Bankruptcy Forms: Filing Bankruptcy Chapter 7 Bankruptcy Software Chapter 13

The Center For Debt Management
Center4DebtManagement.com ... Always open 24 / 7

Note: For affordable legal assistance The Center For Debt Management highly recommends Standard Legal's Do-It-Yourself Bankruptcy Forms Software Kits. For credit repair services,
the most trusted law firm in America with over 15 years of experience is Lexington Law Firm.

For more bankruptcy help and bankruptcy alternatives, go to Bankruptcy Resources



TITLE 11–BANKRUPTCY

CHAPTER 7–LIQUIDATION

Sub Chapter III – Stockbroker Liquidation

Sec. 741. Definitions for this subchapter

   In this subchapter--
        (1) ``Commission'' means Securities and Exchange Commission;
        (2) ``customer'' includes--
            (A) entity with whom a person deals as principal or agent 
        and that has a claim against such person on account of a 
        security received, acquired, or held by such person in the 
        ordinary course of such person's business as a stockbroker, from 
        or for the securities account or accounts of such entity--
                (i) for safekeeping;
                (ii) with a view to sale;
                (iii) to cover a consummated sale;
                (iv) pursuant to a purchase;
                (v) as collateral under a security agreement; or
                (vi) for the purpose of effecting registration of 
            transfer; and

            (B) entity that has a claim against a person arising out 
        of--
                (i) a sale or conversion of a security received, 
            acquired, or held as specified in subparagraph (A) of this 
            paragraph; or
                (ii) a deposit of cash, a security, or other property 
            with such person for the purpose of purchasing or selling a 
            security;

        (3) ``customer name security'' means security--
            (A) held for the account of a customer on the date of the 
        filing of the petition by or on behalf of the debtor;
            (B) registered in such customer's name on such date or in 
        the process of being so registered under instructions from the 
        debtor; and
            (C) not in a form transferable by delivery on such date;

        (4) ``customer property'' means cash, security, or other 
    property, and proceeds of such cash, security, or property, 
    received, acquired, or held by or for the account of the debtor, 
    from or for the securities account of a customer--
            (A) including--
                (i) property that was unlawfully converted from and that 
            is the lawful property of the estate;
                (ii) a security held as property of the debtor to the 
            extent such security is necessary to meet a net equity claim 
            of a customer based on a security of the same class and 
            series of an issuer;
                (iii) resources provided through the use or realization 
            of a customer's debit cash balance or a debit item 
            includible in the Formula for Determination of Reserve 
            Requirement for Brokers and Dealers as promulgated by the 
            Commission under the Securities Exchange Act of 1934; and
                (iv) other property of the debtor that any applicable 
            law, rule, or regulation requires to be set aside or held 
            for the benefit of a customer, unless including such 
            property as customer property would not significantly 
            increase customer property; but

            (B) not including--
                (i) a customer name security delivered to or reclaimed 
            by a customer under section 751 of this title; or
                (ii) property to the extent that a customer does not 
            have a claim against the debtor based on such property;

        (5) ``margin payment'' means payment or deposit of cash, a 
    security, or other property, that is commonly known to the 
    securities trade as original margin, initial margin, maintenance 
    margin, or variation margin, or as a mark-to-market payment, or that 
    secures an obligation of a participant in a securities clearing 
    agency;
        (6) ``net equity'' means, with respect to all accounts of a 
    customer that such customer has in the same capacity--
            (A)(i) aggregate dollar balance that would remain in such 
        accounts after the liquidation, by sale or purchase, at the time 
        of the filing of the petition, of all securities positions in 
        all such accounts, except any customer name securities of such 
        customer; minus
            (ii) any claim of the debtor against such customer in such 
        capacity that would have been owing immediately after such 
        liquidation; plus
            (B) any payment by such customer to the trustee, within 60 
        days after notice under section 342 of this title, of any 
        business related claim of the debtor against such customer in 
        such capacity;

        (7) ``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;
        (8) ``settlement payment'' means a preliminary settlement 
    payment, a partial settlement payment, an interim settlement 
    payment, a settlement payment on account, a final settlement 
    payment, or any other similar payment commonly used in the 
    securities trade; and
        (9) ``SIPC'' means Securities Investor Protection Corporation.

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2611; Pub. L. 97-222, Sec. 8, 
July 27, 1982, 96 Stat. 237; Pub. L. 98-353, title III, Sec. 482, July 
10, 1984, 98 Stat. 382; Pub. L. 103-394, title V, Sec. 501(d)(25), Oct. 
22, 1994, 108 Stat. 4146.)


                      Historical and Revision Notes

                         legislative statements

    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.


                        senate report no. 95-989

    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 Sec. 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.

                       References in Text

    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 (Sec. 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.


                               Amendments

    1994--Par. (4)(A)(iii). Pub. L. 103-394 struck out ``(15 U.S.C. 78a 
et seq.)'' after ``Act of 1934''.
    1984--Par. (2)(A). Pub. L. 98-353, Sec. 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, Sec. 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, Sec. 482(2)(C), substituted ``such 
person'' for ``the debtor''.
    Par. (4)(A)(i). Pub. L. 98-353, Sec. 482(3), substituted ``from and 
that is the lawful'' for ``and that is''.
    Par. (6)(A)(i). Pub. L. 98-353, Sec. 482(4), inserted a comma after 
``petition'' and ``any'' after ``except''.
    Par. (7). Pub. L. 98-353, Sec. 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, Sec. 482(6), inserted ``a final settlement 
payment,''.
    1982--Par. (4). Pub. L. 97-222, Sec. 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, Sec. 8(3), added par. (5). Former par. (5) 
redesignated (6).
    Par. (6). Pub. L. 97-222, Sec. 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, Sec. 8(5), added pars. (7) and (8).
    Par. (9). Pub. L. 97-222, Sec. 8(2), (6), redesignated former par. 
(6) as (9) and substituted ``Securities'' for ``Security''.


                    Effective Date of 1994 Amendment

    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.


                    Effective Date of 1984 Amendment

    Amendment by Pub. L. 98-353 effective with respect to cases filed 90 
days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out 
as a note under section 101 of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 101, 362, 546, 548, 555, 752 
of this title; title 12 sections 1787, 1821.


Back Index Next

Note: For affordable legal assistance The Center For Debt Management highly recommends Standard Legal's Do-It-Yourself Bankruptcy Forms Software Kits. For credit repair services,
the most trusted law firm in America with over 15 years of experience is Lexington Law Firm.

For more bankruptcy help and bankruptcy alternatives, go to Bankruptcy Resources

Go to Index of Related Articles and Resources!

Click Below To Check Out More Financial Resources

Return to Top

The Center For Debt Management™

Helping Consumers Save Money and Reduce Debt Is Our Only Business!™

We invite you to explore the sectors listed below. We promise that you'll find exceptional values, offers and resources in which to reduce your living expenses and to enjoy life!


Debt Management and Financial Services! The Internet's oldest and most comprehensive debt management agency! Resources for debt management, consumer credit counseling, debt consolidation, debt reduction settlements, legal aid, financial aid, loans and financing, credit repair, credit reports, insurance quotes, income sources, tax assistance, and more.

Established in 1989 and serving the online community since 1992!


This site was created and designed by Daniel A. Gelinas
Disclaimer and Privacy Policy      © Copyright  2007 "The Center For Debt Management"      Contact Us
Return to Top

Legal Resource Center: United States Code TITLE 11 Filing Bankruptcy Forms Software