[Code of Federal Regulations]
[Title 17, Volume 1]
[Revised as of April 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 17CFR190.08]

[Page 631-634]
 
              TITLE 17--COMMODITY AND SECURITIES EXCHANGES
 
             CHAPTER I--COMMODITY FUTURES TRADING COMMISSION
 
PART 190_BANKRUPTCY--Table of Contents
 
Sec.  190.08  Allocation of property and allowance of claims.

    The property of the debtor's estate must be allocated among account 
classes and between customer classes as provided in this section, except 
for special distributions required under Appendix B to this part. The 
property so allocated will constitute a separate estate of the customer 
class and the account class to which it is allocated, and will be 
designated by reference to such customer class and account class.
    (a) Scope of customer property. (1) Customer property includes the 
following:
    (i) All cash, securities, or other property or the proceeds of such 
cash, securities or other property received, acquired, or held by or for 
the account of the debtor, from or for the account of a customer, 
including a non-public customer, which is:
    (A) Property received, acquired or held to margin, guarantee, 
secure, purchase or sell a commodity contract;
    (B) Open commodity contracts;
    (C) Warehouse receipts, bills of lading, or other documents of title 
or property held or acquired by the debtor to fulfill a commodity 
contract;
    (D) Profits or contractual rights accruing to a customer as the 
result of a commodity contract;
    (E) The full proceeds of a letter of credit if such letter of credit 
was received, acquired or held to margin, guarantee, secure, purchase or 
sell a commodity contract;
    (F) Property hypothecated under Sec.  1.30 of this chapter to the 
extent that the value of such property exceeds the

[[Page 632]]

proceeds of any loan of margin made with respect thereto, and
    (ii) All cash, securities, or other property which:
    (A) Is segregated on the filing date;
    (B) Is a security owned by the debtor to the extent there are 
customer claims for securities of the same class and series of an 
issuer;
    (C) Is specifically identifiable to a customer;
    (D) Is property of a type described in paragraph (a)(1)(i)(A) of 
this section which has been withdrawn and subsequently is recovered by 
the avoidance powers of the trustee;
    (E) Represents recovery of any debit balance, margin deficit, or 
other claim of the debtor against a customer account;
    (F) Was unlawfully converted but is part of the debtor's estate;
    (G) Is property of the debtor that any applicable law, rule, 
regulation, or order requires to be set aside for the benefit of 
customers, unless including such property in the customer estate would 
not significantly increase the customer estate;
    (H) Is property of the debtor's estate recovered by the Commission 
in any proceeding brought against the principals, agents, or employees 
of the debtor;
    (I) Is proceeds from the investment of customer property by the 
trustee pending final distribution; or
    (J) Is cash, securities or other property of the debtor's estate, 
including the debtor's trading or operating accounts and commodities of 
the debtor held in inventory, but only to the extent that the property 
enumerated in paragraphs (a)(1)(i)(E) and (a)(1)(ii)(A) through 
(a)(1)(ii)(H) of this section is insufficient to satisfy in full all 
claims of public customers.
    (2) Customer property will not include:
    (i) Claims against the debtor for damages for any wrongdoing of the 
debtor, including claims for misrepresentation or fraud, or for any 
violation of the Act or of the regulations thereunder;
    (ii) Other claims for property which are not based upon property 
received, acquired or held by or for the account of the debtor, from or 
for the account of the customer;
    (iii) Forward contracts;
    (iv) Property delivered to or from a customer to or by another 
customer to fulfill a commodity contract held for or on behalf of either 
customer by the debtor if such delivery is effected pursuant to Sec.  
190.05 by a commodity broker other than the debtor;
    (v) Property deposited by a customer with a commodity broker after 
the entry of an order for relief which is not necessary to meet the 
maintenance margin requirements applicable to the accounts of such 
customer;
    (vi) Property hypothecated pursuant to Sec.  1.30 of this chapter to 
the extent of the loan of margin with respect thereto; and
    (vii) Money, securities or property held to margin, guarantee or 
secure security futures products, or accruing as a result of such 
products, if held in a securities account.
    (b) Allocation of property between customer classes. No portion of 
the customer estate may be allocated to pay non-public customer claims 
until all public customer claims have been satisfied in full. Any 
property segregated on behalf of non-public customers must be treated 
initially as part of the public customer estate and allocated under 
paragraph (c)(2) of this section.
    (c) Allocation of property among account classes--(1) Segregated 
property. Subject to paragraph (b) of this section, property held by or 
for the account of a customer, which is segregated on behalf of a 
specific account class, or readily traceable on the filing date to 
customers of such account class, must be allocated to the customer 
estate of the account class for which it is segregated or to which it is 
readily traceable.
    (2) All other property. Money, securities and property received from 
or for the account of customers on behalf of any account class which is 
recovered on behalf of the customer estate and which cannot be allocated 
in accordance with paragraph (c)(1) of this section, must be allocated 
as of the primary liquidation date in the following order:
    (i) To the estate of the account class for which, after the 
allocation required

[[Page 633]]

in paragraph (c)(1) of this section, the percentage of each public 
customer net equity claim which is funded is the lowest, until the 
funded percentage of net equity claims of such class equals the 
percentage of each public customer's net equity claim which is funded 
for the account class with the next lowest percentage of the funded 
claims; and then
    (ii) To the estate of the two account classes referred to in 
paragraph (c)(2)(i) of this section so that the percentage of the net 
equity claims which are funded for each class remains equal until the 
percentage of each public customer net equity claim which is funded 
equals the percentage of each public customer net equity claim which is 
funded for the account class with the next lowest percentage of funded 
claims, and so forth, until the percentage of each public customer net 
equity claim which is funded is equal for all classes of accounts; and 
then,
    (iii) Among account classes in the same proportion as the public 
customer net equity claims for each such account class bears to the 
total of public customer net equity claims of all account classes until 
the public customer claims of each account class are paid in full; and, 
thereafter,
    (iv) To the non-public customer estate for each account class in the 
same order as is prescribed in paragraphs (c)(2) (i) to (iii) of this 
section for the allocation of the customer estate among account classes.
    (d) Distribution of customer property--(1) Return or transfer of 
specifically identifiable property other than a commodity contract. 
Specifically identifiable property other than an open commodity contract 
not required to be liquidated under Sec.  190.02(f)(2) may be returned 
or transferred on behalf of the customer to which it is identified:
    (i) If it is margining an open commodity contract, only if cash is 
first deposited with the trustee in an amount equal to the greater of 
the full fair market value of such property on the return date or the 
balance due on the return date on any loan by the debtor to the customer 
for which such property constitutes security; or
    (ii) If it is not so margining an open contract, at the option of 
the customer, either pursuant to the terms of paragraph (d)(1)(i) of 
this section, or pursuant to the following terms: such customer first 
deposits cash with the trustee in an amount equal to the amount by which 
the greater of the value of the specifically identifiable property to be 
transferred or returned on the date of such transfer or return or the 
balance due on the return date on any loan by the debtor to the customer 
for which such property constitutes security, together with any other 
disbursements made, or to be made, to such customer, plus a reasonable 
reserve in the trustee's sole discretion, exceeds the estimated 
aggregate of the funded balances for each class of account of such 
customer less the value on the date of its transfer or return of any 
property transferred or returned prior to the primary liquidation date 
with respect to the customer's net equity claim for such account; 
Provided, That adequate security for the nonrecovery of any overpayments 
by the trustee is provided to the debtor's estate by the customer.
    (2) Transfers of specifically identifiable commodity contracts under 
section 766 of the Bankruptcy Code. Any specifically identifiable 
commodity contract which is not required to be liquidated under Sec.  
190.02(f)(1) or Sec.  190.03(b), and which is not otherwise liquidated, 
may be transferred on behalf of a customer: Provided, That such customer 
must first deposit cash with the trustee in an amount equal to the 
amount by which the equity to be transferred to margin such contract 
together with any other transfers or returns of specifically 
identifiable property or disbursements made, or to be made, to such 
customer, plus a reasonable reserve in the trustee's sole discretion, 
exceeds the estimated aggregate of the funded balances for each class of 
account of such customer less the value on the date of its transfer or 
return of any property transferred or returned prior to the primary 
liquidation date with the respect to the customer's net equity claim for 
such account: and, Provided further, That adequate security for the 
nonrecovery of any overpayments by the trustee is provided to the 
debtor's estate by the customer.

[[Page 634]]

    (3) Distribution in kind of specifically identifiable securities. If 
any securities of a customer would have been specifically identifiable 
under Sec.  190.01(kk)(6) if that customer had had no open commodity 
contracts, the customer may request that the trustee purchase or 
otherwise obtain the largest whole number of like-kind securities, with 
a fair market value (inclusive of transaction costs) which does not 
exceed that portion of such customer's allowed net equity claim that 
constitutes a claim for securities, if like-kind securities can be 
purchased in a fair and orderly manner.
    (4) Proof of customer claim. No distribution shall be made pursuant 
to paragraphs (d)(1) and (d)(3) of this section prior to receipt of a 
completed proof of customer claim as described in Sec.  190.02(d).
    (5) No differential distributions. No further disbursements may be 
made to customers for whom transfers have been made pursuant to Sec.  
190.06 and paragraph (d)(2) of this section, until a percentage of each 
net equity claim equivalent to the percentage distributed to such 
customers is distributed to all public customers. Partial distributions, 
other than the transfers referred to in Sec.  190.06 and paragraph 
(d)(2) of this section, made prior to the final net equity determination 
date must be made pursuant to a preliminary plan of distribution 
approved by the court, upon notice to the parties and to all customers, 
which plan requires adequate security to the debtor's estate for the 
nonrecovery of any overpayments by the trustee and distributes an equal 
percentage of net equity to all public customers.
    (6) Margin payments. The trustee may make margin payments on behalf 
of any account which do not exceed the funded balance of that account.

[48 FR 8739, Mar. 1, 1983; 48 FR 15122, Apr. 1, 1983, as amended at 59 
FR 17471, Apr. 13, 1994; 67 FR 58298, Sept. 13, 2002]