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Holmes v. Sec. Investor Prot. Corp.

Supreme Court of the United States

November 13, 1991, Argued ; March 24, 1992, Decided

No. 90-727

Opinion

 [*261]  [***539]  [**1314]    JUSTICE SOUTER delivered the opinion of the [****8]  Court.

 Respondent Securities Investor Protection Corporation (SIPC) alleges that petitioner Robert G. Holmes, Jr., conspired in a stock-manipulation scheme that disabled two broker-dealers from meeting obligations  [***540]  to customers, thus triggering SIPC's statutory duty to advance funds to reimburse the customers. The issue is whether SIPC can recover from Holmes under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U. S. C. §§ 1961-1968 (1988 ed. and Supp. II). We hold that it cannot.

The Securities Investor Protection Act of 1970 (SIPA), 84 Stat. 1636, as amended, 15 U. S. C. §§ 78aaa-78lll, authorized the formation of SIPC, a private nonprofit corporation, § 78ccc(a)(1), of which most broker-dealers registered under § 15(b) of the Securities Exchange Act of 1934, § 78o(b), are required to be "members," § 78ccc(a)(2)(A). Whenever SIPC determines that a member "has failed or is in danger of failing to meet its obligations to customers, [****9]  " and finds certain other statutory conditions satisfied, it may ask for a "protective decree" in federal district court. § 78eee(a)(3). Once a court finds grounds for granting such a petition, § 78eee(b)(1), it must appoint a trustee charged with liquidating the member's business, § 78eee(b)(3).

After returning all securities registered in specific customers' names, §§ 78fff-2(c)(2); 78fff(a)(1)(A); 78lll(3), the trustee must pool securities not so registered together with cash found in customers' accounts and divide this pool ratably to satisfy customers' claims, §§ 78fff-2(b); 78fff(a)(1)(B). 2 [****10]  To  [*262]  the extent the pool of customer property is inadequate, SIPC must advance up to $ 500,000 per customer 3 to the trustee for use in satisfying those claims. § 78fff-3(a). 4

On July 24, 1981, SIPC sought a decree from the United States District Court for the Southern District of Florida to protect the customers of First State Securities Corporation (FSSC), a broker-dealer and SIPC member. Three days later, it petitioned the United States District Court for the Central District of California, seeking to protect the customers of Joseph Sebag, Inc. (Sebag), also a broker-dealer and SIPC member. Each court issued the requested decree and appointed a trustee, who proceeded to liquidate the broker-dealer.

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503 U.S. 258 *; 112 S. Ct. 1311 **; 117 L. Ed. 2d 532 ***; 1992 U.S. LEXIS 1947 ****; 60 U.S.L.W. 4225; Fed. Sec. L. Rep. (CCH) P96,555; 92 Cal. Daily Op. Service 2460; 92 Daily Journal DAR 4030; 6 Fla. L. Weekly Fed. S 89

ROBERT G. HOLMES, JR., PETITIONER v. SECURITIES INVESTOR PROTECTION CORPORATION, ET AL.

Prior History:  [****1]  ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT.

Disposition: 908 F.2d 1461, reversed and remanded.

CORE TERMS

customers, sale of securities, purchaser, seller, broker-dealers, manipulated, proximate, predicate act, courts, district court, violations, damages, subrogation, cause of action, proximate-cause, conspirators, predicate offense, liquidation, predicated, proximate cause, provisions, causation, stock, court of appeals, antitrust, Investor, rights, racketeering activity, standing requirement, Clayton Act

Securities Law, RICO Actions, General Overview, Antitrust & Trade Law, Private Actions, Costs & Attorney Fees, Clayton Act, Remedies, Standing, Torts, Causation, Proximate Cause, Elements, Civil Procedure, Justiciability