H.R. 9717: Customer Property Protection Act

This bill would change how money and assets are handled if a commodity broker files for bankruptcy.

What it would do

Under current law, certain assets are set aside as customer property in a broker bankruptcy, meaning they are used first to help repay customers. This bill would add a new rule saying that, if there is not enough customer property available to cover customers’ net equity claims, then some additional assets belonging to the broker’s bankruptcy estate could also be treated as customer property.

The additional assets covered would include:

• cash held by the broker
• securities held by the broker
• other property owned by the broker’s estate
• the broker’s trading or operating accounts
• commodities the broker holds in inventory

Limits on the rule

This extra treatment would apply only after accounting for any existing rights that other creditors may already have. The bill says it is subject to:

• any unavoidable security interest
• any unavoidable contractual rights of setoff or netting
• related rights set out in the rules or bylaws of a derivatives clearing organization or clearing agency

In practical terms, the bill is designed to make more assets potentially available to pay customers if a commodity broker fails and the usual customer property pool is not enough.

Who would be affected

The main parties affected would be commodity brokers, their customers, and their creditors in a bankruptcy case. The bill would not change how ordinary consumers interact with brokers in normal circumstances, but it could affect how losses are allocated if a broker becomes insolvent.

Relevant Companies

• None found