Should SIPA Trustee Have Greater Power than Chapter 7 Trustee to Pursue Third-Party Claims?

When a securities brokerage firm fails and Wits customer accounts cannot be expeditiously transferred to another firm, it can either be liquidated under the provisions of the Securities Investor Protection Act of 1970 (SIPA) or via a stockbroker liquidation proceeding under the provisions of chapter...

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Bibliographic Details
Published inAmerican Bankruptcy Institute journal Vol. 31; no. 4; p. 30
Main Authors Birney, Patrick M, Searles, Travis R
Format Journal Article
LanguageEnglish
Published Alexandria American Bankruptcy Institute 01.05.2012
Subjects
Bankruptcy
Bankruptcy laws
Common law
Court hearings & proceedings
Customers
District courts
Federal court decisions
Federal courts
Judges & magistrates
Liquidation
Provisions
Securities industry
State court decisions
Stock brokers
Trustees
United States > US
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Summary:When a securities brokerage firm fails and Wits customer accounts cannot be expeditiously transferred to another firm, it can either be liquidated under the provisions of the Securities Investor Protection Act of 1970 (SIPA) or via a stockbroker liquidation proceeding under the provisions of chapter 7. In certain respects, a liquidation proceeding under SIPA is similar to a stockbroker liquidation proceeding under chapter 7. Notably, neither the Bankruptcy Code nor SIPA expressly confer standing upon a trustee to pursue common law claims against third parties on behalf of the beneficiaries of the liquidating estates. Congress enacted SIPA in 1970 in response to a securities industry crisis that resulted from a rash of securities brokerage firm failures and left the general public demanding greater protection for the customers of such firms. To accomplish this goal, SIPA initiated the Securities Investor Protection Corp (SIPC) which, among many other functions, oversees the liquidation of member firms and, where appropriate, compensates customers of the firms from a SIPC fund.
ISSN:1931-7522