15 U.S.C. § 78jjj: Prohibited acts

Summary

Members of SIPC must file required reports and pay assessments on time. If a member misses a filing or payment and does not fix it within five days after getting written notice, that member cannot do business as a broker or dealer unless the Commission allows it. If the member thinks the notice amount is wrong, it can pay the full amount and then sue SIPC in a U.S. district court to get back what it says it does not owe. If a trustee is appointed or a direct payment process starts, the broker or dealer must stop doing business as such unless the Commission decides otherwise. The Commission can bar or suspend officers, directors, general partners, any owner of 10% or more of voting stock, or other controlling people after notice and a hearing if that is in the public interest. In any liquidation or direct payment matter it is illegal to commit fraud or try to defeat the process. This covers hiding or moving estate assets, making false statements or claims, taking property, paying or getting money for actions, falsifying or withholding documents, and similar acts. Stealing, embezzling, or converting SIPC money or assets or trying to defraud SIPC or a trustee is also illegal. Violators face up to $250,000 in fines, up to 5 years in prison, or both. Anyone who knowingly and with intent to deceive falsely claims SIPC membership or protection can be sued for damages and faces the same fines and prison time. Courts can issue temporary or final orders to stop these false claims, and those orders can be enforced across the United States.

Title 15, §78jjj

Commerce and Trade, Source: USLM XML via OLRC

(a)Failure to pay assessment, etc.

If a member of SIPC shall fail to file any report or information required pursuant to this chapter, or shall fail to pay when due all or any part of an assessment made upon such member pursuant to this chapter, and such failure shall not have been cured, by the filing of such report or information or by the making of such payment, together with interest and penalty thereon, within five days after receipt by such member of written notice of such failure given by or on behalf of SIPC, it shall be unlawful for such member, unless specifically authorized by the Commission, to engage in business as a broker or dealer. If such member denies that it owes all or any part of the amount specified in such notice, it may after payment of the full amount so specified commence an action against SIPC in the appropriate United States district court to recover the amount it denies owing.

(b)Engaging in business after appointment of trustee or initiation of direct payment procedure

It shall be unlawful for any broker or dealer for whom a trustee has been appointed pursuant to this chapter or for whom a direct payment procedure has been initiated to engage thereafter in business as a broker or dealer, unless the Commission otherwise determines in the public interest. The Commission may by order bar or suspend for any period, any officer, director, general partner, owner of 10 per centum or more of the voting securities, or controlling person of any broker or dealer for whom a trustee has been appointed pursuant to this chapter or for whom a direct payment procedure has been initiated from being or becoming associated with a broker or dealer, if after appropriate notice and opportunity for hearing, the Commission shall determine such bar or suspension to be in the public interest.

(c)Concealment of assets; false statements or claims

(1)Specific prohibited acts

Any person who, directly or indirectly, in connection with or in contemplation of any liquidation proceeding or direct payment procedure—

(A)employs any device, scheme, or artifice to defraud;

(B)engages in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person; or

(C)fraudulently or with intent to defeat this chapter—

(i)conceals or transfers any property belonging to the estate of a debtor;

(ii)makes a false statement or account;

(iii)presents or uses any false claim for proof against the estate of a debtor;

(iv)receives any material amount of property from a debtor;

(v)gives, offers, receives, transfers, or obtains any money or property, remuneration, compensation, reward, advantage, other consideration, or promise thereof, for acting or forebearing to act;

(vi)conceals, destroys, mutilates, falsifies, makes a false entry in, or otherwise falsifies any document affecting or relating to the property or affairs of a debtor; or

(vii)withholds, from any person entitled to its possession, any document affecting or relating to the property or affairs of a debtor,

shall be fined not more than $250,000 or imprisoned for not more than five years, or both.

(2)Fraudulent conversion

Any person who, directly or indirectly steals, embezzles, or fraudulently, or with intent to defeat this chapter, abstracts or converts to his own use or to the use of another any of the moneys, securities, or other assets of SIPC, or otherwise defrauds or attempts to defraud SIPC or a trustee by any means, shall be fined not more than $250,000 or imprisoned not more than five years, or both.

(d)Misrepresentation of SIPC membership or protection

(1)In general

Any person who falsely represents by any means (including, without limitation, through the Internet or any other medium of mass communication), with actual knowledge of the falsity of the representation and with an intent to deceive or cause injury to another, that such person, or another person, is a member of SIPC or that any person or account is protected or is eligible for protection under this chapter or by SIPC, shall be liable for any damages caused thereby and shall be fined not more than $250,000 or imprisoned for not more than 5 years.

(2)Injunctions

Any court having jurisdiction of a civil action arising under this chapter may grant temporary injunctions and final injunctions on such terms as the court deems reasonable to prevent or restrain any violation of paragraph (1). Any such injunction may be served anywhere in the United States on the person enjoined, shall be operative throughout the United States, and shall be enforceable, by proceedings in contempt or otherwise, by any United States court having jurisdiction over that person. The clerk of the court granting the injunction shall, when requested by any other court in which enforcement of the injunction is sought, transmit promptly to the other court a certified copy of all papers in the case on file in such clerk’s office.

Notes & Related Subsidiaries

Editorial Notes

References in Text

This chapter, referred to in text, 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.

Amendments

2010—Subsec. (c)(1). Pub. L. 111–203, § 929V(b)(1), substituted “$250,000” for “$50,000” in concluding provisions. Subsec. (c)(2). Pub. L. 111–203, § 929V(b)(2), substituted “$250,000” for “$50,000”. Subsec. (d). Pub. L. 111–203, § 929V(c), added subsec. (d). 1978—Subsec. (a). Pub. L. 95–283, § 13(a), inserted “and penalty” after “interest”, and substituted “it” for “he” wherever appearing. Subsec. (b). Pub. L. 95–283, § 13(b), in heading inserted “or initiation of direct payment procedure” after “trustee”, and in text inserted references to initiation of direct payment procedure in two places. Subsec. (c). Pub. L. 95–283, § 13(c), in heading substituted “Concealment of assets; false statements or claims” for “Embezzlement, etc., of assets of SIPC”, added par. (1), and designated existing provisions as par. (2) and, as so designated, inserted references to direct or indirect acts, and provisions covering defrauding or attempts to defraud SIPC or a trustee, and substituted provisions covering activities constituting fraudulent, or with intent to defeat this chapter, abstracts or conversions, for provisions covering activities constituting unlawfully abstracting or unlawfully and willfully converting moneys, etc.

Statutory Notes and Related Subsidiaries

Effective Date

of 2010 AmendmentAmendment by Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an

Effective Date

note under section 5301 of Title 12, Banks and Banking.

§78jjj Prohibited Acts

Summary

Title 15, §78jjj

Notes & Related Subsidiaries

Editorial Notes

References in Text

Amendments

Statutory Notes and Related Subsidiaries

Effective Date

Effective Date

Citations & Metadata