,i #aacth ,,congress #ast ,session ,h4 ,r4 #cdhb ,,in ,,the ,,house ,,of ,,representatives ,november #ad1 #bjac,mr4 ,garrett 7for himself1 ,mrs4 ,carolyn ,b4 ,maloney of ,new ,york1 ,mr4 ,king of ,new ,york1 ,mr4 ,luetkemeyer1 ,mr4 ,himes1 ,mrs4 ,bachmann1 ,mr4 ,westmoreland1 ,mr4 ,al ,green of ,texas1 ,mr4 ,hurt1 ,mr4 ,fincher1 ,mrs4 ,mc,carthy of ,new ,york1 ,mr4 ,mulvaney1 ,mr4 ,ross1 ,mrs4 ,wagner1 ,mr4 ,murphy of ,florida1 ,mr4 ,cassidy1 ,mr4 ,sessions1 ,ms4 ,ros-,lehtinen1 ,mr4 ,deutch1 ,mr4 ,mc,caul1 ,mr4 ,harper1 ,mr4 ,culberson1 ,mr4 ,duncan of ,tennessee1 ,mr4 ,boustany1 and ,mr4 ,griffin of ,arkansas7 introduced the following bill2 which was referred to the ,committee on ,financial ,services ,a ,,bill ,to amend the ,securities ,investor ,protection ,act of #aigj to confirm that a customer's net equity claim is based on the customer's last statement and that certain recoveries are prohibited1 to change how trustees are appointed1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,restoring ,main ,street ,investor ,protection and ,confidence ,act4 #b4 ,securities ,investor ,protection ,act of #aigj amendments 7a7 ,net equity based on last statement ,section #af7aa7 of the ,securities ,investor ,protection ,act of #aigj 7#ae ,u4,s4,c4 #ghlll7#aa77 is amended to read as follows3 7#aa7 ,net equity 7,a7 ,in general ,the term net equity means the dollar amount of the account or accounts of a customer1 to be determined by-- 7i7 calculating the sum which would have been owed by the debtor to such customer if the debtor had liquidated1 by sale or purchase on the filing date-- 7,i7 all securities positions of such customer 7other than customer name securities reclaimed by such customer72 and 7,,ii7 all positions in futures contracts and options on futures contracts held in a portfolio margining account carried as a securities account pursuant to a portfolio margining program approved by the ,commission1 including all property collateralizing such positions1 to the extent that such property is not otherwise included herein2 minus 7ii7 any indebtedness of such customer to the debtor on the filing date2 plus 7iii7 any payment by such customer of such indebtedness to the debtor which is made with the approval of the trustee and within such period as the trustee may determine 7but in no event more than sixty days after the publication of notice under section #h7;a774 7,b7 ,treatment of certain commodity futures contracts ,a claim for a commodity futures contract received1 acquired1 or held in a portfolio margining account pursuant to a portfolio margining program approved by the ,commission or a claim for a security futures contract1 shall be deemed to be a claim with respect to such contract as of the filing date1 and such claim shall be treated as a claim for cash4 7,c7 ,treatment of accounts held by a customer in separate capacities ,in determining net equity under this paragraph1 accounts held by a customer in separate capacities shall be deemed to be accounts of separate customers4 7,d7 ,reliance on final customer statement 7i7 ,in general ,in determining net equity under this paragraph1 the positions1 options1 and contracts of a customer reported to the customer as held by the debtor1 and any indebtedness of the customer to the debtor1 shall be determined based on-- 7,i7 the information contained in the last statement issued by the debtor to the customer before the filing date2 and 7,,ii7 any additional written confirmations of the customer's positions1 options1 contracts1 or indebtedness received after such last statement but before the filing date4 7ii7 ,exception when debtor's records indicate higher value ,notwithstanding clause 7i71 if the books and records of the debtor indicate that the net value of a customer's positions1 options1 and contracts reported to the customer as held by the debtor1 and any indebtedness of the customer to the debtor1 is greater than the net value of the customer as calculated under clause 7i7 using the customer's last statement1 then the determination of the net equity of the customer under this paragraph shall be done using the books and records of the debtor instead of the customer's last statement4 7iii7 ,fraud exception ,the provisions of this subparagraph shall not apply to any customer that-- 7,i7 knew the debtor was involved in fraudulent activity with respect to any customer of the debtor which reasonably indicated a fraud adversely affecting a substantial number of customers2 or 7,,ii7 was a person that-- 7aa7 was1 or was required to be1 registered-- 7,,aa7 as a broker or dealer under the ,securities ,exchange ,act of #aicd2 or 7,,bb7 as an investment adviser under the ,investment ,advisers ,act of #aidj1 or that would have been required to register as an investment adviser under the ,investment ,advisers ,act of #aidj but for section #bjc7m7 of such ,act2 7bb7 knew1 or1 due to the activities of such person causing such person to be described under item 7aa71 should have known1 that the debtor was involved in fraudulent activity with respect to any customer of the debtor2 and 7cc7 did not notify ,,sipc1 the ,commission1 or law enforcement personnel that the debtor was involved in such fraudulent activity4 4 7b7 ,allocation of customer property to customers ,section #h7;c7 of the ,securities ,investor ,protection ,act of #aigj 7#ae ,u4,s4,c4 #gh;fff-#b7;c77 is amended-- 7#a7 in paragraph 7#a71 by amending subparagraph 7,b7 to read as follows3 7,b7 second1 to customers of such debtor1 as described under paragraph 7#d72 2 and 7#b7 by adding at the end the following3 7#d7 ,allocation of customer property to customers 7,a7 ,in general ,allocations of customer property to customers under paragraph 7#a77;,b7 shall be made such that customers share in customer property based on a methodology-- 7i7 based on the net equity of a customer1 as determined using the last statement issued by the debtor to the customer before the filing date2 7ii7 determined by the trustee1 in consultation with the ,commission2 and 7iii7 approved by the court4 7,b7 ,alternate methodology ,if the trustee determines that allocating customer property in accordance with subparagraph 7,a7 would be unfair and inequitable to a substantial segment of customers and would not fully serve the remedial purposes of this ,act1 allocations of customer property to customers under paragraph 7#a77;,b7 shall be made such that customers share in customer property based on a fair and reasonable methodology1 with special consideration for the typical1 non-professional investor1 that-- 7i7 if the trustee determines that it is necessary in order to reach a fair and reasonable result1 is determined without regard to section #af7aa77;,d72 7ii7 is determined by the trustee1 in consultation with the ,commission2 and 7iii7 is approved by the court4 7,c7 ,public notice and comment ,before approving a proposed methodology under subparagraph 7,a77ii7 or subparagraph 7,b77ii71 the court shall-- 7i7 notify customers and other interested parties that the court is considering the proposed methodology2 and 7ii7 provide the customers and interested parties an opportunity to provide comments on the proposed methodology4 4 7c7 ,prohibition on certain recoveries 7#a7 ,in general ,section #h of the ,securities ,investor ,protection ,act of #aigj 7#ae ,u4,s4,c4 #gh;fff-#b7 is amended by adding at the end the following new subsection3 7g7 ,prohibition on certain recoveries ,notwithstanding any other provision of this ,act1 a trustee may not recover any property transferred by the debtor to a customer before the filing date unless1 at the time of such transfer1 such customer-- 7#a7 knew the debtor was involved in fraudulent activity with respect to any customer of the debtor which reasonably indicated a fraud adversely affecting a substantial number of customers2 or 7#b7 was a person that-- 7,a7 was1 or was required to be1 registered-- 7i7 as a broker or dealer under the ,securities ,exchange ,act of #aicd2 or 7ii7 as an investment adviser under the ,investment ,advisers ,act of #aidj1 or that would have been required to register as an investment adviser under the ,investment ,advisers ,act of #aidj but for section #bjc7m7 of such ,act2 7,b7 knew1 or1 due to the activities of such person causing such person to be described under subparagraph 7,a71 should have known1 that the debtor was involved in fraudulent activity with respect to any customer of the debtor2 and 7,c7 did not notify ,,sipc1 the ,commission1 or law enforcement personnel that the debtor was involved in such fraudulent activity4 4 7#b7 ,construction ,nothing in this ,act1 or the amendments made by this ,act1 shall be construed as prohibiting a trustee appointed under the ,securities ,investor ,protection ,act of #aigj from recovering property transferred by a debtor to a person who is not a customer of the debtor4 7d7 ,appointment of trustees 7#a7 ,in general ,section #e7;b77#c7 of the ,securities ,investor ,protection ,act of #aigj 7#ae ,u4,s4,c4 #gh;eee7b77#c77 is amended to read as follows3 7#c7 ,appointment of trustee and attorney 7,a7 ,in general ,if the court issues a protective decree under paragraph 7#a71 such court shall forthwith appoint1 as trustee for the liquidation of the business of the debtor and as attorney for the trustee1 such persons as the court determines best fit to serve as trustee and as attorney from among the persons selected by the ,commission pursuant to subparagraph 7,b74 ,the persons appointed as trustee and as attorney for the trustee may be associated with the same firm4 7,b7 ,commission ,candidates ,the ,commission shall maintain a list of candidates for the position of trustee and attorney for the trustee for a debtor in a liquidation proceedings1 and shall periodically update the list1 as appropriate4 ,with respect to a debtor and upon the court issuing a protective decree under paragraph 7#a71 the ,commission shall forthwith provide the court with such list4 7,c7 ,disinterest requirement ,no person may be appointed to serve as trustee or attorney for the trustee if such person is not disinterested within the meaning of paragraph 7#f71 except that for any specified purpose other than to represent a trustee in conducting a liquidation proceeding1 the trustee may1 with the approval of ,,sipc and the court1 employ an attorney who is not disinterested4 7,d7 ,qualification ,a trustee appointed under this paragraph shall qualify by filing a bond in the manner prescribed by section #cbb of title #aa1 ,united ,states ,code1 except that neither ,,sipc nor any employee of ,,sipc shall be required to file a bond when appointed as trustee4 7,e7 ,prohibition on trustee serving in multiple liquidations ,a trustee may not be appointed under this paragraph if the trustee is currently serving as trustee for the liquidation of the business of another debtor under this ,act4 4 7#b7 ,compensation for trustee and attorney ,section #e7;b77#e7 of the ,securities ,investor ,protection ,act of #aigj 7#ae ,u4,s4,c4 #gh;eee7b77#e77 is amended-- 7,a7 in subparagraph 7,a71 by adding at the end the following3 ,the court shall publicly disclose all such allowances that are granted42 7,b7 by amending subparagraph 7,c7 to read as follows3 7,c7 ,awarding of allowances ,whenever an application for allowances is filed pursuant to subparagraph 7,b71 the court shall determine the amount of allowances1 giving due consideration to the nature1 extent1 and value of the services rendered4 2 and 7,c7 by adding at the end the following3 7,f7 ,,sipc disclosures ,,sipc shall issue quarterly public reports on-- 7i7 all payments made by ,,sipc to the trustee2 7ii7 all other costs in connection with the liquidation proceeding1 including legal and accounting costs2 and 7iii7 all additional expenses incurred by ,,sipc1 and the nature of such expenses4 4 7#c7 ,effective date ,the amendment made this subsection shall take effect with respect to trustees and attorneys appointed after the date of the enactment of this ,act4 7e7 ,definition of customer status ,section #af7b77;,b7 of the ,securities ,investor ,protection ,act of #aigj 7#ae ,u4,s4,c4 #ghlll7#b77;,b77 is amended-- 7#a7 in clause 7ii71 by striking 82 and0 and inserting a semicolon2 7#b7 in clause 7iii71 by striking the period at the end and inserting a semicolon2 and 7#c7 by adding at the end the following new clauses3 7iv7 any person that had cash or securities that were converted or otherwise misappropriated by the debtor 7or any person who controls1 is controlled by1 or is under common control with the debtor1 if such person was operating through the debtor71 irrespective of whether the debtor held or otherwise had custody1 possession1 or control of such cash or securities2 and 7v7 any other person that the ,commission1 in its discretion and without any need for court approval1 deems a customer of the debtor4 4 7f7 ,determination of need of protection ,section #e of the ,securities ,investor ,protection ,act of #aigj 7#ae ,u4,s4,c4 #gh;eee7 is amended-- 7#a7 in subsection 7a77#c7-- 7,a7 by amending the heading for such paragraph by inserting the ,commission or before sipc2 7,b7 in the first subparagraph 7,a7-- 7i7 by inserting ,the ,commission or before ,,sipc may2 and 7ii7 by inserting the ,commission or before ,,sipc determines2 and 7,c7 by redesignating the second subparagraph 7,a7 and the first subparagraph 7,b7 as clauses 7i7 and 7ii71 respectively1 and moving such clauses #b ems to the right2 and 7#b7 in subsection 7b77#a71 by striking application by ,,sipc and inserting application by the ,commission or ,,sipc4 7g7 ,timing of ,,sipc advances2 ,result of delay ,section #i of the ,securities ,investor ,protection ,act of #aigj 7#ae ,u4,s4,c4 #gh;fff-#c7 is amended by adding at the end the following3 7f7 ,timing of ,,sipc advances2 ,result of delay 7#a7 ,in general ,,sipc advances made to satisfy customer claims pursuant to subsection 7a7 shall be made before the end of the #c-month period beginning on the date that is the end of the #f-month period described under section #h7;a77#c71 plus the amount of any extension granted under such paragraph4 7#b7 ,result of delay ,if ,,sipc fails to make advances to the trustee in the period specified in paragraph 7#a71 then for purposes of calculating a customer's net equity under this ,act1 interest shall accrue beginning on the date that is the end of the #c-month period specified in paragraph 7#a74 7#c7 ,court determination ,if the trustee determines that enough information has been provided to ,,sipc to make an advance pursuant to subsection 7a71 the trustee may petition the court to have the court direct ,,sipc to make such advance4 4 7h7 ,timing of payments to customers ,section #h7;b7 of the ,securities ,investor ,protection ,act of #aigj 7#ae ,u4,s4,c4 #gh;fff-#b7;b77 is amended-- 7#a7 in paragraph 7#a71 by striking and at the end2 7#b7 in paragraph 7#b71 by striking the period at the end and inserting a semicolon2 and 7#c7 by inserting after paragraph 7#b7 the following3 7#c7 upon petition by a customer1 order the trustee to carry out the obligations of the trustee under this subsection with respect to such customer2 and 7#d7 if the court determines that the trustee has improperly delayed carrying out the obligations of the trustee under this subsection1 impose financial sanctions on the trustee4 4 7i7 ,commission authority ,to require ,,sipc action ,section #aa7;b7 of the ,securities ,investor ,protection ,act of #aigj 7#ae ,u4,s4,c4 #gh;ggg7b77 is amended to read as follows3 7b7 ,commission authority ,to require ,,sipc action ,in the event of the refusal of ,,sipc to commit its funds or otherwise to act for the protection of customers of any member of ,,sipc1 the ,commission may require ,,sipc to discharge its obligations under this ,act without court approval4 4 7j7 ,limitation on ,,sec loans to ,,sipc ,section #d7;g7 of the ,securities ,investor ,protection ,act of #aigj 7#ae ,u4,s4,c4 #gh;ddd7g77 is amended by inserting after this ,act the following3 and the ,commission1 in consultation with the ,secretary of the ,treasury1 determines that ,,sipc is unable to borrow in the public debt markets at reasonable terms 7both as to yield and maturity74 7k7 ,inspection of ,,sipc members by ,,sec and self-,regulatory organizations 7#a7 ,in general ,the ,securities ,investor ,protection ,act of #aigj 7#ae ,u4,s4,c4 #gh;aaa et seq47 is amended-- 7,a7 in section #aa1 by adding at the end the following3 7e7 ,inspection of ,,sipc members by ,,sec ,the ,commission shall carry out periodic inspections of ,,sipc members to ensure that the information such members provide to customers1 including information contained in account statements and transaction confirmations1 is accurate4 2 and 7,b7 in section #ac7;c7-- 7i7 by redesignating paragraphs 7#a7 and 7#b7 as subparagraphs 7,a7 and 7,b71 respectively1 and moving such subparagraphs #b ems to the right2 7ii7 by striking ,the self-regulatory organization and inserting the following3 7#a7 ,in general ,the self-regulatory organization 2 and 7iii7 by adding at the end the following3 7#b7 ,inspection of information provided to customers ,under such regulations as the ,commission may prescribe1 the self-regulatory organization of which a member of ,,sipc is a member or in which it is a participant shall inspect or examine such member to-- 7,a7 assess the financial stability of such member2 and 7,b7 ensure that the information such member provides to customers1 including information contained in account statements and transaction confirmations1 is accurate4 4 7#b7 ,report ,not later than the end of the #a-year period beginning on the date of the enactment of this ,act1 the ,securities and ,exchange ,commission shall issue a report to the ,committee on ,financial ,services of the ,house of ,representatives and the ,committee on ,banking1 ,housing1 and ,urban ,affairs of the ,senate on the implementation of the amendments made by this subsection4 #c4 ,effective date ,except as provided under section #b7;d77#c71 the amendments made by section #b shall take effect with respect to a liquidation proceeding under the ,securities ,investor ,protection ,act of #aigj that-- 7#a7 was in progress on the date of the enactment of this ,act2 or 7#b7 is initiated after the date of the enactment of this ,act4