11 U.S.C. § 741

Current through P.L. 118-44 (published on www.congress.gov on 03/18/2024), except for [P. L. 118-42]

Section 741 - Definitions for this subchapter

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.

11 U.S.C. § 741

Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2611; Pub. L. 97-222, §8, July 27, 1982, 96 Stat. 237; Pub. L. 98-353, title III, §482, July 10, 1984, 98 Stat. 382; Pub. L. 103-394, title V, §501(d)(25), Oct. 22, 1994, 108 Stat. 4146; Pub. L. 109-8, title IX, §907(a)(2), Apr. 20, 2005, 119 Stat. 173; Pub. L. 109-390, §5(a)(3), Dec. 12, 2006, 120 Stat. 2697.

HISTORICAL AND REVISION NOTES

LEGISLATIVE STATEMENTSSection 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. 95-989Section 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 TEXTThe 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.

AMENDMENTS2006-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. 109-8added 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 AMENDMENTAmendment 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.

EFFECTIVE DATE OF 2005 AMENDMENTAmendment by Pub. L. 109-8 effective 180 days after Apr. 20, 2005, 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 AMENDMENTAmendment by Pub. L. 103-394 effective Oct. 22, 1994, and not applicable with respect to cases commenced under this title before Oct. 22, 1994, see section 702 of Pub. L. 103-394 set out as a note under section 101 of this title.

EFFECTIVE DATE OF 1984 AMENDMENTAmendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353 set out as a note under section 101 of this title.

attorney: The term "attorney" means attorney, professional law association, corporation, or partnership, authorized under applicable law to practice law.(4A) The term "bankruptcy assistance" means any goods or services sold or otherwise provided to an assisted person with the express or implied purpose of providing information, advice, counsel, document preparation, or filing, or attendance at a creditors' meeting or appearing in a case or proceeding on behalf of another or providing legal representation with respect to a case or proceeding under this title.
claim: The term "claim" means-(A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; or(B) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured.
debtor: The term "debtor" means person or municipality concerning which a case under this title has been commenced.(13A) The term "debtor's principal residence"-(A) means a residential structure if used as the principal residence by the debtor, including incidental property, without regard to whether that structure is attached to real property; and(B) includes an individual condominium or cooperative unit, a mobile or manufactured home, or trailer if used as the principal residence by the debtor.
entity: The term "entity" includes person, estate, trust, governmental unit, and United States trustee.
financial institution: The term "financial institution" means-(A) a Federal reserve bank, or an entity that is a commercial or savings bank, industrial savings bank, savings and loan association, trust company, federally-insured credit union, or receiver, liquidating agent, or conservator for such entity and, when any such Federal reserve bank, receiver, liquidating agent, conservator or entity is acting as agent or custodian for a customer (whether or not a "customer", as defined in section 741) in connection with a securities contract (as defined in section 741) such customer; or(B) in connection with a securities contract (as defined in section 741) an investment company registered under the Investment Company Act of 1940.(22A) The term "financial participant" means-(A) an entity that, at the time it enters into a securities contract, commodity contract, swap agreement, repurchase agreement, or forward contract, or at the time of the date of the filing of the petition, has one or more agreements or transactions described in paragraph (1), (2), (3), (4), (5), or (6) of section 561(a) with the debtor or any other entity (other than an affiliate) of a total gross dollar value of not less than $1,000,000,000 in notional or actual principal amount outstanding (aggregated across counterparties) at such time or on any day during the 15-month period preceding the date of the filing of the petition, or has gross mark-to-market positions of not less than $100,000,000 (aggregated across counterparties) in one or more such agreements or transactions with the debtor or any other entity (other than an affiliate) at such time or on any day during the 15-month period preceding the date of the filing of the petition; or(B) a clearing organization (as defined in section 402 of the Federal Deposit Insurance Corporation Improvement Act of 1991).
financial participant: The term "financial participant" means-(A) an entity that, at the time it enters into a securities contract, commodity contract, swap agreement, repurchase agreement, or forward contract, or at the time of the date of the filing of the petition, has one or more agreements or transactions described in paragraph (1), (2), (3), (4), (5), or (6) of section 561(a) with the debtor or any other entity (other than an affiliate) of a total gross dollar value of not less than $1,000,000,000 in notional or actual principal amount outstanding (aggregated across counterparties) at such time or on any day during the 15-month period preceding the date of the filing of the petition, or has gross mark-to-market positions of not less than $100,000,000 (aggregated across counterparties) in one or more such agreements or transactions with the debtor or any other entity (other than an affiliate) at such time or on any day during the 15-month period preceding the date of the filing of the petition; or(B) a clearing organization (as defined in section 402 of the Federal Deposit Insurance Corporation Improvement Act of 1991).
margin payment: The term "margin payment" means, for purposes of the forward contract provisions of this title, payment or deposit of cash, a security or other property, that is commonly known in the forward contract trade as original margin, initial margin, maintenance margin, or variation margin, including mark-to-market payments, or variation payments.(38A) The term "master netting agreement"-(A) means an agreement providing for the exercise of rights, including rights of netting, setoff, liquidation, termination, acceleration, or close out, under or in connection with one or more contracts that are described in any one or more of paragraphs (1) through (5) of section 561(a), or any security agreement or arrangement or other credit enhancement related to one or more of the foregoing, including any guarantee or reimbursement obligation related to 1 or more of the foregoing; and(B) if the agreement contains provisions relating to agreements or transactions that are not contracts described in paragraphs (1) through (5) of section 561(a), shall be deemed to be a master netting agreement only with respect to those agreements or transactions that are described in any one or more of paragraphs (1) through (5) of section 561(a).(38B) The term "master netting agreement participant" means an entity that, at any time before the date of the filing of the petition, is a party to an outstanding master netting agreement with the debtor.
petition: The term "petition" means petition filed under section 301, 302, 303 and 3 1504 of this title, as the case may be, commencing a case under this title.(42A) The term "production payment" means a term overriding royalty satisfiable in cash or in kind-(A) contingent on the production of a liquid or gaseous hydrocarbon from particular real property; and(B) from a specified volume, or a specified value, from the liquid or gaseous hydrocarbon produced from such property, and determined without regard to production costs.
securities clearing agency: The term "securities clearing agency" means person that is registered as a clearing agency under section 17A of the Securities Exchange Act of 1934, or exempt from such registration under such section pursuant to an order of the Securities and Exchange Commission, or whose business is confined to the performance of functions of a clearing agency with respect to exempted securities, as defined in section 3(a)(12) of such Act for the purposes of such section 17A.(48A) The term "securities self regulatory organization" means either a securities association registered with the Securities and Exchange Commission under section 15A of the Securities Exchange Act of 1934 or a national securities exchange registered with the Securities and Exchange Commission under section 6 of the Securities Exchange Act of 1934.
security agreement: The term "security agreement" means agreement that creates or provides for a security interest.
settlement payment: The term "settlement payment" means, for purposes of the forward contract provisions of this title, a preliminary settlement payment, a partial settlement payment, an interim settlement payment, a settlement payment on account, a final settlement payment, a net settlement payment, or any other similar payment commonly used in the forward contract trade.
stockbroker: The term "stockbroker" means person-(A) with respect to which there is a customer, as defined in section 741 of this title; and(B) that is engaged in the business of effecting transactions in securities-(i) for the account of others; or(ii) with members of the general public, from or for such person's own account.
transfer: The term "transfer" means-(A) the creation of a lien;(B) the retention of title as a security interest;(C) the foreclosure of a debtor's equity of redemption; or(D) each mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with-(i) property; or(ii) an interest in property.(54A) The term "uninsured State member bank" means a State member bank (as defined in section 3 of the Federal Deposit Insurance Act) the deposits of which are not insured by the Federal Deposit Insurance Corporation.