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119th Congress

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119th Congress

Title 11 — Bankruptcy

Chapter 7 — Liquidation

§ 741. Definitions for this subchapter

Statutory text

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”—

(A)

means—

(i)

a contract for the purchase, sale, or loan of a security, a certificate of deposit, a mortgage loan, any interest in a mortgage loan, a group or index of securities, certificates of deposit, or mortgage loans or interests therein (including an interest therein or based on the value thereof), or option on any of the foregoing, including an option to purchase or sell any such security, certificate of deposit, mortgage loan, interest, group or index, or option, and including any repurchase or reverse repurchase transaction on any such security, certificate of deposit, mortgage loan, interest, group or index, or option (whether or not such repurchase or reverse repurchase transaction is a “repurchase agreement”, as defined in section 101);

(ii)

any option entered into on a national securities exchange relating to foreign currencies;

(iii)

the guarantee (including by novation) by or to any securities clearing agency of a settlement of cash, securities, certificates of deposit, mortgage loans or interests therein, group or index of securities, or mortgage loans or interests therein (including any interest therein or based on the value thereof), or option on any of the foregoing, including an option to purchase or sell any such security, certificate of deposit, mortgage loan, interest, group or index, or option (whether or not such settlement is in connection with any agreement or transaction referred to in clauses (i) through (xi));

(iv)

any margin loan;

(v)

any extension of credit for the clearance or settlement of securities transactions;

(vi)

any loan transaction coupled with a securities collar transaction, any prepaid forward securities transaction, or any total return swap transaction coupled with a securities sale transaction;

(vii)

any other agreement or transaction that is similar to an agreement or transaction referred to in this subparagraph;

(viii)

any combination of the agreements or transactions referred to in this subparagraph;

(ix)

any option to enter into any agreement or transaction referred to in this subparagraph;

(x)

a master agreement that provides for an agreement or transaction referred to in clause (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), or (ix), together with all supplements to any such master agreement, without regard to whether the master agreement provides for an agreement or transaction that is not a securities contract under this subparagraph, except that such master agreement shall be considered to be a securities contract under this subparagraph only with respect to each agreement or transaction under such master agreement that is referred to in clause (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), or (ix); or

(xi)

any security agreement or arrangement or other credit enhancement related to any agreement or transaction referred to in this subparagraph, including any guarantee or reimbursement obligation by or to a stockbroker, securities clearing agency, financial institution, or financial participant in connection with any agreement or transaction referred to in this subparagraph, but not to exceed the damages in connection with any such agreement or transaction, measured in accordance with section 562; and

(B)

does not include any purchase, sale, or repurchase obligation under a participation in a commercial mortgage loan;

(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.

Legislative history

Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.

  1. Pub. L. 95–598 · 92 Stat. 2549

    Enacted · 11 U.S.C. § 741

    Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2611

    Source evidence

    Code source credit
    Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2611

  2. Pub. L. 97–222 § 8(1) · 96 Stat. 235

    1. Struck · 11 U.S.C. § 741(4)

      Pub. L. 97–222, § 8(1), struck out “at any time” after “security, or property,” in provisions preceding subpar. (A)

    2. Inserted · 11 U.S.C. § 741(4)

      Pub. L. 97–222, § 8(1), inserted “of a customer” after “claim” in subpar. (A)(ii)

    Source evidence

    Code amendment note
    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).

    Enacted provision · exact public law section
    (1) in paragraph (4)— (A) by striking out “at any time”, and (B) in subparagraph (A)(ii) by inserting “of a customer” after “claim”,

  3. Pub. L. 97–222 § 8(3) · 96 Stat. 235

    Redesignated · 11 U.S.C. § 741(5)

    Pub. L. 97–222, § 8(3), added par. (5). Former par. (5) redesignated (6)

    Source evidence

    Code amendment note
    Par. (5). Pub. L. 97–222, § 8(3), added par. (5). Former par. (5) redesignated (6).

    Enacted provision · exact public law section
    (3) by inserting after paragraph (4) the following new paragraph: “(5) ‘margin payment’ means payment or deposit of cash, a “Margin payment.” 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;”,

  4. Pub. L. 97–222 § 8(2) · 96 Stat. 235

    1. Redesignated · 11 U.S.C. § 741(6)

      Pub. L. 97–222, § 8(2), (4), redesignated former par. (5) as (6), in provisions preceding subpar. (A)

    2. Redesignated · 11 U.S.C. § 741(6)

      Pub. L. 97–222, § 8(2), (4), 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)

    Source evidence

    Code amendment note
    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).

    Enacted provision · exact public law section
    (2) by redesignating paragraphs (5) and (6) as paragraphs (6) and (9), respectively,

  5. Pub. L. 97–222 § 8(5) · 96 Stat. 235

    Added · 11 U.S.C. § 741(7); 11 U.S.C. § 741(8)

    Pub. L. 97–222, § 8(5), added pars. (7) and (8)

    Source evidence

    Code amendment note
    Pars. (7), (8). Pub. L. 97–222, § 8(5), added pars. (7) and (8).

    Enacted provision · exact public law section
    (5) by inserting after paragraph (6), as so redesignated, the following new paragraphs: “(7) ‘securities contract’ means contract for the purchase, Definitions. sale, or loan of a security, including an option for the purchase or sale of a security, 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, or any other similar payment commonly used in the securities trade; and”, and

  6. Pub. L. 97–222 § 8(2) · 96 Stat. 235

    1. Redesignated · 11 U.S.C. § 741(9)

      Pub. L. 97–222, § 8(2), (6), redesignated former par. (6) as (9)

    2. Substituted · 11 U.S.C. § 741(9)

      Pub. L. 97–222, § 8(2), (6), substituted “Securities” for “Security”

    Source evidence

    Code amendment note
    Par. (9). Pub. L. 97–222, § 8(2), (6), redesignated former par. (6) as (9) and substituted “Securities” for “Security”.

    Enacted provision · exact public law section
    (2) by redesignating paragraphs (5) and (6) as paragraphs (6) and (9), respectively,

  7. Pub. L. 98–353 § 482(1) · 98 Stat. 333

    1. Substituted · 11 U.S.C. § 741(2)(A)

      Pub. L. 98–353, § 482(1), substituted “with whom a person deals” for “with whom the debtor deals”

    2. Substituted · 11 U.S.C. § 741(2)(A)

      Pub. L. 98–353, § 482(1), substituted “that has a claim” for “that holds a claim”

    3. Substituted · 11 U.S.C. § 741(2)(A)

      Pub. L. 98–353, § 482(1), substituted “against such person” for “against the debtor”

    4. Substituted · 11 U.S.C. § 741(2)(A)

      Pub. L. 98–353, § 482(1), substituted “held by such person” for “held by the debtor”

    5. Substituted · 11 U.S.C. § 741(2)(A)

      Pub. L. 98–353, § 482(1), substituted “such person’s business as a stockbroker,” for “business as a stockbroker”

    Source evidence

    Code amendment note
    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”.

    Enacted provision · exact public law section
    (1) in paragraph (2)(A), by— (A) striking out “the debtor” the first time it appears and inserting in lieu thereof “a person”; (B) striking out “holds” and inserting in lieu thereof “has”; (C) striking out “the debtor” the second and third time it appears and inserting in lieu thereof “such person”; and (D) striking out “business as a stockbroker” and inserting in lieu thereof “such person”s business as a stockbroker,”,

  8. Pub. L. 98–353 § 482(2)(A) · 98 Stat. 333

    1. Substituted · 11 U.S.C. § 741(2)(B)

      Pub. L. 98–353, § 482(2)(A), (B), substituted “has a claim” for “holds a claim” in provisions preceding cl. (i)

    2. Substituted · 11 U.S.C. § 741(2)(B)

      Pub. L. 98–353, § 482(2)(A), (B), substituted “against a person” for “against the debtor” in provisions preceding cl. (i)

    Source evidence

    Code amendment note
    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).

    Enacted provision · exact public law section
    (A) striking out “holds” and inserting in lieu thereof “has”;

  9. Pub. L. 98–353 § 482(2)(C) · 98 Stat. 333

    Substituted · 11 U.S.C. § 741(2)(B)(ii)

    Pub. L. 98–353, § 482(2)(C), substituted “such person” for “the debtor”

    Source evidence

    Code amendment note
    Par. (2)(B)(ii). Pub. L. 98–353, § 482(2)(C), substituted “such person” for “the debtor”.

    Enacted provision · exact public law section
    (C) by striking out “the debtor” and inserting in lieu thereof “such person” in clause (ii);

  10. Pub. L. 98–353 § 482(3) · 98 Stat. 333

    Substituted · 11 U.S.C. § 741(4)(A)(i)

    Pub. L. 98–353, § 482(3), substituted “from and that is the lawful” for “and that is”

    Source evidence

    Code amendment note
    Par. (4)(A)(i). Pub. L. 98–353, § 482(3), substituted “from and that is the lawful” for “and that is”.

    Enacted provision · exact public law section
    (3) in paragraph (4)(A)(i), by striking out “and that is” and inserting in lieu thereof “from and that is the lawful”;

  11. Pub. L. 98–353 § 482(4) · 98 Stat. 333

    Inserted · 11 U.S.C. § 741(6)(A)(i)

    Pub. L. 98–353, § 482(4), inserted a comma after “petition” and “any” after “except”

    Source evidence

    Code amendment note
    Par. (6)(A)(i). Pub. L. 98–353, § 482(4), inserted a comma after “petition” and “any” after “except”.

    Enacted provision · exact public law section
    (4) in paragraph (6)(A)(i), by— (A) inserting a comma after “petition”; and (B) inserting “any” after “except”; and

  12. Pub. L. 98–353 § 482(5) · 98 Stat. 333

    1. Amended · 11 U.S.C. § 741(7)

      Pub. L. 98–353, § 482(5), amended par. (7) generally

    2. Inserted · 11 U.S.C. § 741(7)

      Pub. L. 98–353, § 482(5), 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

    Source evidence

    Code amendment note
    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.

    Enacted provision · exact public law section
    (5) in paragraph (7), by amending such paragraph to read as follows: “(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;”; and

  13. Pub. L. 98–353 § 482(6) · 98 Stat. 333

    Inserted · 11 U.S.C. § 741(8)

    Pub. L. 98–353, § 482(6), inserted “a final settlement payment,”

    Source evidence

    Code amendment note
    Par. (8). Pub. L. 98–353, § 482(6), inserted “a final settlement payment,”.

    Enacted provision · exact public law section
    (6) in paragraph (8) by inserting “a final settlement payment,” after “settlement payment on account,”.

  14. Bankruptcy Reform Act of 1994

    Pub. L. 103–394 title V § 501(d)(25) · 108 Stat. 4106

    Struck · 11 U.S.C. § 741(4)(A)(iii)

    Pub. L. 103–394 struck out “(15 U.S.C. 78a et seq.)” after “Act of 1934”

    Source evidence

    Code amendment note
    Par. (4)(A)(iii). Pub. L. 103–394 struck out “(15 U.S.C. 78a et seq.)” after “Act of 1934”.

    Enacted provision · exact public law section
    (25) in section 741(4)(A)(iii) by striking “(15 U.S.C. 78a et seq.)”,

  15. Pub. L. 109–8 title IX § 907(a)(2) · 119 Stat. 23

    1. Added · 11 U.S.C. § 741(7)

      Pub. L. 109–8 added par. (7)

    2. Struck · 11 U.S.C. § 741(7)

      Pub. L. 109–8 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;”

    Source evidence

    Code amendment note
    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;”.

    Enacted provision · exact public law section
    (2) in section 741(7), by striking paragraph (7) and inserting the following: “(7) ‘securities contract’— “(A) means— “(i) a contract for the purchase, sale, or loan of a security, a certificate of deposit, a mortgage loan or any interest in a mortgage loan, a group or index of securities, certificates of deposit, or mortgage loans or interests therein (including an interest therein or based on the value thereof), or option on any of the foregoing, including an option to purchase or sell any such security, certificate of deposit, mortgage loan, interest, group or index, or option, and including any repurchase or reverse repurchase transaction on any such security, certificate of deposit, mortgage loan, interest, group or index, or option; “(ii) any option entered into on a national securities exchange relating to foreign currencies; “(iii) the guarantee by or to any securities clearing agency of a settlement of cash, securities, certificates of deposit, mortgage loans or interests therein, group or index of securities, or mortgage loans or interests therein (including any interest therein or based on the value thereof), or option on any of the foregoing, including an option to purchase or sell any such security, certificate of deposit, mortgage loan, interest, group or index, or option; “(iv) any margin loan; “(v) any other agreement or transaction that is similar to an agreement or transaction referred to in this subparagraph; “(vi) any combination of the agreements or transactions referred to in this subparagraph; “(vii) any option to enter into any agreement or transaction referred to in this subparagraph; “(viii) a master agreement that provides for an agreement or transaction referred to in clause (i), (ii), (iii), (iv), (v), (vi), or (vii), together with all supplements to any such master agreement, without regard to whether the master agreement provides for an agreement or transaction that is not a securities contract under this subparagraph, except that such master agreement shall be considered to be a securities contract under this subparagraph only with respect to each agreement or transaction under such master agreement that is referred to in clause (i), (ii), (iii), (iv), (v), (vi), or (vii); or “(ix) any security agreement or arrangement or other credit enhancement related to any agreement or transaction referred to in this subparagraph, including any guarantee or reimbursement obligation by or to a stockbroker, securities clearing agency, financial institution, or financial participant in connection with any agreement or transaction referred to in this subparagraph, but not to exceed the damages in connection with any such agreement or transaction, measured in accordance with section 562; and “(B) does not include any purchase, sale, or repurchase obligation under a participation in a commercial mortgage loan;” ; and

  16. Financial Netting Improvements Act of 2006

    Pub. L. 109–390 § 5(a)(3)(A) · 120 Stat. 2692

    1. Substituted · 11 U.S.C. § 741(7)(A)(i)

      Pub. L. 109–390, § 5(a)(3)(A), substituted “a mortgage loan,” for “a mortgage loan or”

    2. Inserted · 11 U.S.C. § 741(7)(A)(i)

      Pub. L. 109–390, § 5(a)(3)(A), inserted “(whether or not such repurchase or reverse repurchase transaction is a ‘repurchase agreement’, as defined in section 101)” before semicolon at end

    Source evidence

    Code amendment note
    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.

    Enacted provision · exact public law section
    (A) in clause (i)— (i) by striking “mortgage loan or” and inserting “mortgage loan,”; and (ii) by inserting before the semicolon “(whether or not such repurchase or reverse repurchase transaction is a ‘repurchase agreement’, as defined in section 101)”;

    Effective date note
    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.

  17. Financial Netting Improvements Act of 2006

    Pub. L. 109–390 § 5(a)(3)(B) · 120 Stat. 2692

    Inserted · 11 U.S.C. § 741(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

    Source evidence

    Code amendment note
    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.

    Enacted provision · exact public law section
    (B) in clause (iii)— (i) by inserting “(including by novation)” after “the guarantee”; and (ii) by inserting before the semicolon “(whether or not such settlement is in connection with any agreement or transaction referred to in clauses (i) through (xi))”;

    Effective date note
    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.

  18. Financial Netting Improvements Act of 2006

    Pub. L. 109–390 § 5(a)(3)(D) · 120 Stat. 2692

    1. Added · 11 U.S.C. § 741(7)(A)(v)(vii)

      Pub. L. 109–390, § 5(a)(3)(D), (E), added cls. (v) and (vi)

    2. Redesignated · 11 U.S.C. § 741(7)(A)(v)(vii)

      Pub. L. 109–390, § 5(a)(3)(D), (E), redesignated former cl. (v) as (vii). Former cls. (vi) and (vii) redesignated (viii) and (ix), respectively

    Source evidence

    Code amendment note
    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.

    Enacted provision · exact public law section
    (D) by redesignating clauses (v) through (ix) as clauses (vii) through (xi), respectively; and

    Effective date note
    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.

  19. Financial Netting Improvements Act of 2006

    Pub. L. 109–390 § 5(a)(3)(D) · 120 Stat. 2692

    Redesignated · 11 U.S.C. § 741(7)(A)(viii)

    Pub. L. 109–390, § 5(a)(3)(D), redesignated cl. (vi) as (viii). Former cl. (viii) redesignated (x)

    Source evidence

    Code amendment note
    Par. (7)(A)(viii). Pub. L. 109–390, § 5(a)(3)(D), redesignated cl. (vi) as (viii). Former cl. (viii) redesignated (x).

    Enacted provision · exact public law section
    (D) by redesignating clauses (v) through (ix) as clauses (vii) through (xi), respectively; and

    Effective date note
    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.

  20. Financial Netting Improvements Act of 2006

    Pub. L. 109–390 § 5(a)(3)(C) · 120 Stat. 2692

    Substituted · 11 U.S.C. § 741(7)(A)(viii)

    Pub. L. 109–390, § 5(a)(3)(C), substituted “(vii), (viii), or (ix)” for “or (vii)” in two places

    Target inherited from the preceding amendment note.

    Source evidence

    Code amendment note
    Pub. L. 109–390, § 5(a)(3)(C), substituted “(vii), (viii), or (ix)” for “or (vii)” in two places.

    Enacted provision · exact public law section
    (C) in clause (viii), by striking “or (vii)” each place it appears and inserting “(vii), (viii), or (ix)”;

    Effective date note
    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.

  21. Financial Netting Improvements Act of 2006

    Pub. L. 109–390 § 5(a)(3)(D) · 120 Stat. 2692

    Redesignated · 11 U.S.C. § 741(7)(A)(ix)(xi)

    Pub. L. 109–390, § 5(a)(3)(D), redesignated cls. (vii) to (ix) as (ix) to (xi), respectively

    Source evidence

    Code amendment note
    Par. (7)(A)(ix) to (xi). Pub. L. 109–390, § 5(a)(3)(D), redesignated cls. (vii) to (ix) as (ix) to (xi), respectively.

    Enacted provision · exact public law section
    (D) by redesignating clauses (v) through (ix) as clauses (vii) through (xi), respectively; and

    Effective date note
    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.

32 of 33 references resolved to an enrolled provision · 1 partial

Notes

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 § 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.

Editorial Notes

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, 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.

Amendments1982–2006 · 5 rounds

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;”.

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, § 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”.

Statutory Notes and Related Subsidiaries

Effective Date of 2006 Amendment

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 , see section 7 of Pub. L. 109–390, set out as a note under section 101 of this title.

Effective Date of 2005 Amendment

Amendment by Pub. L. 109–8 effective 180 days after , 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.

Effective Date of 1994 Amendment

Amendment by Pub. L. 103–394 effective , and not applicable with respect to cases commenced under this title before , 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 , see section 552(a) of Pub. L. 98–353, set out as a note under section 101 of this title.

Credits

1978–2006 · 6 acts
  1. 1978Pub. L. 95–598, , 92 Stat. 2611
  2. 1982Pub. L. 97–222, § 8, , 96 Stat. 237
  3. 1984Pub. L. 98–353, title III, § 482, , 98 Stat. 382
  4. 1994Pub. L. 103–394, title V, § 501(d)(25), , 108 Stat. 4146
  5. 2005Pub. L. 109–8, title IX, § 907(a)(2), , 119 Stat. 173
  6. 2006Pub. L. 109–390, § 5(a)(3), , 120 Stat. 2697.
Show as published

(Pub. L. 95–598, , 92 Stat. 2611; Pub. L. 97–222, § 8, , 96 Stat. 237; Pub. L. 98–353, title III, § 482, , 98 Stat. 382; Pub. L. 103–394, title V, § 501(d)(25), , 108 Stat. 4146; Pub. L. 109–8, title IX, § 907(a)(2), , 119 Stat. 173; Pub. L. 109–390, § 5(a)(3), , 120 Stat. 2697.)

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