15 U.S.C. § 78fff–1: Powers and duties of a…

Summary

A trustee gets the same powers and control over the broker and its property as a bankruptcy trustee. The trustee can reverse certain payments made before the liquidation. With SIPC’s approval and without needing a court order, the trustee can hire and pay staff and outside experts, use SIPC employees, and manage margin and customer accounts for the liquidation. The trustee must follow duties like a chapter 7 bankruptcy trustee, but does not have to sell securities for cash. The trustee must return securities to customers as much as possible. With SIPC’s prior approval and without court approval, the trustee may pay or guarantee the firm’s debts if the securities the trustee gets appear to be worth at least what is paid. The trustee must send written reports to the court and SIPC about distributing cash and securities, investigate the firm’s affairs quickly, question officers and others, report any fraud or misconduct, and give a written investigation report to SIPC and others the court names.

Title 15, §78fff–1

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(a)Trustee powers

A trustee shall be vested with the same powers and title with respect to the debtor and the property of the debtor, including the same rights to avoid preferences, as a trustee in a case under title 11. In addition, a trustee may, with the approval of SIPC but without any need for court approval—

(1)hire and fix the compensation of all personnel (including officers and employees of the debtor and of its examining authority) and other persons (including accountants) that are deemed by the trustee necessary for all or any purposes of the liquidation proceeding;

(2)utilize SIPC employees for all or any purposes of a liquidation proceeding; and

(3)margin and maintain customer accounts of the debtor for the purposes of section 78fff–2(f) of this title.

(b)Trustee duties

To the extent consistent with the provisions of this chapter or as otherwise ordered by the court, a trustee shall be subject to the same duties as a trustee in a case under chapter 7 of title 11, including, if the debtor is a commodity broker, as defined under section 101 of such title, the duties specified in subchapter IV of such chapter 7, except that a trustee may, but shall have no duty to, reduce to money any securities constituting customer property or in the general estate of the debtor. In addition, the trustee shall—

(1)deliver securities to or on behalf of customers to the maximum extent practicable in satisfaction of customer claims for securities of the same class and series of an issuer; and

(2)subject to the prior approval of SIPC but without any need for court approval, pay or guarantee all or any part of the indebtedness of the debtor to a bank, lender, or other person if the trustee determines that the aggregate market value of securities to be made available to the trustee upon the payment or guarantee of such indebtedness does not appear to be less than the total amount of such payment or guarantee.

(c)Reports by trustee to court

The trustee shall make to the court and to SIPC such written reports as may be required of a trustee in a case under chapter 7 of title 11, and shall include in such reports information with respect to the progress made in distributing cash and securities to customers. Such reports shall be in such form and detail as the Commission determines by rule to present fairly the results of the liquidation proceeding as of the date of or for the period covered by such reports, having due regard for the requirements of section 78q of this title and the rules prescribed under such section and the magnitude of items and transactions involved in connection with the operations of a broker or dealer.

(d)Investigations

The trustee shall—

(1)as soon as practicable, investigate the acts, conduct, property, liabilities, and financial condition of the debtor, the operation of its business, and any other matter, to the extent relevant to the liquidation proceeding, and report thereon to the court;

(2)examine, by deposition or otherwise, the directors and officers of the debtor and any other witnesses concerning any of the matters referred to in paragraph (1);

(3)report to the court any facts ascertained by the trustee with respect to fraud, misconduct, mismanagement, and irregularities, and to any causes of action available to the estate; and

(4)as soon as practicable, prepare and submit, to SIPC and such other persons as the court designates and in such form and manner as the court directs, a statement of his investigation of matters referred to in paragraph (1).

Notes & Related Subsidiaries

Editorial Notes

Prior Provisions

A prior section 7 of Pub. L. 91–598 was renumbered section 11 and is classified to section 78ggg of this title.

Amendments

1978—Subsec. (a). Pub. L. 95–598, § 308(i), substituted “trustee in a case under title 11” for “trustee in bankruptcy under the Bankruptcy Act has with respect to a bankrupt and the property of a bankrupt”. Subsec. (b). Pub. L. 95–598, § 308(j), substituted “trustee in a case under chapter 7 of title 11, including, if the debtor is a commodity broker, as defined under section 101 of such title, the duties specified in subchapter IV of such chapter 7,” for “trustee in bankruptcy”. Subsec. (c). Pub. L. 95–598, § 308(k), substituted “required of a trustee in a case under chapter 7 of title 11” for “required by the Bankruptcy Act”.

Statutory Notes and Related Subsidiaries

Effective Date

of 1978 AmendmentAmendment 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.

§78fff–1 Powers and Duties of a Trustee

Summary

Title 15, §78fff–1

Notes & Related Subsidiaries

Editorial Notes

Prior Provisions

Amendments

Statutory Notes and Related Subsidiaries

Effective Date

Effective Date

Citations & Metadata