11 U.S. Code § 741 - Definitions for this subchapter
Section 741(6) of the House bill and Senate amendment is deleted by the House amendment since the defined term is used only in section 741(4)(A)(iii). A corresponding change is made in that section.
Section 741 sets forth definitions for subchapter III of chapter 7.
Paragraph (1) defines “Commission” to mean the Securities and Exchange Commission.
Paragraph (2) defines “customer” to include anybody that interacts with the debtor in a capacity that concerns securities transactions. The term embraces cash or margin customers of a broker or dealer in the broadest sense.
Paragraph (3) defines “customer name security” in a restrictive fashion to include only non-transferable securities that are registered, or in the process of being registered in a customer’s own name. The securities must not be endorsed by the customer and the stockbroker must not be able to legally transfer the securities by delivery, by a power of attorney, or otherwise.
Paragraph (4) defines “customer property” to include all property of the debtor that has been segregated for customers or property that should have been segregated but was unlawfully converted. Clause (i) refers to customer property not properly segregated by the debtor or customer property converted and then recovered so as to become property of the estate. Unlawfully converted property that has been transferred to a third party is excluded until it is recovered as property of the estate by virtue of the avoiding powers. The concept excludes customer name securities that have been delivered to or reclaimed by a customer and any property properly belonging to the stockholder, such as money deposited by a customer to pay for securities that the stockholder has distributed to such customer.
Paragraph (5) [enacted as (6)] defines “net equity” to establish the extent to which a customer will be entitled to share in the single and separate fund. Accounts of a customer are aggregated and offset only to the extent the accounts are held by the customer in the same capacity. Thus, a personal account is separate from an account held as trustee. In a community property state an account held for the community is distinct from an account held as separate property.
The net equity is computed by liquidating all securities positions in the accounts and crediting the account with any amount due to the customer. Regardless of the actual dates, if any, of liquidation, the customer is only entitled to the liquidation value at the time of the filing of the petition. To avoid double counting, the liquidation value of customer name securities belonging to a customer is excluded from net equity. Thus, clause (ii) includes claims against a customer resulting from the liquidation of a security under clause (i). The value of a security on which trading has been suspended at the time of the filing of the petition will be estimated. Once the net liquidation value is computed, any amount that the customer owes to the stockbroker is subtracted including any amount that would be owing after the hypothetical liquidation, such as brokerage fees. Debts owed by the customer to the debtor, other than in a securities related transaction, will not reduce the net equity of the customer. Finally, net equity is increased by any payment by the customer to the debtor actually paid within 60 days after notice. The principal reason a customer would make such a payment is to reclaim customer name securities under § 751.
Paragraph (6) defines “1934 Act” to mean the Securities Exchange Act of 1934 [15 U.S.C. 78a et seq.].
Paragraph (7) [enacted as (9)] defines “SIPC” to mean the Securities Investor Protection Corporation.
The Securities Exchange Act of 1934, referred to in par. (4)(A)(iii), is act June 6, 1934, ch. 404, 48 Stat. 881, as amended, which is classified principally to chapter 2B (§ 78a et seq.) of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see section 78a of Title 15 and Tables.
2006—Par. (7)(A)(i). Pub. L. 109–390, § 5(a)(3)(A), substituted “a mortgage loan,” for “a mortgage loan or” and inserted “(whether or not such repurchase or reverse repurchase transaction is a ‘repurchase agreement’, as defined in section 101)” before semicolon at end.
Par. (7)(A)(iii). Pub. L. 109–390, § 5(a)(3)(B), inserted “(including by novation)” after “the guarantee” and “(whether or not such settlement is in connection with any agreement or transaction referred to in clauses (i) through (xi))” before semicolon at end.
Par. (7)(A)(v) to (vii). Pub. L. 109–390, § 5(a)(3)(D), (E), added cls. (v) and (vi) and redesignated former cl. (v) as (vii). Former cls. (vi) and (vii) redesignated (viii) and (ix), respectively.
Par. (7)(A)(viii). Pub. L. 109–390, § 5(a)(3)(D), redesignated cl. (vi) as (viii). Former cl. (viii) redesignated (x).
Pub. L. 109–390, § 5(a)(3)(C), substituted “(vii), (viii), or (ix)” for “or (vii)” in two places.
Par. (7)(A)(ix) to (xi). Pub. L. 109–390, § 5(a)(3)(D), redesignated cls. (vii) to (ix) as (ix) to (xi), respectively.
2005—Par. (7). Pub. L. 109–8 added par. (7) and struck out former par. (7) which read as follows: “ ‘securities contract’ means contract for the purchase, sale, or loan of a security, including an option for the purchase or sale of a security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any option entered into on a national securities exchange relating to foreign currencies, or the guarantee of any settlement of cash or securities by or to a securities clearing agency;”.
1984—Par. (2)(A). Pub. L. 98–353, § 482(1), substituted “with whom a person deals” for “with whom the debtor deals”, “that has a claim” for “that holds a claim”, “against such person” for “against the debtor”, “held by such person” for “held by the debtor”, and “such person’s business as a stockbroker,” for “business as a stockbroker”.
Par. (2)(B). Pub. L. 98–353, § 482(2)(A), (B), substituted “has a claim” for “holds a claim” and “against a person” for “against the debtor” in provisions preceding cl. (i).
Par. (2)(B)(ii). Pub. L. 98–353, § 482(2)(C), substituted “such person” for “the debtor”.
Par. (4)(A)(i). Pub. L. 98–353, § 482(3), substituted “from and that is the lawful” for “and that is”.
Par. (6)(A)(i). Pub. L. 98–353, § 482(4), inserted a comma after “petition” and “any” after “except”.
Par. (7). Pub. L. 98–353, § 482(5), amended par. (7) generally, inserting provisions relating to options for the purchase or sale of certificates of deposit, or a group or index of securities (including any interest therein or based on the value thereof), or any option entered into on a national securities exchange relating to foreign currencies.
Par. (8). Pub. L. 98–353, § 482(6), inserted “a final settlement payment,”.
1982—Par. (4). Pub. L. 97–222, § 8(1), struck out “at any time” after “security, or property,” in provisions preceding subpar. (A), and inserted “of a customer” after “claim” in subpar. (A)(ii).
Par. (5). Pub. L. 97–222, § 8(3), added par. (5). Former par. (5) redesignated (6).
Par. (6). Pub. L. 97–222, § 8(2), (4), redesignated former par. (5) as (6), in provisions preceding subpar. (A), substituted “all accounts of a customer that such customer has” for “the aggregate of all of a customer’s accounts that such customer holds”, in subpar. (A)(2) inserted “in such capacity”, and in subpar. (B) inserted “in such capacity”. Former par. (6) redesignated (9).
Pars. (7), (8). Pub. L. 97–222, § 8(5), added pars. (7) and (8).
Par. (9). Pub. L. 97–222, § 8(2), (6), redesignated former par. (6) as (9) and substituted “Securities” for “Security”.
Amendment by Pub. L. 109–390 not applicable to any cases commenced under this title or to appointments made under any Federal or State law, before Dec. 12, 2006, see section 7 of Pub. L. 109–390, set out as a note under section 101 of this title.
Amendment by Pub. L. 109–8 effective 180 days after Apr. 20, 2005, and not applicable with respect to cases commenced under this title before such effective date, except as otherwise provided, see section 1501 of Pub. L. 109–8, set out as a note under section 101 of this title.
Amendment by Pub. L. 103–394 effective Oct. 22, 1994, and not applicable with respect to cases commenced under this title before Oct. 22, 1994, see section 702 of Pub. L. 103–394, set out as a note under section 101 of this title.
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