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March 2013


From the editors of CCH Federal Securities Law Reporter, CCH Blue Sky Law Reporter and the securities publications of Aspen Publishers, this update describes important developments covered in these publications, as well as timely topics of interest generally to federal and state securities practitioners. This update includes a preview of IPO Vital Signs, an advanced IPO research analysis tool, for IPO professionals and pre-IPO companies and a preview of RBsource, a new all-in-one online securities law resource, powered by the Securities Redbook. Finally, please see the “Hot Topic of the Month,” for research tips and references to CCH and Aspen source material on point.

 To view past issues of the Securities Update, please visit

 If you have questions or comments concerning the information provided below, please contact me at


Securities Regulation Daily

The law changes every day. The tools you use need to change with it. Introducing Wolters Kluwer Securities Regulation Daily — a daily news service created by attorneys for attorneys — providing same-day coverage of breaking news and developments for federal and state securities — including the latest securities-related rulemaking, no-action letters, SEC staff comment letters, updates on litigation, and a wealth of other SEC activity, plus a complete report of the daily securities law news that affects your world.

Securities Regulation Daily subscribers get special copyright permissions to forward information to colleagues or clients; the option to customize your daily email by topic and/or jurisdiction; the ability to receive breaking news email alerts; time-saving mobile apps for iPhone®, iPad®, BlackBerry®, or Android®; access to all links to cases and other referenced primary source content without being prompted for user name and password; and a searchable archival database.


Financial Reform Resources



CCH Federal Securities Law Reporter

SHO DTCC Sandy Relief Kept Till May at SIFMA’s Asking. The SEC has extended its prior exemptive relief for vault securities affected by last fall’s Hurricane Sandy. Specifically, the SEC’s order applies to Regulation SHO’s locate, short sale price test, and close-out requirements for securities held at Depository Trust & Clearing Corporation’s (DTCC) vault located at 55 Walter Street in New York City. The prior relief was set to expire February 1, 2013. The relief now expires at 11:59 p.m. E.D.T. on May 5, 2013.
On December 12, 2012, the SEC issued its first order providing relief for owned, physical securities held in DTCC’s New York City vault. Specifically, the SEC exempted broker-dealers from Regulation SHO’s Rule 203(b) locate and delivery requirements for short sale orders in these securities. The SEC also said that short sale orders in affected DTCC-held securities are exempt from Rule 200(g)(2) and that broker-dealers may mark these orders “short exempt” under Rule 201’s short sale price test.
However, prior to accepting a short sale order in affected securities from another person, or executing an order for itself, a broker-dealer must determine if the sale involves a “vault security” owned by the seller under Regulation SHO Rule 200. “Vault security” means “owned securities, represented by physical certificates that were located in the [DTCC] Vault at the time Hurricane Sandy made landfall, whose settlement is dependent on the delivery of such physical certificates (or documentation with equivalent effect).” A broker-dealer also must document its finding.
Additionally, the SEC exempted participants of a registered clearing agency regarding affected DTCC-held securities from Regulation SHO’s Rule 204 close-out and penalty box provisions. To claim the exemption, a participant must: (1) determine and document that the sale of an owned vault security led to a fail to deliver, (2) use DTCC’s systems to verify daily when the vault security is available for settlement, (3) deliver the vault security as soon as possible or close out the fail to deliver position by the start of trading on the fourth settlement day after the participant finds that the vault security is available for settlement, and (4) state in its books and records that the vault security was delivered or the fail to deliver position was closed out in the time required. Release No. 38-68934 is reported at ¶80,242.

Sunset of Interim Securities-Based Swaps Exemptions Prolonged. The SEC has extended the sunset date of temporary exemptions for pre-Dodd-Frank securities-based swap agreements from February 11, 2013, to February 11, 2014. The affected temporary rules govern security-based swap agreements that are “securities” as of July 16, 2011, the effective date of Dodd-Frank Title VII. The extension applies to Securities Act Rule 240(c), Exchange Act Rules 12a-11(b) and 12h-1(i), and Trust Indenture Act Rule 4d-12.
The SEC said it likely would not finish evaluating the impact of treating securities-based swap agreements as securities under Dodd-Frank prior to the temporary rules’ current February 2013 sunset. The SEC also said it needs more time to evaluate comments it received on the interim rules. A comment by Kenneth E. Bentsen, Jr., the Securities Industry and Financial Markets Association’s Executive Vice President, Public Policy and Advocacy, had requested an extension to July 17, 2013, to allow the SEC time to address open questions and prepare markets for Dodd-Frank compliance. As a result, the SEC opted to extend the temporary rules to avoid possible market disruptions.
Additionally, the SEC’s Division of Corporation Finance had previously issued no-action relief for security-based swaps that are based on or reference only loans or loan indexes because these security-based swaps are omitted from the definition of “security-based swap agreement.” According to the extending release, CorpFin’s Cleary Gottlieb no-action letter dealing with these instruments is effective until the temporary rules expire. Extension of Exemptions for Security-Based Swaps, Release No. 33-9383, is reported at ¶80,239.

Madoff Investors Not “Customers” Under SIPA. A three-judge panel of the Second Circuit Court of Appeals affirmed a NY district court ruling that injured investors did not qualify as “customers” of Bernard Madoff’s failed fund under the Securities Investor Protection Act (SIPA).

The appellant investors sought to be recognized as customers of Bernard L. Madoff Investment Securities (BLMIS) in order to obtain coverage under SIPA, which would potentially provide compensation for uncompensated losses up to a cap of $500,000 per customer. Appellants did not invest directly with BLMIS, however. Rather, they invested with two limited partnerships, which in turn invested in two hedge funds, Rye Select Broad Market Fund and Rye Select Broad Market Prime Fund. The hedge funds, or “feeder funds,” advised investors and invested the pooled capital with BLMIS through securities accounts maintained only in the funds’ names. Thus, the question was whether the investors or the feeder funds were the “customers” of BLMIS.

The appellate panel reviewed the bankruptcy court’s conclusion independently and found no error in its ruling that the individual investors did not qualify as “customers” under SIPA. The panel noted that circuit precedent supported a narrow interpretation of “customer,” which is defined to include persons who have “deposited cash with the debtor for the purpose of purchasing securities” and who have a claim arising out of “sales or conversion” of those securities.

The panel identified the “critical aspect” of the customer definition to be the entrustment of cash or securities to the broker-dealer for the purposes of trading securities. Appellants did not meet this requirement because they had no direct financial relationship or securities accounts with BLMIS, they had no property interest in and lacked control of the assets the feeder funds invested with BLMIS, and they were not identified in BLMIS’s books and records. The court stated that regardless of their intent, appellants “never entrusted their cash or securities” to BLMIS, and thus failed to satisfy a critical aspect of the “customer” definition. In re: Bernard L. Madoff Investment Securities (2ndCir) will be published at ¶97,296.

Drug Company Knew Info in Undisclosed Reports Would be Relevant. A complaint stated claims of actionable omissions from offering documents, a 1st Circuit panel found in reversing in part a district court’s dismissal of the complaint in its entirety. Twenty-three undisclosed reports of adverse effects linked to a developmental drug, the circuit court concluded, gave rise to uncertainties and risks that would be relevant to consumers.

The action related to a prospectus and a registration statement issued in January 2010 by AMAG Pharmaceutical, Inc. (AMAG) in connection with a secondary stock offering. The plaintiffs argued that the offering documents failed to disclose 23 reports of serious adverse effects linked to Feraheme, an iron-replacement drug under development by AMAG, and also failed to disclose information the FDA revealed in a warning letter issued nine months after the offering.

Specifically, the offering documents included detailed disclosures about clinical trial results, the FDA approval process, and other matters, but did not include the fact that AMAG had reported 23 “serious adverse events” to the FDA since Fereheme had entered the market in July 2009, including a fatality in which the drug was identified as the primary suspect. Shortly after the offering, a securities analyst reported that several patients using the drug had reported adverse reactions. AMAG’s share price dropped after this report and continued to fall as more skepticism was expressed by analysts and despite AMAG’s contention that the adverse events were consistent with its disclosures.

The plaintiffs filed suit, and then an amended complaint after the FDA issued a warning letter stating that AMAG’s website had misrepresented Feraheme’s approved uses. The district court dismissed the complaint in its entirety, concluding that the 23 adverse events were not a “known trend or uncertainty” under Item 303 of Regulation S-K and did not make the offering “speculative or risky” under Item 503. The district court also concluded that the complaint failed to link the practices questioned in the FDA letter to AMAG’s business practices at the time of the offering.

The circuit court concluded that the complaint stated claims of actionable omissions because the 23 undisclosed reports gave rise to uncertainties that AMAG reasonably knew constituted uncertainties or risks under Items 303 and 503. The court wrote: “We have no trouble drawing the reasonable inference that before the Offering AMAG knew that a death, two life-threatening reactions, and fourteen hospitalizations would have been relevant to consumers when deciding whether to use Feraheme, as opposed to another proven and safer alternative.” The court also stated that the allegations allowed the inference that AMAG knew before the offering that the 23 adverse events could have prompted FDA action, given that the FDA had twice declined to approve Feraheme due to safety concerns. These allegations, the court stated, more than sufficed to plead plausible claims for omissions under Securities Act Section 11 due to undisclosed Item 303 uncertainties and undisclosed Item 503 risks, and the panel accordingly reversed the district court’s ruling on the complaint’s claims under Sections 11, 12 and 15.

The panel, however, then held that the complaint failed to allege omissions sufficient to state a claim as to the information the FDA revealed in its warning letter nine months after the offering. The district court correctly noted, the panel wrote, that the complaint lacked factual allegations allowing the inference that AMAG’s website contained the information at issue when the offering took place or that AMAG derived significant revenue from internet sales. Silverstrand Investments v. AMAG Pharmaceuticals (1stCir) is reported at 97,279.

Press Release Contained No Omissions Rendering It False or Misleading. A 2nd Circuit panel agreed with a district court’s holding that a press release contained no omissions that would render it false or misleading. The additional allegations offered by the plaintiff-appellant on appeal failed to cure this deficiency. The panel accordingly affirmed the district court’s judgment dismissing the plaintiff-appellant’s amended complaint with prejudice and denying leave to amend.

The action was brought by an investor on behalf of purchasers of stock in Elan Corporation (Elan), a neuroscience-based biotech company. The action arose out of the joint development by Elan and Wyeth Inc. of bapineuzumab, which was intended to treat Alzheimer’s. According to the complaint, the companies released a press release in June 2008 that omitted several facts that were necessary to prevent the press release from being misleadingly optimistic. Six weeks after the press release was issued, the companies, as planned, presented the entire Phase 2 results at a scientific conference. The investor maintained that these complete results showed that the June press release was false and misleading, due to a number of omissions. The day after the complete results were released, the price of Elan’s American Depositary Receipts fell by forty-two percent.

The circuit court concluded that, in the context of the presentation of the full details, there was nothing omitted from the June press release the rendered it false or misleading to a reasonable investor. The court observed that the complaint did not allege that anything in the June release was literally false. The release’s headline, “Encouraging Top-line Results,” for example, was not identified as misleading. The investor asserted that “top-line” results are defined as an entire study population and that this usage was thus misleading. The court stated that, even if that were correct, given the context of the statements, no reasonable investor could have understood the headline to mean anything other than the positive subgroup results discussed in the release.

None of what was allegedly omitted from the June press release, the court continued, was necessary to make the release not misleading. For example, the investor argued that the release failed to disclose the methodology of the post-hoc analysis. The press release, the court stated simply remarked that a post-hoc analysis was used without specifying the methodology, and this was not misleading. “At bottom,” the court wrote, the investor “simply has a problem with using post-hoc analysis as a methodology in pharmaceutical studies.” “Our job,” the court continued, “is not to evaluate the use of post-hoc analysis generally in the scientific community.” Therefore, the press release’s disclosure that the only positive results from the Phase 2 study stemmed from post-hoc analysis was accurate.

In sum, the court wrote, the June press release stated generally what eventually came out at the later conference. There was nothing revealed in the complete results that rendered the June press release false or misleading to a reasonable investor. The circuit court accordingly affirmed the dismissal of the amended complaint with prejudice and further agreed with the decision to deny leave to amend. Kleinman v. Elan Corp., plc (2ndCir) is reported at ¶97,277.

CCH Blue Sky Law Reporter  

Arkansas No-Action Letters: (1) Broker-dealer definition exclusion granted for out-of-state limited partnership with institutional clients. The “broker-dealer” definition exclusion applied to a limited partnership (LP) without a place of business in Arkansas whose only clients were institutional investors. The LP was registered under Section 15 of the Securities Exchange Act of 1934, as well as being a FINRA member whose clients, none of whom were natural persons, qualified as “institutional investors” under Article 1, Section 102(11) of the 2002 Uniform Securities Act. ¶10,678.

(2) BD, agent, IA and IA rep. registration not required for corporation posting online videos of enterpreneurs’ businesses for public viewing. No enforcement action was taken for a corporation’s failure to register as a broker-dealer, agent, investment adviser or investment adviser representative in connection with having a website for entrepreneurs to post brief videos of their businesses for public viewing. The corporation would assist in the production of the videos and charge the entrepreneurs a production cost but would not generate profits from the website, or introduce or broker any deals between the entrepreneurs and potential investors, effect transactions in securities for itself or the entrepreneurs, or have any direct communications with the potential investors that would suggest the corporation’s providing investment advice to them. ¶10,679.

New Hampshire No-Action Letter. Broker-dealer licensing required for issuer to claim real estate transaction exemption for notes or bonds. The Deputy Director of the New Hampshire Bureau of Securities Regulation granted a promissory note exemption to a company that reassigns qualified persons’ private mortgages (deeds of trust) to other individuals for an agreed upon cash settlement, but required the company to license as a broker-dealer. The company advertised its service country-wide to persons who, having already provided owner financing, are then scheduled to receive payments secured by real estate. The settlement is an offer from the buyer to purchase the remaining monthly payments from the private mortgage holder (the person receiving the payments). ¶39,627.

Oregon Supreme Court Adopts Reliance Requirement, Fraud on the Market Presumption. The Supreme Court of Oregon has held that misrepresentation claims brought under the Oregon Securities Law required a stock purchaser to establish reliance on those misrepresentations. In State ex rel. Oregon State Treasurer v. Marsh & McLennan Cos., the State of Oregon had asserted claims on behalf of the state’s public employee retirement fund, alleging that the defendants had published false and misleading statements that caused the retirement fund to suffer losses on the defendants’ stock that the fund had purchased on the open market. Although neither Section 59.135 nor Section 59.137 of the Oregon Securities Law contains the terms “rely” or “reliance,” the statutes nevertheless require a showing of reliance because the necessary causal link involved in the sale and purchase of a security is reliance in some form by the purchaser on misrepresentations made by those involved in selling the stock. Otherwise, the damages suffered by a stock purchaser would not have been “caused by” the misrepresentations, the court reasoned.

The state high court also held, however, that a plaintiff who purchases stock in an open and efficient market may establish reliance under the Oregon Securities Law by means of the rebuttable presumption available under the “fraud on the market” doctrine. The legislative history of Section 59.137 reflects the intent of the Oregon legislature to create consistency between Oregon and federal securities law, the court concluded. In recognizing claims by open market stock purchasers, therefore, the Oregon legislature also incorporated the fraud on the market doctrine recognized under federal securities law, which holds that the price of a security traded on the open market is based on publicly available information, and that material misrepresentations artificially distort a security’s price, thereby establishing indirect reliance by purchasers. To conclude otherwise would be to interpret the terms of Section 59.137 in a restrictive manner, when the unquestioned intent of the legislature was to expand the reach of the Oregon Securities Law to make it consistent with federal securities law, Accordingly, the court reversed the grant of summary judgment for the defendants and remanded the case to the Court of Appeals for further proceedings. The decision is reported at ¶75,015.


Aspen Federal Securities Publications  

Broker-Dealer Law and Regulation, Fourth Edition, by Norman S. Poser and James A. Fanto. The 2013 Supplement is now available online. This is an authoritative, analytical and practical guide for advising clients on their rights, duties, and liabilities under today’s complex securities regulations. It provides reliable guidance on the latest federal and state law governing private litigation and arbitration between broker-dealers and their customers, as well as regulation by the SEC and the SROs. The 2013 Supplement includes: review of regulatory actions to implement enhanced activities and capital regulation of financial institutions as a result of Dodd-Frank; review of the SEC’s study on “decimalization” as mandated by Dodd-Frank and its establishment of a “consolidated audit trail”; review of the results of the GAO study on the SEC’s oversight of FINRA; discussion of the potential for new financial intermediaries, “funding portals,” made possible by the JOBS Act; continuing updates on the regulation of security-based swap dealers; analysis of FINRA’s new rules on customer communications and a review of current regulatory examination priorities; discussion of joint CFTC and SEC “Identity Theft Red Flag Rule” and FINRA’s final Rule 3230 on telemarketing; extensive review of noteworthy FINRA and SEC supervision cases and current issues of interest of the joint SEC/FINRA guidance on branch inspections, and of supervisory issues associated with compliance officers; discussion of the easing of public capital raising for “emerging growth companies” effected by the JOBS Act, including activities of research analysts; discussion of Judge Rakoff’s failure to accept SEC/Citigroup settlement; discussion of new FINRA Rule 5310 on best execution; overview of FINRA actions addressing suitability violations for the sale of exotic and complex products; discussion of FINRA guidance on the new suitability rule; identification of concern over being a “tippee” of a government official covered by the Stop Trading on Congressional Knowledge (STOCK) Act of 2012; and review of the Second Circuit debate over what constitutes “substantial assistance” in aiding-and-abetting.

U.S. Regulation of the International Securities and Derivatives Markets, Tenth Edition, by Edward F. Greene, Alan L. Beller, Edward J. Rosen, Leslie N. Silverman, Daniel A. Braverman, Sebastian R. Sperber and Nicolar Grabar. A Special Report is now available online. This resource provides the only available comprehensive analysis of the application of U.S. securities and commodities laws to participants and transactions in securities and derivatives in the international capital and financial markets. The publication provides in-depth analysis of the legal framework for all types of securities offerings—from registered IPOs to Rule 144A offerings and from common stock to highly structured instruments. It also offers guidance on U.S. regulations governing securities brokers and dealers, foreign banks, investment companies and investment advisers, as well as futures commission merchants, dealers in swaps and security-based swaps, major participants in swaps and security-based swaps, commodity pool operators, and commodity trading advisors. This Special Report analyzes 2012 developments in the United States and Europe with respect to regulation of the banking, securities, and derivatives industries. It first addresses the U.S. JOBS Act, passed in April 2012, and describes the new regulatory regime for offerings by “emerging growth companies.” Chapter 1 also covers the SEC’s proposed rules eliminating the ban on general solicitation and general advertising in certain Regulation D and Rule 144A private placements and discusses the likely effect of those rules if they are adopted as proposed. Chapter 2 covers the SEC rules implementing conflict minerals disclosures and resource extraction payments disclosures. The SEC adopted a new Specialized Disclosure Report, Form SD, for this purpose, and this chapter provides guidance to companies on complying with the new requirements. Chapter 3 addresses the final rules adopted by the SEC implementing the compensation committee independence requirements of Dodd-Frank and the related proposed NYSE and NASDAQ rules imposing listing conditions related to compensation committee independence requirements. Chapter 4 addresses the status of bank regulatory developments in the United States two years after the enactment of the Dodd-Frank Act. Chapter 5 discusses the extraterritorial application of recent legislation in the United States and Europe. Chapter 6 covers U.S. reporting and withholding tax obligations under FATCA and provides guidance to foreign financial institutions that come within its scope. Chapter 7 covers recent regulatory developments in Europe affecting the banking and securities industries. This chapter also provides an update on the status of selected EU financial services directives on securities offerings and ongoing reporting, including, among others, the Markets in Financial Instruments Directive, the Prospectus Directive and the Transparency Directive.


IPO Vital Signs

IPO Vital Signs, an advanced IPO research analysis tool, assists IPO professionals and pre-IPO companies satisfy their most challenging research needs and answers hundreds of mission critical questions for all the players in the IPO process. IPO Vital Signs’ tabular data analyses focus on issues surrounding client advisement, deal negotiation, and prospectus disclosure.

IPO Week in Review, a weekly e-newsletter to keep professionals up to date with recent filing and going public activity, is an important element of the IPO Vital Signs system or is available by separate subscription. Coverage includes a monthly feature article on recent trends in going public in the U.S.

To see how an IPO Vital Sign works click on the Vital Sign title below:



#1001 IPO Offerings 
Evaluate IPO professional firms (“IPO Team Members”) by IPO activity for the past 12 months.
Review IPO Team Members by fourteen characteristics

  • Offer Date
  • SIC Code
  • Ticker Symbol
  • Exchange
  • Offer Price
  • Number of Shares
  • Gross Spread
  • Offer Amount
  • Market Capitalization
  • Revenue
  • Net Income
  • Net Worth
  • Days in Registration
  • Estimated Out-of-Pocket Expenses

Tip! Scroll left to right, and re-sort the table of data by clicking a column heading. Re-arrange a “professional” column in alphabetical order and scroll to see a particular firm’s activity.


A new research tool powered by the Securities Redbook (Securities Act Handbook), RBsource offers you securities laws, rules, regulations and forms together with related SEC guidance and interpretations. With RBsource, you will have SEC guidance related to a specific law, regulation or rule at your fingertips without the need of further searching or browsing. RBsource uniquely associates related content, going beyond the limits of standard searching making research more streamlined and productive. This intuitive research tool will drastically reduce your research time and provide the unparalleled confidence expected from the trusted Securities Act Handbook.

SEC Rulemaking Activity

  • 33-9387—Adjustments to Civil Monetary Penalty Amounts (February 27, 2013).

The SEC revised its civil monetary penalty amounts in 17 CFR Part 201, including adding new Section 201.1005. The revised amounts are effective upon, and apply to violations that occur after, publication of the final rule in the Federal Register.

  • 34-68934—Order Extending Temporary Exemptions From Certain Rules Of Regulation SHO Related To Hurricane Sandy (February 14, 2013).

The SEC extended its prior exemptive relief for vault securities affected by last Fall’s Hurricane Sandy. The order applies to Regulation SHO’s locate, short sale price test, and close-out requirements for securities held at DTCC’s vault located at 55 Walter Street in New York City. The prior relief was set to expire February 1, 2013. The relief now expires at 11:59 p.m. E.D.T. on May 5, 2013.

  • 34-68864—Order Extending Temporary Exemptions under the Securities Exchange Act of 1934 in Connection with the Revision of the Definition of “Security” to Encompass Security-Based Swaps, and Request for Comment (February 7, 2013).

The SEC extended the sunset of temporary exemptions related to Exchange Act amendments made by Dodd-Frank Title VII to include “security-based swap” within “security” to February 11, 2014. But the sunset is unchanged for related temporary exemptions from Exchange Act Sections 5, 6, and 29(b).

The Road Ahead

Upcoming rulemaking activity will continue to reshape the securities regulation landscape. The items below are a selection of expected near-term regulatory actions. The SEC’s schedule is subject to change at any time. RBsource includes daily updates to securities regulations affected by final Commission action.

SEC Chairman Elisse B. Walter has said in recent Congressional testimony and several speeches that Dodd-Frank Act and JOBS Act implementation remain high priorities for the Commission. Ms. Walter noted the SEC’s limited resources and did not give a specific time frame for completing unfinished rules. It is also unclear how the impending federal government sequester may impact SEC rulemaking. Additionally, the Senate has not yet scheduled a confirmation hearing for Mary Jo White, whom President Barack Obama has nominated to replace Ms. Walter as SEC chairman. Stay tuned to RBsource for updates to important securities regulations.


Hot Topic of the Month

This month’s hot topic is the Securities Investor Protection Act (“SIPA”). SIPA was enacted in 1970 in response to serious and persistent financial problems which beset the securities industry and for which investors were not protected under the Securities Act or the Exchange Act. The primary purpose of SIPA is to protect individual investors by insuring them against loss arising from the financial difficulties of, or failure of, brokerage firms. In addition, the Act seeks to insulate the economy from the disruption which can follow the failure of major financial institutions, to upgrade financial responsibility requirements applicable to brokers and dealers, and to eliminate, to the maximum extent possible, the risks which lead to customer loss (customers remain subject to market fluctuations). Except as otherwise provided, Exchange Act provisions apply to the Securities Investor Protection Act as if the SIPA constituted an amendment to, and was included as a section of, the Exchange Act.

The Securities Investor Protection Corporation (SIPC) is a nonprofit membership corporation created by the Act. SIPC’s main tasks are the accumulation of the insurance fund and implementation of the protective provisions of the Act. Accumulation of the fund involves assessments against SIPC members, that is, all persons registered as brokers or dealers, and borrowing. The SIPC is subject to the supervision of the Securities and Exchange Commission.

A “customer” protected under SIPA may be a person with whom an SIPC member dealt as principal or agent, and who has a claim on account of securities received, acquired, or held by the debtor in the ordinary course of its business as broker or dealer from or for the person’s securities accounts. The circumstances of the receipt, acquisition or holding may have been with a view to sale, in order to cover consummated sales, as a result of purchases, for use as collateral security, or for the purpose of transfer. In addition, persons who have a claim against the debtor arising from securities sales or conversions, and persons who deposited cash with the debtor to buy securities, are within the definition of “customer.”

The Dodd-Frank Wall Street Reform and Consumer Protection Act makes several significant changes to (SIPA). For example, the SIPC fund is revised to permit assessments based on a percentage of a member’s gross revenues from the securities business. The maximum cash advance payable from the SIPC fund has been increased from $100,000 to $250,000 and may be adjusted for inflation every five years. The penalties for prohibited acts have been increased and a new penalty has been created to address misrepresentation of SIPC membership or protection. The measure also increases the SIPC’s borrowing limit from $1 billion to $2.5 billion.

We publish information in a wide range of resources (e.g., Federal Securities Law Reporter, SEC Today, Securities Regulation - Loss & Seligman, etc.), and document types (cases, laws, regulations, newsletter articles, treatise discussion). For example:

  • Federal Securities Law Reporter
    • Report letter (2-27-13)
    • Securities Investor Protection Act, at ¶26,651, et seq. 
    • In re: Bernard L. Madoff Investment Securities (2ndCir), at ¶97,296.
    • Securities Investor Protection Division v. Bernard L. Madoff Investment Securities LLC, (SDNY) at ¶95,089
    • CCH Explanations (e.g., ¶26,691.012)
  • SEC Today
    • Securities Industry Group Says Net Investment Method Should Not Be Used in Stanford Ponzi Scheme (8-25-11)
  • White Papers – Madoff and Other Fraudulent Schemes: Tax and Planning Implications, by Virchow, Krause & Company, LLP and James Hamilton (March 2009)
  • Dodd-Frank Wall Street Reform and Consumer Protection Act: Law, Explanation and Analysis (e.g., ¶4095, SIPA Amendments)
  • Broker-Dealer Law and Regulation – Poser and Fanto (e.g., §12.03)
  • Securities Regulation – Loss & Seligman (e.g., Chapter 8.B.5)
  • Jim Hamilton’s World of Securities Regulation ( (e.g., 7-4-12))