§ 78ddd. — SIPC Fund.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 15USC78ddd]
TITLE 15--COMMERCE AND TRADE
CHAPTER 2B-1--SECURITIES INVESTOR PROTECTION
Sec. 78ddd. SIPC Fund
(a) In general
(1) Establishment of fund
SIPC shall establish a ``SIPC Fund'' (hereinafter in this
chapter referred to as the ``fund''). All amounts received by SIPC
(other than amounts paid directly to any lender pursuant to any
pledge securing a borrowing by SIPC) shall be deposited in the fund,
and all expenditures made by SIPC shall be made out of the fund.
(2) Balance of the fund
Except as otherwise provided in this section, the balance of the
fund at any time shall consist of the aggregate at such time of the
following items:
(A) Cash on hand or on deposit.
(B) Amounts invested in United States Government or agency
securities.
(C) Such confirmed lines of credit as SIPC may from time to
time maintain, other than those maintained pursuant to paragraph
(4).
(3) Confirmed lines of credit
For purposes of this section, the amount of confirmed lines of
credit as of any time is the aggregate amount which SIPC at such
time has the right to borrow from banks and other financial
institutions under confirmed lines of credit or other written
agreements which provide that moneys so borrowed are to be repayable
by SIPC not less than one year from the time of such borrowings
(including, for purposes of determining when such moneys are
repayable, all rights of extension, refunding, or renewal at the
election of SIPC).
(4) Other lines
SIPC may maintain such other confirmed lines of credit as it
considers necessary or appropriate, and such other confirmed lines
of credit shall not be included in the balance of the fund, but
amounts received from such lines of credit may be disbursed by SIPC
under this chapter as though such amounts were part of the fund.
(b) Initial required balance for fund
Within one hundred and twenty days from December 30, 1970, the
balance of the fund shall aggregate not less than $75,000,000, less any
amounts expended from the fund within that period.
(c) Assessments
(1) Initial assessments
Each member of SIPC shall pay to SIPC, or the collection agent
for SIPC specified in section 78iii(a) of this title, on or before
the one hundred and twentieth day following December 30, 1970, an
assessment equal to one-eighth of 1 per centum of the gross revenues
from the securities business of such member during the calendar year
1969, or if the Commission shall determine that, for purposes of
assessment pursuant to this paragraph, a lesser percentage of gross
revenues from the securities business is appropriate for any class
or classes of members (taking into account relevant factors,
including but not limited to types of business done and nature of
securities sold), such lesser percentages as the Commission, by rule
or regulation, shall establish for such class or classes, but in no
event less than one sixteenth of 1 per centum for any such class. In
no event shall any assessment upon a member pursuant to this
paragraph be less than $150.
(2) General assessment authority
SIPC shall, by bylaw, impose upon its members such assessments
as, after consultation with self-regulatory organizations, SIPC may
deem necessary and appropriate to establish and maintain the fund
and to repay any borrowings by SIPC. Any assessments so made shall
be in conformity with contractual obligations made by SIPC in
connection with any borrowing incurred by SIPC. Subject to paragraph
(3) and subsection (d)(1)(A) of this section, any such assessment
upon the members, or any one or more classes thereof, may, in whole
or in part, be based upon or measured by (A) the amount of their
gross revenues from the securities business, or (B) all or any of
the following factors: the amount or composition of their gross
revenues from the securities business, the number or dollar volume
of transactions effected by them, the number of customer accounts
maintained by them or the amounts of cash and securities in such
accounts, their net capital, the nature of their activities (whether
in the securities business or otherwise) and the consequent risks,
or other relevant factors.
(3) Limitations
Notwithstanding any other provision of this chapter--
(A) no assessment shall be made upon a member otherwise than
pursuant to paragraph (1) or (2) of this subsection,
(B) an assessment may be made under paragraph (2) of this
subsection at a rate in excess of one-half of one per centum
during any twelve-month period if SIPC determines, in accordance
with a bylaw, that such rate of assessment during such period
will not have a material adverse effect on the financial
condition of its members or their customers, except that no
assessments shall be made pursuant to such paragraph upon a
member which require payments during any such period which
exceed in the aggregate one per centum of such member's gross
revenues from the securities business for such period, and
(C) no assessment shall include any charge based upon the
member's activities (i) in the distribution of shares of
registered open end investment companies or unit investment
trusts, (ii) in the sale of variable annuities, (iii) in the
business of insurance, or (iv) in the business of rendering
investment advisory services to one or more registered
investment companies or insurance company separate accounts.
(d) Requirements respecting assessments and lines of credit
(1) Assessments
(A) \1/2\ of 1 percent assessment
Subject to subsection (c)(3) of this section, SIPC shall
impose upon each of its members an assessment at a rate of not
less than one-half of 1 per centum per annum of the gross
revenues from the securities business of such member--
(i) until the balance of the fund aggregates not less
than $150,000,000 (or such other amount as the Commission
may determine in the public interest),
(ii) during any period when there is outstanding
borrowing by SIPC pursuant to subsection (f) or subsection
(g) of this section, and
(iii) whenever the balance of the fund (exclusive of
confirmed lines of credit) is below $100,000,000 (or such
other amount as the Commission may determine in the public
interest).
(B) \1/4\ of 1 percent assessment
During any period during which--
(i) the balance of the fund (exclusive of confirmed
lines of credit) aggregates less than $150,000,000 (or such
other amount as the Commission has determined under
paragraph (2)(B)), or
(ii) SIPC is required under paragraph (2)(B) to phase
out of the fund all confirmed lines of credit,
SIPC shall endeavor to make assessments in such a manner that
the aggregate assessments payable by its members during such
period shall not be less than one-fourth of 1 per centum per
annum of the aggregate gross revenues from the securities
business for such members during such period.
(C) Minimum assessment
The minimum assessment imposed upon each member of SIPC
shall be $25 per annum through the year ending December 31,
1979, and thereafter shall be the amount from time to time set
by SIPC bylaw, but in no event shall the minimum assessment be
greater than $150 per annum.
(2) Lines of credit
(A) $50,000,000 limit after 1973
After December 31, 1973, confirmed lines of credit shall not
constitute more than $50,000,000 of the balance of the fund.
(B) Phaseout requirement
When the balance of the fund aggregates $150,000,000 (or
such other amount as the Commission may determine in the public
interest) SIPC shall phase out of the fund all confirmed lines
of credit.
(e) Prior trusts; overpayments and underpayments
(1) Prior trusts
There may be contributed and transferred at any time to SIPC any
funds held by any trust established by a self-regulatory
organization prior to January 1, 1970, and the amounts so
contributed and transferred shall be applied, as may be determined
by SIPC with approval of the Commission, as a reduction in the
amounts payable pursuant to assessments made or to be made by SIPC
upon members of such self-regulatory organization pursuant to
subsection (c)(2) of this section. No such reduction shall be made
at any time when there is outstanding any borrowing by SIPC pursuant
to subsection (g) of this section or any borrowings under confirmed
lines of credit.
(2) Overpayments
To the extent that any payment by a member exceeds the maximum
rate permitted by subsection (c) of this section, the excess shall
be recoverable only against future payments by such member, except
as otherwise provided by SIPC bylaw.
(3) Underpayments
If a member fails to pay when due all or any part of an
assessment made upon such member, the unpaid portion thereof shall
bear interest at such rate as may be determined by SIPC bylaw and,
in addition to such interest, SIPC may impose such penalty charge as
may be determined by SIPC bylaw. Any such penalty charge imposed
upon a SIPC member shall not exceed 25 per centum of any unpaid
portion of the assessment. SIPC may waive such penalty charge in
whole or in part in circumstances where it considers such waiver
appropriate.
(f) Borrowing authority
SIPC shall have the power to borrow moneys and to evidence such
borrowed moneys by the issuance of bonds, notes, or other evidences of
indebtedness, all upon such terms and conditions as the Board of
Directors may determine in the case of a borrowing other than pursuant
to subsection (g) of this section, or as may be prescribed by the
Commission in the case of a borrowing pursuant to subsection (g) of this
section. The interest payable on a borrowing pursuant to subsection (g)
of this section shall be equal to the interest payable on the related
notes or other obligations issued by the Commission to the Secretary of
the Treasury. To secure the payment of the principal of, and interest
and premium, if any, on, all bonds, notes, or other evidences of
indebtedness so issued, SIPC may make agreements with respect to the
amount of future assessments to be made upon members and may pledge all
or any part of the assets of SIPC and of the assessments made or to be
made upon members. Any such pledge of future assessments shall (subject
to any prior pledge) be valid and binding from the time that it is made,
and the assessments so pledged and thereafter received by SIPC, or any
collection agent for SIPC, shall immediately be subject to the lien of
such pledge without any physical delivery thereof or further act, and
the lien of such pledge shall be valid and binding against all parties
having claims of any kind against SIPC or such collection agent whether
pursuant to this chapter, in tort, contract or otherwise, irrespective
of whether such parties have notice thereof. During any period when a
borrowing by SIPC pursuant to subsection (g) of this section is
outstanding, no pledge of any assessment upon a member to secure any
bonds, notes, or other evidences of indebtedness issued other than
pursuant to subsection (g) of this section shall be effective as to the
excess of the payments under the assessment on such member during any
twelve-month period over one-fourth of 1 per centum of such member's
gross revenues from the securities business for such period. Neither the
instrument by which a pledge is authorized or created, nor any statement
or other document relative thereto, need be filed or recorded in any
State or other jurisdiction. The Commission may by rule or regulation
provide for the filing of any instrument by which a pledge or borrowing
is authorized or created, but the failure to make or any defect in any
such filing shall not affect the validity of such pledge or borrowing.
(g) SEC loans to SIPC
In the event that the fund is or may reasonably appear to be
insufficient for the purposes of this chapter, the Commission is
authorized to make loans to SIPC. At the time of application for, and as
a condition to, any such loan, SIPC shall file with the Commission a
statement with respect to the anticipated use of the proceeds of the
loan. If the Commission determines that such loan is necessary for the
protection of customers of brokers or dealers and the maintenance of
confidence in the United States securities markets and the SIPC has
submitted a plan which provides as reasonable an assurance of prompt
repayment as may be feasible under the circumstances, then the
Commission shall so certify to the Secretary of the Treasury, and issue
notes or other obligations to the Secretary of the Treasury pursuant to
subsection (h) of this section. If the Commission determines that the
amount or time for payment of the assessments pursuant to such plan
would not satisfactorily provide for the repayment of such loan, it may,
by rules and regulations, impose upon the purchasers of equity
securities in transactions on national securities exchanges and in the
over-the-counter markets a transaction fee in such amount as at any time
or from time to time it may determine to be appropriate, but not
exceeding one-fiftieth of 1 per centum of the purchase price of the
securities. No such fee shall be imposed on a transaction (as defined by
rules or regulations of the Commission) of less than $5,000. For the
purposes of the next preceding sentence, (1) the fee shall be based upon
the total dollar amount of each purchase; (2) the fee shall not apply to
any purchase on a national securities exchange or in an over-the-counter
market by or for the account of a broker or dealer registered under
section 78o(b) of this title unless such purchase is for an investment
account of such broker or dealer (and for this purpose any transfer from
a trading account to an investment account shall be deemed a purchase at
fair market value); and (3) the Commission may, by rule, exempt any
transaction in the over-the-counter markets or on any national
securities exchange where necessary to provide for the assessment of
fees on purchasers in transactions in such markets and exchanges on a
comparable basis. Such fee shall be collected by the broker or dealer
effecting the transaction for or with the purchaser, or by such other
person as provided by the Commission by rule, and shall be paid to SIPC
in the same manner as assessments imposed pursuant to subsection (c) of
this section but without regard to the limits on such assessments, or in
such other manner as the Commission may by rule provide.
(h) SEC notes issued to Treasury
To enable the Commission to make loans under subsection (g) of this
section, the Commission is authorized to issue to the Secretary of the
Treasury notes or other obligations in an aggregate amount of not to
exceed $1,000,000,000, in such forms and denominations, bearing such
maturities, and subject to such terms and conditions, as may be
prescribed by the Secretary of the Treasury. Such notes or other
obligations shall bear interest at a rate determined by the Secretary of
the Treasury, taking into consideration the current average market yield
on outstanding marketable obligations of the United States of comparable
maturities during the month preceding the issuance of the notes or other
obligations. The Secretary of the Treasury may reduce the interest rate
if he determines such reduction to be in the national interest. The
Secretary of the Treasury is authorized and directed to purchase any
notes and other obligations issued hereunder and for that purpose he is
authorized to use as a public debt transaction the proceeds from the
sale of any securities issued under chapter 31 of title 31, and the
purposes for which securities may be issued under that chapter are
extended to include any purchase of such notes and obligations. The
Secretary of the Treasury may at any time sell any of the notes or other
obligations acquired by him under this subsection. All redemptions,
purchases, and sales by the Secretary of the Treasury of such notes or
other obligations shall be treated as public debt transactions of the
United States.
(i) Consolidated group
Except as otherwise provided by SIPC bylaw, gross revenues from the
securities business of a member of SIPC shall be computed on a
consolidated basis for such member and all its subsidiaries (other than
the foreign subsidiaries of such member), and the operations of a member
of SIPC shall include those of any business to which such member has
succeeded.
(Pub. L. 91-598, Sec. 4, Dec. 30, 1970, 84 Stat. 1639; Pub. L. 95-283,
Sec. 6, May 21, 1978, 92 Stat. 253.)
References in Text
This chapter, referred to in subsecs. (a)(1), (4), (c)(3), (g), and
(i)(1), 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.
Codification
In subsec. (h), ``chapter 31 of title 31'' and ``that chapter''
substituted for ``the Second Liberty Bond Act, as amended'' and ``that
Act, as amended,'', respectively, on authority of Pub. L. 97-258,
Sec. 4(b), Sept. 13, 1982, 96 Stat. 1067, the first section of which
enacted Title 31, Money and Finance.
Amendments
1978--Subsec. (a). Pub. L. 95-283, Sec. 6(a), in par. (2)
substituted ``Except as otherwise provided in this section, the'' for
``The'', in par. (2)(C) inserted provisions for inapplicability to other
lines of credit, and added par. (4).
Subsec. (c). Pub. L. 95-283, Sec. 6(b), in par. (2) struck out ``or
rule'' after ``bylaw'', and in par. (3) struck out reference to section
78ccc(f) of this title in introductory text and ``or rule'' after
``bylaw'' in subpar. (B).
Subsec. (d)(1)(C). Pub. L. 95-283, Sec. 6(c), added subpar. (C).
Subsec. (e). Pub. L. 95-283, Sec. 6(d), in par. (2) substituted ``be
recoverable only against future payments by such member, except as
otherwise provided by SIPC bylaw'' for ``not be recoverable except
against future payments by such member in accordance with a bylaw or
rule of SIPC'', and in par. (3) substituted provisions authorizing
interest and penalty charges to be imposed by SIPC bylaw and amount of
penalty charge, for provisions authorizing interest to be imposed by
SIPC bylaw or rule.
Subsec. (f). Pub. L. 95-283, Sec. 6(e), struck out ``examining
authority as'' before ``collection agent for SIPC, shall immediately be
subject''.
Subsec. (g). Pub. L. 95-283, Sec. 6(f), redesignated cls. (A) to (C)
as (1) to (3), respectively, and, as so redesignated, in cl. (2) struck
out applicability to a member of a national securities exchange and in
cl. (3) substituted provisions relating to exemptions by rule of
transactions in the over-the-counter market or on any national
securities exchange, for provisions relating to exemptions by rules and
regulations of transactions in the over-the-counter market, and inserted
provisions authorizing the collection of fees by such other persons as
designated by the Commission by rule for such purpose, and provisions
relating to limits on manner of payment of fees.
Subsec. (i). Pub. L. 95-283, Sec. 6(g), substituted ``Consolidated
group'' for `` `Gross revenues' defined'' in heading, redesignated par.
(2) as entire section and, as so redesignated, substituted provisions
relating to computations by a member, for provisions relating to
computations by a broker or dealer. Pars. (1) and (3), which generally
defined term ``gross revenues'' and authorized the SIPC to define all
other terms used in this subsec., respectively, were struck out.
Section Referred to in Other Sections
This section is referred to in sections 78ccc, 78hhh, 78iii, 78kkk
of this title.
