The first element is satisfied when the claimant entrusts cash or securities to the broker "for some purpose connected with participation in the securities market." Baroff, 497 F.2d at 283; see In re SSIW Corp., 7 B.R. 735, 739 (Bankr.S.D.N Y 1980); SEC v. Kenneth Bove Co., 378 F. Supp. 697, 700 (S.D.N.Y. 1974); In re Atkeison, 446 F. Supp. 844, 847 (M.D.Tenn. 1977). The claimant must be a "trading" or "public" customer who tenders his securities for the purpose of having them traded for his account by the broker.
On January 9, 1981, the District Court entered an order declaring that Pine Street qualified as a "customer" under the SIPA and was entitled to the full amount of its claim. In re Atkeison, 446 F. Supp. 844 (M.D.Tenn. 1977). SIPC and the trustee appealed.
The SIPA is designed to protect customers of securities brokers and dealers which might fail, and who "have either cash or securities or both in the custody of broker-dealer firms." Securities and Exchange Commission v. Ambassador Church Finance/Development Group, Inc. (In re Henry C. Atkeison, Jr.), 446 F. Supp. 844, 847 (M.D.Tenn. 1977), quoting, H.R. Rep. No. 91-1613, 91st Cong., 2d Sess., reprinted in [1970] U.S. Code Cong. Admin.News, pp. 5254, 5255. See also Securities and Exchange Commission v. Guaranty Bond and Securities Corp., 496 F.2d 145, 147 (6th Cir. 1974), rev'd on other grounds sub nom. Securities Investor Protection Corp. v. Barbour, 421 U.S. 412, 95 S.Ct. 1733, 44 L.Ed.2d 263 (1975).
Because they had received the security interest. bought from the broker-dealer the dealer did not have it. See, e.g., Matter of Atkeison v. Ambassador Church, 446 F. Supp. 844, 848 (M.D.Tenn. 1977). It is true that the general partner, or, if you will, the broker-dealer, had the $100,000 cash payment.
See SIPA § 78fff-2(b). See, e.g. SIPC v. Vigman, 803 F.2d 1513, 1516 (9th Cir. 1986); SEC v. Aberdeen Securities Co., Inc., 480 F.2d at 1123-24; Matter of Atkeison, 446 F. Supp. 844 (M.D.Tenn. 1977); Matter of Bevill, Bresler Schulman, Inc., 83 B.R. at 892. It is well established that claims based on a debtor's failure to execute securities trades are not "customer" claims which a trustee may satisfy with SIPC funds or Customer Property. Rather, these claims are general unsecured breach of contract claims.
See also SEC v. Aberdeen Securities Co., 480 F.2d 1121, 1123-24 (3d Cir.) (SIPA customer account valued as of the filing date), cert. denied sub nom. Seligsohn v. Securities and Exchange Commission, 414 U.S. 1111, 94 S.Ct. 841, 38 L.Ed.2d 738 (1973); Matter of Atkeison, 446 F.Supp. 844, 847 (M.D.Tenn.1977) (in determining what securities are owed to customer, trustee must examine books and records of debtor as of filing date); Matter of Bevill, Bresler & Schulman, Inc., 83 B.R. 880, 892 (D.N.J.1988) ("When distributing securities to customers in satisfaction of net equity claims, 'all securities shall be valued as of the close of business on the filing date.' ") (quoting 15 U.S.C. § 78fff-2(b)). SIPC may not advance funds for claims against the broker that do not fall within the narrow scope of a customer's net equity claim.
See, e.g., SIPC v. Vigman, 803 F.2d 1513, 1516 (9th Cir. 1986) (claimant's net equity equivalent to amount that broker would have owed claimant had it liquidated holdings on the date SIPC filed protective decree, less outstanding debt owed by claimant to debtor). See also SEC v. Aberdeen Securities Co., Inc., 480 F.2d at 1123-24 (SIPA customer account valued as of the filing date); Matter of Atkeison, 446 F. Supp. 844, 847 (M.D.Tenn. 1977) (in determining what securities are owed to customer, trustee must examine books and records of debtor as of filing date); Matter of Bevill, Bresler Schulman, Inc., 83 B.R. at 892 ("When distributing securities to customers in satisfaction of net equity claims, `all securities shall be valued as of the close of business on the filing date.'") (quoting 15 U.S.C. § 78fff-2(b)). For these purposes, "accounts held by a customer in separate capacities shall be deemed to be accounts of separate customers."
The Trustee argues that even if claimants are customers the evidence of indebtedness is all that claimants are entitled to receive pursuant to SIPA's remedial scheme. The Trustee cites SIPC v. Associated Underwriters, 423 F. Supp. 168 (D.Utah 1975) and In re Atkeison, 446 F. Supp. 844 (M.D.Tenn. 1977) in support of his argument. In Associated Underwriters, the Court found that SIPA contemplates the return of the customer property held by the broker or the property the broker should be holding for the customer's account.
In determining what securities are owed a customer, an examination of the books and records of the debtor as of the "filing date" is required. Matter of Atkeison, 446 F. Supp. 844, 847 (M.D.Tenn. 1977). When distributing securities to customers in satisfaction of net equity claims, "all securities shall be valued as of the close of business on the filing date."
S.E. C. v. F. O. Baroff Co. Inc., supra at 283. See also S.E. C. v. Kelly, Andrews Bradley, Inc., 385 F. Supp. 948, 951 (S.D.N.Y. 1974); S.E. C. v. E. P. Seggos Co., 416 F. Supp. 280, 282-3 (S.D.N.Y. 1976); Matter of Atkeison, 446 F. Supp. 844, 849 (N.D.Tenn. 1977); To be sure, as noted by the Court in Mass. Financial Service Inc. v. SIPC, 411 F. Supp. 411, 415 (D.Mass.), aff'd 545 F.2d 754 (1st Cir. 1976), cert. denied, 431 U.S. 904, 97 S.Ct. 1696, 52 L.Ed.2d 388 (1977):