or reverse that exclusion. SIPC must have rules to let such excluded firms join if allowed, and those excluded must tell their U.S. customers about the exclusion as the Commission requires. Gives SIPC usual corporate powers: to sue and be sued, run offices, make a seal, make bylaws and rules, handle liquidations and customer payments, operate in any state without local licensing limits, own and sell property, hire staff, make contracts, and set its fiscal year. Sets a seven-member Board: one director from Treasury staff, one from Federal Reserve staff, and five appointed by the President with Senate approval (three from the securities industry and two public members who have had no industry ties for two years). Directors serve three-year terms and the President names a Chairman and Vice Chairman from the two public members. SIPC must file proposed bylaw changes and rule changes with the Commission. Bylaw changes take effect after 30 days unless the Commission disapproves or asks for public comment. Rule changes are published for comment and cannot take effect without Commission approval. The Commission must, within 35 days of publication (or up to 90 days if it explains why), either approve the rule or start proceedings. Any proceedings must finish within 180 days (with up to a 60-day extension). The Commission can also require SIPC to adopt, change, or remove any bylaw or rule.

Title 15, §78ccc

Commerce and Trade — Source: USLM XML via OLRC

(a)(1)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)(A)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)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.

(C)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)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)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.

(c)(1)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)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)The President shall designate a Chairman and Vice Chairman from among those directors appointed under paragraph (2)(C)(ii) of this subsection.

(4)(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,

(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)All matters relating to compensation of directors shall be as provided in the bylaws of SIPC.

(d)The Board of Directors shall meet at the call of its Chairman, or as otherwise provided by the bylaws of SIPC.

(e)(1)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)(A)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)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.

(C)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)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)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).

(3)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.

Notes & Related Subsidiaries

Editorial Notes

References in Text

This chapter, referred to in subsecs. (a) to (c) and (e), was in the original “this Act”, meaning Pub. L. 91–598, Dec. 30, 1970, 84 Stat. 1636. For complete classification of this Act to the Code, see Tables. The District of Columbia Nonprofit Corporation Act, referred to in subsec. (a)(1)(B), is Pub. L. 87–569, Aug. 6, 1962, 76 Stat. 265, which is not classified to the Code.

Amendments

2000—Subsec. (a)(2)(A)(iii). Pub. L. 106–554 added cl. (iii). 1978—Subsec. (a). Pub. L. 95–283, § 2(a), substituted “Creation and membership” for “Creation” in heading, redesignated introductory text and cls. (1) and (3) as par. (1), and added par. 2 which incorporated provisions formerly contained in cl. (2) as par. (2)(A). Subsec. (b). Pub. L. 95–283, § 3, in par. (1) substituted “State, Federal, or other court” for “court, State, or Federal”, in par. (3) substituted provisions relating to adoption, etc., of bylaws by the Board of Directors, for provisions relating to adoption, etc., of bylaws and rules by the Board of Directors, added par. (4), and redesignated former pars. (4) to (8) as (5) to (9), respectively. Subsec. (c)(2)(C)(ii). Pub. L. 95–283, § 4(a), substituted “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,” for “any broker or dealer, within the meaning of paragraph (18) of section 78c(a) of this title, or similarly associated with a national securities exchange or other securities industry group”. Subsec. (c)(5). Pub. L. 95–283, § 4(b), substituted “Compensation” for “Compensation, etc.” in heading, and in text struck out provisions relating to determinations of dollar volume of trading on exchanges. Subsec. (e). Pub. L. 95–283, § 5, inserted “and rules” after “Bylaws” in heading, and in text substituted provisions relating to procedures applicable to proposed changes in the bylaws and rules of SIPC and required action by the Commission with respect to any SIPC bylaw or rule, for provisions relating to procedures applicable to adoption of initial bylaws and rules of SIPC and any alteration, supplement, repeal, or addition,

Effective Date

of any such bylaw or rule, and required action by the Commission with respect to any SIPC bylaw or rule. Subsec. (f). Pub. L. 95–283, § 2(b), struck out subsec. (f) which set forth qualifications for other members of SIPC.

§78ccc Securities Investor Protection Corporation