---
kind: "section"
citation: "15 U.S.C. § 78fff–2"
title: "15"
title_heading: "Commerce and Trade"
number: "78fff–2"
heading: "Special provisions of a liquidation proceeding"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/15/78fff-2"
units:
  - "Chapter 2B–1 — Securities Investor Protection"
---

# §78fff–2. Special provisions of a liquidation proceeding

- (a) **Notice and claims—**
  - (1) **Notice of proceedings—** Promptly after the appointment of the trustee, such trustee shall cause notice of the commencement of proceedings under this section to be published in one or more newspapers of general circulation in the form and manner determined by the court, and at the same time shall cause a copy of such notice to be mailed to each [person](/usc/15/7a.md?p=6) who, from the books and records of the [debtor](/usc/15/78lll.md?p=5), appears to have been a [customer](/usc/15/78lll.md?p=2-A) of the [debtor](/usc/15/78lll.md?p=5) with an open account within the past twelve months, to the address of such [person](/usc/15/7a.md?p=6) as it appears from the books and records of the [debtor](/usc/15/78lll.md?p=5). Notice to creditors other than [customers](/usc/15/78lll.md?p=2-A) shall be given in the manner prescribed by [title 11](/usc/11.md), except that such notice shall be given by the trustee.
  - (2) **Statement of claim—** A [customer](/usc/15/78lll.md?p=2-A) shall file with the trustee a written statement of claim but need not file a formal proof of claim, except that no obligation of the [debtor](/usc/15/78lll.md?p=5) to any [person](/usc/15/7a.md?p=6) associated with the [debtor](/usc/15/78lll.md?p=5) within the meaning of [section 78c(a)(18) of this title](/usc/15/78c.md?p=a-18) or [section 78c(a)(21) of this title](/usc/15/78c.md?p=a-21), any beneficial owner of 5 per centum or more of the voting stock of the [debtor](/usc/15/78lll.md?p=5), or any member of the immediate family of any such [person](/usc/15/7a.md?p=6) or owner may be satisfied without formal proof of claim.
  - (3) **Time limitations—** No claim of a [customer](/usc/15/78lll.md?p=2-A) or other creditor of the [debtor](/usc/15/78lll.md?p=5) which is received by the trustee after the expiration of the six-month period beginning on the date of publication of notice under [paragraph (1)](#a-1) shall be allowed, except that the court may, upon application within such period and for cause shown, grant a reasonable, fixed extension of time for the filing of a claim by the United States, by a [State](/usc/15/15g.md?p=2) or political subdivision thereof, or by an infant or incompetent [person](/usc/15/7a.md?p=6) without a guardian. Any claim of a [customer](/usc/15/78lll.md?p=2-A) for [net equity](/usc/15/78lll.md?p=11) which is received by the trustee after the expiration of such period of time as may be fixed by the court (not exceeding sixty days after the date of publication of notice under [paragraph (1)](#a-1)) need not be paid or satisfied in whole or in part out of [customer property](/usc/15/78lll.md?p=4), and, to the extent such claim is satisfied from moneys advanced by SIPC, it shall be satisfied in cash or [securities](/usc/15/78lll.md?p=14) (or both) as the trustee determines is most economical to the estate.
  - (4) **Effect on claims—** Except as otherwise provided in this section, and without limiting the powers and duties of the trustee to discharge obligations promptly as specified in this section, nothing in this section shall limit the right of any [person](/usc/15/7a.md?p=6), including any subrogee, to establish by formal proof or otherwise as the court may provide such claims as such [person](/usc/15/7a.md?p=6) may have against the [debtor](/usc/15/78lll.md?p=5), including claims for the payment of money and the delivery of specific [securities](/usc/15/78lll.md?p=14), without resort to moneys advanced by SIPC to the trustee.
- (b) **Payments to customers—** After receipt of a written statement of claim pursuant to [subsection (a)(2)](#a-2), the trustee shall promptly discharge, in accordance with the provisions of this section, all obligations of the [debtor](/usc/15/78lll.md?p=5) to a [customer](/usc/15/78lll.md?p=2-A) relating to, or [net equity](/usc/15/78lll.md?p=11) claims based upon, [securities](/usc/15/78lll.md?p=14) or cash, by the delivery of [securities](/usc/15/78lll.md?p=14) or the making of payments to or for the account of such [customer](/usc/15/78lll.md?p=2-A) (subject to the provisions of [subsection (d)](#d) and [section 78fff–3(a) of this title](/usc/15/78fff–3.md?p=a)) insofar as such obligations are ascertainable from the books and records of the [debtor](/usc/15/78lll.md?p=5) or are otherwise established to the satisfaction of the trustee. For purposes of distributing [securities](/usc/15/78lll.md?p=14) to [customers](/usc/15/78lll.md?p=2-A), all [securities](/usc/15/78lll.md?p=14) shall be valued as of the close of business on the [filing date](/usc/15/78lll.md?p=7). For purposes of this subsection, the court shall, among other things—
  - (1) with respect to [net equity](/usc/15/78lll.md?p=11) claims, authorize the trustee to satisfy claims out of moneys made available to the trustee by SIPC notwithstanding the fact that there has not been any showing or determination that there are sufficient funds of the [debtor](/usc/15/78lll.md?p=5) available to satisfy such claims; and
  - (2) with respect to claims relating to, or [net equities](/usc/15/78lll.md?p=11) based upon, [securities](/usc/15/78lll.md?p=14) of a class and series of an issuer which are ascertainable from the books and records of the [debtor](/usc/15/78lll.md?p=5) or are otherwise established to the satisfaction of the trustee, authorize the trustee to deliver [securities](/usc/15/78lll.md?p=14) of such class and series if and to the extent available to satisfy such claims in whole or in part, with partial deliveries to be made pro rata to the greatest extent considered practicable by the trustee.

  Any payment or delivery of property pursuant to this subsection may be conditioned upon the trustee requiring [claimants](/usc/15/7a.md?p=4) to execute, in a form to be determined by the trustee, appropriate receipts, supporting affidavits, releases, and assignments, but shall be without prejudice to any right of a [claimant](/usc/15/7a.md?p=4) to file formal proof of claim within the period specified in [subsection (a)(3)](#a-3) for any balance of [securities](/usc/15/78lll.md?p=14) or cash to which such [claimant](/usc/15/7a.md?p=4) considers himself entitled.

- (c) **Customer related property—**
  - (1) **Allocation of customer property—** The trustee shall allocate [customer property](/usc/15/78lll.md?p=4) of the [debtor](/usc/15/78lll.md?p=5) as follows:
    - (A) first, to SIPC in repayment of advances made by SIPC pursuant to [section 78fff–3(c)(1) of this title](/usc/15/78fff–3.md?p=c-1), to the extent such advances recovered [securities](/usc/15/78lll.md?p=14) which were apportioned to [customer property](/usc/15/78lll.md?p=4) pursuant to [section 78fff(d) of this title](/usc/15/78fff.md?p=d);
    - (B) second, to [customers](/usc/15/78lll.md?p=2-A) of such [debtor](/usc/15/78lll.md?p=5), who shall share ratably in such [customer property](/usc/15/78lll.md?p=4) on the basis and to the extent of their respective [net equities](/usc/15/78lll.md?p=11);
    - (C) third, to SIPC as subrogee for the claims of [customers](/usc/15/78lll.md?p=2-A);
    - (D) fourth, to SIPC in repayment of advances made by SIPC pursuant to [section 78fff–3(c)(2) of this title](/usc/15/78fff–3.md?p=c-2).

    Any [customer property](/usc/15/78lll.md?p=4) remaining after allocation in accordance with this paragraph shall become part of the general estate of the [debtor](/usc/15/78lll.md?p=5). To the extent [customer property](/usc/15/78lll.md?p=4) and SIPC advances pursuant to [section 78fff–3(a) of this title](/usc/15/78fff–3.md?p=a) are not sufficient to pay or otherwise satisfy in full the [net equity](/usc/15/78lll.md?p=11) claims of [customers](/usc/15/78lll.md?p=2-A), such [customers](/usc/15/78lll.md?p=2-A) shall be entitled, to the extent only of their respective unsatisfied [net equities](/usc/15/78lll.md?p=11), to participate in the general estate as unsecured creditors. For purposes of allocating [customer property](/usc/15/78lll.md?p=4) under this paragraph, [securities](/usc/15/78lll.md?p=14) to be delivered in payment of [net equity](/usc/15/78lll.md?p=11) claims for [securities](/usc/15/78lll.md?p=14) of the same class and series of an issuer shall be valued as of the close of business on the [filing date](/usc/15/78lll.md?p=7).

  - (2) **Delivery of customer name securities—** The trustee shall deliver [customer name securities](/usc/15/78lll.md?p=3) to or on behalf of a [customer](/usc/15/78lll.md?p=2-A) of the [debtor](/usc/15/78lll.md?p=5) entitled thereto if the [customer](/usc/15/78lll.md?p=2-A) is not indebted to the [debtor](/usc/15/78lll.md?p=5). If the [customer](/usc/15/78lll.md?p=2-A) is so indebted, such [customer](/usc/15/78lll.md?p=2-A) may, with the approval of the trustee, reclaim [customer name securities](/usc/15/78lll.md?p=3) upon payment to the trustee, within such period of time as the trustee determines, of all indebtedness of such [customer](/usc/15/78lll.md?p=2-A) to the [debtor](/usc/15/78lll.md?p=5).
  - (3) **Recovery of transfers—** Whenever [customer property](/usc/15/78lll.md?p=4) is not sufficient to pay in full the claims set forth in subparagraphs [(A)](#c-1-A) through [(D)](#c-1-D) of paragraph (1), the trustee may recover any property transferred by the [debtor](/usc/15/78lll.md?p=5) which, except for such transfer, would have been [customer property](/usc/15/78lll.md?p=4) if and to the extent that such transfer is voidable or void under the provisions of title 11. Such recovered property shall be treated as [customer property](/usc/15/78lll.md?p=4). For purposes of such recovery, the property so transferred shall be deemed to have been the property of the [debtor](/usc/15/78lll.md?p=5) and, if such transfer was made to a [customer](/usc/15/78lll.md?p=2-A) or for his benefit, such [customer](/usc/15/78lll.md?p=2-A) shall be deemed to have been a creditor, the laws of any [State](/usc/15/15g.md?p=2) to the contrary notwithstanding.
- (d) **Purchase of securities—** The trustee shall, to the extent that [securities](/usc/15/78lll.md?p=14) can be purchased in a fair and orderly market, purchase [securities](/usc/15/78lll.md?p=14) as necessary for the delivery of [securities](/usc/15/78lll.md?p=14) to [customers](/usc/15/78lll.md?p=2-A) in satisfaction of their claims for [net equities](/usc/15/78lll.md?p=11) based on [securities](/usc/15/78lll.md?p=14) under [section 78fff–1(b)(1) of this title](/usc/15/78fff–1.md?p=b-1) and for the transfer of [customer](/usc/15/78lll.md?p=2-A) accounts under [subsection (f)](#f), in order to restore the accounts of such [customers](/usc/15/78lll.md?p=2-A) as of the [filing date](/usc/15/78lll.md?p=7). To the extent consistent with [subsection (c)](#c), [customer property](/usc/15/78lll.md?p=4) and moneys advanced by SIPC may be used by the trustee to pay for [securities](/usc/15/78lll.md?p=14) so purchased. Moneys advanced by SIPC for each account of a separate [customer](/usc/15/78lll.md?p=2-A) may not be used to purchase [securities](/usc/15/78lll.md?p=14) to the extent that the aggregate value of such [securities](/usc/15/78lll.md?p=14) on the [filing date](/usc/15/78lll.md?p=7) exceeded the amount permitted to be advanced by SIPC under the provisions of [section 78fff–3(a) of this title](/usc/15/78fff–3.md?p=a).
- (e) **Closeouts—**
  - (1) **In general—** Any contract of the [debtor](/usc/15/78lll.md?p=5) for the purchase or sale of [securities](/usc/15/78lll.md?p=14) in the ordinary course of its business with other brokers or dealers which is wholly executory on the [filing date](/usc/15/78lll.md?p=7) shall not be completed by the trustee, except to the extent permitted by SIPC rule. Upon the adoption by SIPC of rules with respect to the closeout of such a contract but prior to the adoption of rules with respect to the completion of such a contract, the other broker or dealer shall close out such contract, without unnecessary delay, in the best available market and pursuant to such SIPC rules. Until such time as SIPC adopts rules with respect to the completion or closeout of such a contract, such a contract shall be closed out in accordance with [Commission](/usc/15/78lll.md?p=1) Rule S6(d)–1 as in effect on May 21, 1978, or any comparable rule of the [Commission](/usc/15/78lll.md?p=1) subsequently adopted, to the extent not inconsistent with the provisions of this subsection.
  - (2) **Net profit or loss—** A broker or dealer shall net all profits and losses on all contracts closed out under this subsection and—
    - (A) if such broker or dealer shows a net profit on such contracts, he shall pay such net profit to the trustee; and
    - (B) if such broker or dealer sustains a net loss on such contracts, he shall be entitled to file a claim against the [debtor](/usc/15/78lll.md?p=5) with the trustee in the amount of such net loss.

    To the extent that a net loss sustained by a broker or dealer arises from contracts pursuant to which such broker or dealer was acting for its own [customer](/usc/15/78lll.md?p=2-A), such broker or dealer shall be entitled to receive funds advanced by SIPC to the trustee in the amount of such loss, except that such broker or dealer may not receive more than $40,000 for each separate [customer](/usc/15/78lll.md?p=2-A) with respect to whom it sustained a loss. With respect to a net loss which is not payable under the preceding sentence from funds advanced by SIPC, the broker or dealer shall be entitled to participate in the general estate as an unsecured creditor.

  - (3) **Registered clearing agencies—** Neither a registered clearing agency which by its rules has an established procedure for the closeout of open contracts between an insolvent broker or dealer and its participants, nor its participants to the extent such participants’ claims are or may be processed within the registered clearing agency, shall be entitled to receive SIPC funds in payment of any losses on such contracts, except as SIPC may otherwise provide by rule. If such registered clearing agency or its participants sustain a net loss on the closeout of such contracts with the [debtor](/usc/15/78lll.md?p=5), they shall have the right to participate in the general estate as unsecured creditors to the extent of such loss. Any funds or other property owed to the [debtor](/usc/15/78lll.md?p=5), after the closeout of such contracts, shall be promptly paid to the trustee. Rules adopted by SIPC under this paragraph shall provide that in no case may a registered clearing agency or its participants, to the extent such participants’ claims are or may be processed within the registered clearing agency, be entitled to receive funds advanced by SIPC in an amount greater, in the aggregate, than could be received by the participants if such participants proceeded individually under paragraph [(1)](#e-1) and [(2)](#e-2).
  - (4) **“Customer” defined—** For purposes of this subsection, the term “[customer](/usc/15/78lll.md?p=2-A)” does not include any [person](/usc/15/7a.md?p=6) who—
    - (A) is a broker or dealer;
    - (B) had a claim for cash or [securities](/usc/15/78lll.md?p=14) which by contract, [agreement](/usc/15/7a.md?p=2), or understanding, or by operation of law, was part of the capital of the claiming broker or dealer or was subordinated to the claims of any or all creditors of such broker or dealer; or
    - (C) had a relationship of the kind specified in [section 78fff–3(a)(5) of this title](/usc/15/78fff–3.md?p=a-5) with the [debtor](/usc/15/78lll.md?p=5).

    A claiming broker or dealer shall be deemed to have been acting on behalf of its [customer](/usc/15/78lll.md?p=2-A) if it acted as agent for such [customer](/usc/15/78lll.md?p=2-A) or if it held such [customer](/usc/15/78lll.md?p=2-A)’s order which was to be executed as a part of its contract with the [debtor](/usc/15/78lll.md?p=5).

- (f) **Transfer of customer accounts—** In order to facilitate the prompt satisfaction of [customer](/usc/15/78lll.md?p=2-A) claims and the orderly liquidation of the [debtor](/usc/15/78lll.md?p=5), the trustee may, pursuant to terms satisfactory to him and subject to the prior approval of SIPC, sell or otherwise transfer to another member of SIPC, without consent of any [customer](/usc/15/78lll.md?p=2-A), all or any part of the account of a [customer](/usc/15/78lll.md?p=2-A) of the [debtor](/usc/15/78lll.md?p=5). In connection with any such sale or transfer to another member of SIPC and subject to the prior approval of SIPC, the trustee may—
  - (1) waive or modify the need to file a written statement of claim pursuant to [subsection (a)(2)](#a-2); and
  - (2) enter into such [agreements](/usc/15/7a.md?p=2) as the trustee considers appropriate under the circumstances to indemnify any such member of SIPC against shortages of cash or [securities](/usc/15/78lll.md?p=14) in the [customer](/usc/15/78lll.md?p=2-A) accounts sold or transferred.

  The funds of SIPC may be made available to guarantee or secure any indemnification under [paragraph (2)](#f-2). The prior approval of SIPC to such indemnification shall be conditioned, among such other standards as SIPC may determine, upon a determination by SIPC that the probable cost of any such indemnification can reasonably be expected not to exceed the cost to SIPC of proceeding under [section 78fff–3(a) of this title](/usc/15/78fff–3.md?p=a) and [section 78fff–3(b) of this title](/usc/15/78fff–3.md?p=b).


## Source credit

(Pub. L. 91–598, § 8, as added Pub. L. 95–283, § 9, May 21, 1978, 92 Stat. 261; amended Pub. L. 95–598, title III, § 308(l), (m), Nov. 6, 1978, 92 Stat. 2675.)

## Notes

### Editorial Notes

### Prior Provisions

A prior section 8 of Pub. L. 91–598 was renumbered section 12 and is classified to section 78hhh of this title.

### Amendments

1978—Subsecs. (a)(1), (c)(3). Pub. L. 95–598 substituted “title 11” for “the Bankruptcy Act”.

### Statutory Notes and Related Subsidiaries

### Effective Date of 1978 Amendment

Amendment by Pub. L. 95–598 effective Oct. 1, 1979, see section 402(a) of Pub. L. 95–598, set out as an Effective Date note preceding section 101 of Title 11, Bankruptcy.