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§ 766. Treatment of cus­tom­er prop­er­ty

(a) Margin calls

(b) Delivery ob­li­ga­tions un­der open com­mod­i­ty con­tracts

(c) Return to cus­tom­er of spe­cif­i­cal­ly iden­ti­fi­able se­cu­ri­ty

(d) Cash de­pos­it by cus­tom­er if val­ue of prop­er­ty ex­ceeds cus­tom­er enti­tlement

(e) Obligation to liq­ui­date cer­tain com­mod­i­ty con­tracts

(f) Obligation to liq­ui­date prop­er­ty oth­er than com­mod­i­ty con­tracts

(g) Lim­itation on dis­tri­bu­tion of se­cu­ri­ties

(h) Pro rata dis­tri­bu­tion of cus­tom­er prop­er­ty +

(i) Distribution of prop­er­ty if debt­or is clear­ing or­ga­ni­za­tion +

(j) Rules for dis­tri­bu­tion of ex­cess prop­er­ty

(a) The trust­ee shall an­swer all mar­gin calls with re­spect to a spe­cif­i­cal­ly iden­ti­fi­able com­mod­i­ty con­tract of a cus­tom­er un­til such time as the trust­ee re­turns or trans­fers such com­mod­i­ty con­tract, but the trust­ee may not make a mar­gin pay­ment that has the ef­fect of a dis­tri­bu­tion to such cus­tom­er of more than that to which such cus­tom­er is en­ti­tled un­der sub­sec­tion (h) or (i) of this sec­tion.

(b) The trust­ee shall pre­vent any open com­mod­i­ty con­tract from re­main­ing open af­ter the last day of trad­ing in such com­mod­i­ty con­tract, or into the first day on which no­tice of in­tent to de­liv­er on such com­mod­i­ty con­tract may be ten­dered, which­ev­er oc­curs first. With re­spect to any com­mod­i­ty con­tract that has re­mained open af­ter the last day of trad­ing in such com­mod­i­ty con­tract or with re­spect to which de­liv­ery must be made or ac­cepted un­der the rules of the con­tract mar­ket on which such com­mod­i­ty con­tract was made, the trust­ee may op­er­ate the busi­ness of the debt­or for the pur­pose of—

(1) ac­cept­ing or mak­ing ten­der of no­tice of in­tent to de­liv­er the phys­i­cal com­mod­i­ty un­der­ly­ing such com­mod­i­ty con­tract;

(2) fa­cil­i­tat­ing de­liv­ery of such com­mod­i­ty; or

(3) dis­pos­ing of such com­mod­i­ty if a par­ty to such com­mod­i­ty con­tract de­faults.

(c) The trust­ee shall re­turn prompt­ly to a cus­tom­er any spe­cif­i­cal­ly iden­ti­fi­able se­cu­ri­ty, prop­er­ty, or com­mod­i­ty con­tract to which such cus­tom­er is en­ti­tled, or shall trans­fer, on such cus­tom­er's be­half, such se­cu­ri­ty, prop­er­ty, or com­mod­i­ty con­tract to a com­mod­i­ty bro­ker that is not a debt­or un­der this ti­tle, sub­ject to such rules or reg­u­la­tions as the Com­mis­sion may pre­scribe, to the ex­tent that the val­ue of such se­cu­ri­ty, prop­er­ty, or com­mod­i­ty con­tract does not ex­ceed the amount to which such cus­tom­er would be en­ti­tled un­der sub­sec­tion (h) or (i) of this sec­tion if such se­cu­ri­ty, prop­er­ty, or com­mod­i­ty con­tract were not re­turned or trans­fer­red un­der this sub­sec­tion.

(d) If the val­ue of a spe­cif­i­cal­ly iden­ti­fi­able se­cu­ri­ty, prop­er­ty, or com­mod­i­ty con­tract ex­ceeds the amount to which the cus­tom­er of the debt­or is en­ti­tled un­der sub­sec­tion (h) or (i) of this sec­tion, then such cus­tom­er to whom such se­cu­ri­ty, prop­er­ty, or com­mod­i­ty con­tract is spe­cif­i­cal­ly iden­ti­fied may de­pos­it cash with the trust­ee equal to the dif­fer­ence be­tween the val­ue of such se­cu­ri­ty, prop­er­ty, or com­mod­i­ty con­tract and such amount, and the trust­ee then shall—

(1) re­turn prompt­ly such se­cu­ri­ty, prop­er­ty, or com­mod­i­ty con­tract to such cus­tom­er; or

(2) trans­fer, on such cus­tom­er's be­half, such se­cu­ri­ty, prop­er­ty, or com­mod­i­ty con­tract to a com­mod­i­ty bro­ker that is not a debt­or un­der this ti­tle, sub­ject to such rules or reg­u­la­tions as the Com­mis­sion may pre­scribe.

(e) Sub­ject to sub­sec­tion (b) of this sec­tion, the trust­ee shall liq­ui­date any com­mod­i­ty con­tract that—

(1) is iden­ti­fied to a par­tic­u­lar cus­tom­er and with re­spect to which such cus­tom­er has not time­ly in­structed the trust­ee as to the de­sired dis­po­si­tion of such com­mod­i­ty con­tract;

(2) can­not be trans­fer­red un­der sub­sec­tion (c) of this sec­tion; or

(3) can­not be iden­ti­fied to a par­tic­u­lar cus­tom­er.

(f) As soon as prac­ti­ca­ble af­ter the com­mence­ment of the case, the trust­ee shall re­duce to mon­ey, con­sis­tent with good mar­ket prac­tice, all se­cu­ri­ties and oth­er prop­er­ty, oth­er than com­mod­i­ty con­tracts, held as prop­er­ty of the es­tate, ex­cept for spe­cif­i­cal­ly iden­ti­fi­able se­cu­ri­ties or prop­er­ty dis­trib­ut­able un­der sub­sec­tion (h) or (i) of this sec­tion.

(g) The trust­ee may not dis­trib­ute a se­cu­ri­ty or oth­er prop­er­ty ex­cept un­der sub­sec­tion (h) or (i) of this sec­tion.

(h) Ex­cept as pro­vided in sub­sec­tion (b) of this sec­tion, the trust­ee shall dis­trib­ute cus­tom­er prop­er­ty rat­ably to cus­tom­ers on the ba­sis and to the ex­tent of such cus­tom­ers' al­lowed net eq­ui­ty claims, and in pri­or­i­ty to all oth­er claims, ex­cept claims of a kind spe­ci­fied in sec­tion 507(a)(1)(2) of this ti­tle that are at­trib­ut­able to the ad­min­is­tra­tion of cus­tom­er prop­er­ty. Such dis­tri­bu­tion shall be in the form of—

(1) cash;

(2) the re­turn or trans­fer, un­der sub­sec­tion (c) or (d) of this sec­tion, of spe­cif­i­cal­ly iden­ti­fi­able cus­tom­er se­cu­ri­ties, prop­er­ty, or com­mod­i­ty con­tracts; or

(3) pay­ment of mar­gin calls un­der sub­sec­tion (a) of this sec­tion. Not­with­stand­ing any oth­er pro­vi­sion of this sub­sec­tion, a cus­tom­er net eq­ui­ty claim based on a pro­pri­e­tary ac­count, as de­fined by Com­mis­sion rule, reg­u­la­tion, or or­der, may not be paid ei­ther in whole or in part, di­rect­ly or in­di­rect­ly, out of cus­tom­er prop­er­ty un­less all oth­er cus­tom­er net eq­ui­ty claims have been paid in full.

(i) If the debt­or is a clear­ing or­ga­ni­za­tion, the trust­ee shall dis­trib­ute—

(1) cus­tom­er prop­er­ty, oth­er than mem­ber prop­er­ty, rat­ably to cus­tom­ers on the ba­sis and to the ex­tent of such cus­tom­ers' al­lowed net eq­ui­ty claims based on such cus­tom­ers' ac­counts oth­er than pro­pri­e­tary ac­counts, and in pri­or­i­ty to all oth­er claims, ex­cept claims of a kind spe­ci­fied in sec­tion 507(a)(1)(2) of this ti­tle that are at­trib­ut­able to the ad­min­is­tra­tion of such cus­tom­er prop­er­ty; and

(2) mem­ber prop­er­ty rat­ably to cus­tom­ers on the ba­sis and to the ex­tent of such cus­tom­ers' al­lowed net eq­ui­ty claims based on such cus­tom­ers' pro­pri­e­tary ac­counts, and in pri­or­i­ty to all oth­er claims, ex­cept claims of a kind spe­ci­fied in sec­tion 507(a)(1)(2) of this ti­tle that are at­trib­ut­able to the ad­min­is­tra­tion of mem­ber prop­er­ty or cus­tom­er prop­er­ty.

(j)(1) The trust­ee shall dis­trib­ute cus­tom­er prop­er­ty in ex­cess of that dis­trib­uted un­der sub­sec­tion (h) or (i) of this sec­tion in ac­cor­dance with sec­tion 726 of this ti­tle.

(2) Ex­cept as pro­vided in sec­tion 510 of this ti­tle, if a cus­tom­er is not paid the full amount of such cus­tom­er's al­lowed net eq­ui­ty claim from cus­tom­er prop­er­ty, the un­paid por­tion of such claim is a claim en­ti­tled to dis­tri­bu­tion un­der sec­tion 726 of this ti­tle.

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2619; Pub. L. 97-222, § 19, July 27, 1982, 96 Stat. 240; Pub. L. 98-353, ti­tle III, § 489, July 10, 1984, 98 Stat. 383; Pub. L. 109-8, Title XV, § 1502(a)(4), April 20, 2005, 119 Stat. 216.)

HISTORICAL AND REVISION NOTES (11 U.S.C. § 766)

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Page Last Updated:  April 28, 2013