SIPC V. BARBOUR

Decision Date19 May 1975
Citation421 U. S. 412
CourtU.S. Supreme Court

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

Syllabus

Petitioner Securities Investor Protection Corp. (SIPC) was established by Congress under the Securities Investor Protection Act of 1970 (SIPA) as a nonprofit membership corporation, to provide, inter alia, financial relief to the customers of failing broker-dealers with whom the customers had left cash or securities on deposit. The SIPA creates procedures for the orderly liquidation of financially troubled member firms under which the SIPC is required, by assessing members, to maintain a fund for customer protection. The SIPC may file an application with a court for a decree initiating liquidation proceedings if it determines that a member has failed or is in danger of failing to meet its obligations to customers, and that any one of five specified conditions indicating financial difficulty exist, and the filing of the application vests the court with exclusive jurisdiction over the member and its property. If the court finds the existence of a specified condition, it must grant the application, issue the decree, and appoint the SIPC's designee as trustee to liquidate the business, and the SIPC is obligated, if necessary, to advance funds to meet certain customer claims. The Securities and Exchange Commission (SEC) is given "plenary authority" to supervise the SIPC, and is specifically authorized to apply to a district court for an order requiring the SIPC to discharge its statutory obligations. This action was brought by respondent receiver appointed to wind up the affairs of Guaranty Bond, an insolvent registered broker-dealer, to compel the SIPC to exercise its statutory authority for the benefit of Guaranty Bond's customers. The District Court denied relief. The Court of Appeals reversed.

Held: Customers of failing broker-dealers have no implied right of action under the SIPA to compel the SIPC to act for their benefit, the SEC's statutory authority to compel the SIPC to discharge its obligations being the exclusive means by which the SIPC can be forced to act. Pp. 418-425.

(a) The express statutory provision for one form of proceeding ordinarily implies that no other enforcement means was intended

Page 421 U. S. 413

by the legislature, and here the SIPA's legislative history was entirely consonant with the implication of the statutory language that no private right of action was intended. Cf. Passenger Corp. v. Passengers Assn., 414 U. S. 453. P P. 418-420.

(b) The overall structure and purpose of the SIPC scheme are incompatible with an implied private right of action, which might well precipitate liquidations that the SIPC, which treat that approach as a last resort, might be able to avoid. P P. 420-423.

(c) The SIPA contains no standards of conduct that a private action could implement. J. I. Case Co. v. Borak, 377 U. S. 426; Allen v. State Board of Elections, 393 U. S. 544, distinguished. P P. 423-425.

496 F.2d 145, reversed and remanded.

MARSHALL, J., delivered the opinion of the Court, in which BURGER, C.J., and BRENNAN, STEWART, WHITE:, BLACKMUN, POWELL, and REHNQUIST, JJ., joined. DOUGLAS, J., dissented.

MR. JUSTICE MARSHALL delivered the opinion of the Court.

The Securities Investor Protection Corp. (SIPC) was established by Congress as a nonprofit membership corporation for the purpose, inter alia, of providing financial relief to the customers of failing broker-dealers with whom they had left cash or securities on deposit. The question presented by this case is whether such customers have an implied private right of action under the Securities Investor Protection Act of 1970 (Act or SIPA), 84 Stat. 1636, 15 U.S.C. § 78aaa et seq.,

Page 421 U. S. 414

to compel the SIPC to exercise its statutory authority for their benefit.

I

In December, 1970, the Securities and Exchange Commission (SEC) filed a complaint in District Court against Guaranty Bond and Securities Corp., a registered broker-dealer, to enjoin continued violation of the Commission's net capital and other rules. On January 6, 1971, the District Court issued a preliminary injunction, and, on January 29, it granted the Commission's motion for appointment of a receiver to wind up the affairs of Guaranty Bond. James C. Barbour (hereafter respondent) was appointed receiver.

On April 6, 1972, respondent, alleging that customers of Guaranty Bond would sustain a loss at least equal to the costs of administering the receivership, obtained from the court an order directing the SEC and SIPC to show cause "why the remedies afforded by the [SIPA] should not be made available in this proceeding." In its answer, the SEC took the position that respondent had not demonstrated that Guaranty's customers would, in fact, sustain any loss, since it appeared that the receiver would have a cause of action for damages or restitution against Guaranty's parent company and principals. The SIPC, on the other hand, challenged the receiver's standing to maintain an action to compel its intervention, and, in direct opposition to the position of the SEC, argued that Guaranty's insolvency prior to the December 30, 1970, date on which the SIPA took effect meant that application of the Act to this case would give it an unlawful retroactive effect.

The District Court upheld the receiver's right of action, but denied relief on the ground that Guaranty's hopeless insolvency prior to the effective date of the SIPA rendered the Act inapplicable. The Court of Appeals for

Page 421 U. S. 415

the Sixth Circuit reversed. Since Guaranty had conducted 101 transactions after December 30, and the SEC did not move to prevent its carrying on business as a broker-dealer until January 6, it held that Guaranty qualified as a broker-dealer on the effective date of the Act. The court then rejected the SIPC's argument that the provision for SEC enforcement actions to compel the SIPC to perform its functions was meant to be exclusive of such actions by protected customers or their representative, and remanded the case for further proceedings. We granted certiorari, limited to the questions whether customers have an implied right of action to compel the SIPC to act, and, if so, whether a receiver has standing to maintain it. 419 U.S. 894 (1974). Since we now reverse the Court of Appeals on the ground that no implied right of action exists, we do not address the second question.

II

Following a period of great expansion in the 1960's, the securities industry experienced a business contraction that led to the failure or instability of a significant number of brokerage firms. Customers of failed firms found their cash and securities on deposit either dissipated or tied up in lengthy bankruptcy proceedings. In addition to its disastrous effects on customer assets and investor confidence, this situation also threatened a "domino effect" involving otherwise solvent brokers that had substantial open transactions with firms that failed. Congress enacted the SIPA to arrest this process, restore investor confidence in the capital markets, and upgrade the financial responsibility requirements for registered brokers and dealers. S.Rep. No. 91-1218, pp. 2-4 (1970); H.R.Rep. No. 91-1613, pp. 2-4 (1970).

The Act apportions responsibility for these tasks among the SEC, the securities industry self-regulatory

Page 421 U. S. 416

organizations, and the SIPC, a nonprofit, private membership corporation to which most registered brokers and dealers are required to belong. 15 U.S.C. § 78ccc. Most important for present purposes, the Act creates a new form of liquidation proceeding, applicable only to member firms, designed to accomplish the completion of open transactions and the speedy return of most customer property.

To this end, the SIPC is required to establish and maintain a fund for customer protection by laying assessments on the annual gross revenues of its members. The SEC and the securities industry self-regulatory organizations are required to notify the SIPC whenever it appears that a member is in or approaching financial difficulty. If the SIPC determines that a member has failed or is in danger of failing to meet its obligations to customers, and finds any one of five specified conditions suggestive of financial irresponsibility, then it

"may apply to any court of competent jurisdiction . . . for a decree adjudicating that customers of such member are in need of the protection provided by [the Act]."

§ 78eee(a)(2).

The mere filing of an SIPC application gives the court in which it is filed exclusive jurisdiction over the member and its property, wherever located, and requires the court to stay

"any pending bankruptcy, mortgage foreclosure, equity receivership, or other proceeding to reorganize, conserve, or liquidate the [member] or its property and any other suit against any receiver conservator, or trustee of the [member] or its property."

§ 78eee(b)(2). If the SEC has pending any action against the member, it may, with the Commission's consent, be combined with the SIPC proceeding. If no such action is pending, the SEC may intervene as a party to the SIPC proceeding.

If the court finds any of the five conditions on which

Page 421 U. S. 417

an SIPC application may be based, it must grant the application and issue the decree, and appoint as trustee for the liquidation of the business and as attorney for the trustee, "such persons as SIPC shall specify." §§ 78eee(b)(1), (3).

The trustee is empowered and directed by the Act to return customer property, complete open transactions, enforce rights of subrogation, and liquidate the business of the member, § 78fff(a); he is not empowered to reorganize or rehabilitate the business. The SIPC is required to advance him such sums as are necessary to complete open transactions, and to accomplish the return of customer property up to a value of ,000. § 78fff(f).

The role of the SEC in this scheme,...

To continue reading

Request your trial
210 cases
  • Birbeck v. Southern New England Production Credit
    • United States
    • U.S. District Court — District of Connecticut
    • 29 Marzo 1985
    ... ... v. Barbour, 421 U.S. 412, 423 95 S.Ct. 1733, 1740, 44 L.Ed.2d 263 (1975); Calhoon v. Harvey, 379 U.S. 134 85 S.Ct. 292, 13 L.Ed.2d 190 (1964). And finally, ... ...
  • In re Reed
    • United States
    • U.S. Bankruptcy Court — District of Utah
    • 15 Mayo 1981
    ... ... 1946, 60 L.Ed.2d 560 (1979); Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975); Securities Investor Protection Corporation v. Barbour, 421 U.S. 412, 95 S.Ct. 1733, 44 L.Ed.2d 263 (1975); National Railroad Passenger Corp. v. Passengers Association, 414 U.S. 453, 94 S.Ct. 690, 38 ... ...
  • NAACP v. Wilmington Medical Center, Inc.
    • United States
    • U.S. District Court — District of Delaware
    • 7 Abril 1978
    ... ... See Securities Investor Protection Corp. v. Barbour, 421 U.S. 412, 95 S.Ct. 1733, 44 L.Ed.2d 263 (1975). Nothing in the language of Title VI or Section 504, nor anything the Court has found in their ... ...
  • Local Division 519 v. LaCrosse Municipal Trans.
    • United States
    • U.S. District Court — Western District of Wisconsin
    • 8 Marzo 1978
    ... ... v. Barbour, 421 U.S. 412, 423, 95 S.Ct. 1733, 44 L.Ed.2d 263 (1975); Calhoon v. Harvey, 379 U.S. 134, 85 S.Ct. 292, 13 L.Ed.2d 190 (1964). And finally, is ... ...
  • Request a trial to view additional results
3 books & journal articles
  • Kedar S. Bhatia, Reconsidering the Purely Jurisdictional View of the Alien Tort Statute
    • United States
    • Emory University School of Law Emory International Law Reviews No. 27-1, September 2013
    • Invalid date
    ...to provide a private cause of action where the statute does not supply one expressly.”).See, e.g., Sec. Investor Prot. Corp. v. Barbour, 421 U.S. 412, 415 (1975) (declining to recognize acause of action for professionals looking to attempting to compel agency action); Nat’l R.R. Passenger C......
  • Constraining Corporate Law Principles in Affiliate World
    • United States
    • Emory University School of Law Emory Law Journal No. 72-4, 2023
    • Invalid date
    ...SIPA to compel SIPC to initiate a liquidation proceeding in the event SIPC refuses to do so."). 201. See Sec. Inv. Prot. Corp. v. Barbour, 421 U.S. 412, 412 (1975) ("Customers of failing broker-dealers have no implied right of action under the SIPA to compel the SIPC to act for their benefi......
  • Hipaa Hypocrisy and the Case for Enforcing Federal Privacy Standards Under State Law
    • United States
    • Seattle University School of Law Seattle University Law Review No. 30-03, March 2007
    • Invalid date
    ...benefit of the public") (citing Piper v. Chris-Craft Indus., 430 U.S. 1 (1977) ("unlawful" conduct); Sec. Investor Prot. Corp. v. Barbour, 421 U.S. 412 (1975) (duty of SIPC to "discharge its obligations"); Nat'l R.R. Corp. v. Nat'l Ass'n of R.R. Passengers, 414 U.S. 453 (1974) (forbidding "......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT