Broker-Dealer Insolvencies and the Intersection of SIPA and the Bankruptcy Code

This practice note discusses the Securities Investor Protection Act of 1970 (SIPA), 15 U.S.C. §§ 78aaa–78lll, enacted to protect securities investors from losses caused by the failure of U.S.-registered broker-dealers. By protecting customers against the loss of their assets, SIPA promotes investor confidence in the capital markets. Significantly, and as the focus of this note, SIPA created a new form of liquidation proceeding, applicable only to registered broker-dealers that are members of the Securities Investor Protection Corporation (SIPC) and designed to "accomplish the completion of open transactions and the speedy return of customer property." See generally Sec. Inv'r Prot. Corp. v. Barbour, 421 U.S. 412, 415 (1975).