Bill C-5

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	PART XII
	SECURITIES FIRM BANKRUPTCIES
	Interpretation
Definitions	253. In this Part,
``customer'' « client »	``customer'' includes
	(a) a person with or for whom a securities firm deals as principal or agent and who has a claim against the securities firm in respect of a security received, acquired or held by the securities firm in the ordinary course of business as a securities firm from or for a securities account of that person
	(i) for safekeeping or in segregation,
	(ii) with a view to sale,
	(iii) to cover a completed sale,
	(iv) pursuant to a purchase,
	(v) to secure performance of an obligation of that person, or
	(vi) for the purpose of effecting a transfer,
	(b) a person who has a claim against the securities firm arising out of a sale or wrongful conversion by the securities firm of a security referred to in paragraph (a), and
	(c) a person who has cash or other assets held in a securities account with the securities firm,
	but does not include a person who has a claim against the securities firm for cash or securities that, by agreement or operation of law, is part of the capital of the securities firm or a claim that is subordinated to claims of creditors of the securities firm;
``customer compensation body'' « organisme d'indemnisa- tion des clients »	``customer compensation body'' means a prescribed body and includes, unless it is prescribed to be excluded from this definition, the Canadian Investor Protection Fund;
``customer name securities'' « valeur mobilière immatricu- lée »	``customer name securities'' means securities that on the date of bankruptcy of a securities firm are held by or on behalf of the securities firm for the account of a customer and are registered in the name of the customer or are in the process of being so registered, but does not include securities registered in the name of the customer that, by endorsement or otherwise, are in negotiable form;
``deferred customer'' « client responsable »	``deferred customer'' means a customer whose misconduct caused or materially contributed to the insolvency of a securities firm;
``eligible financial contract'' « contrat financier admissible »	``eligible financial contract'' has the meaning assigned by subsection 65.1(8);
``net equity'' « capitaux nets »	``net equity'' means, with respect to the securities account or accounts of a customer, maintained in one capacity, the net dollar value of the account or accounts, equal to the amount that would be owed by a securities firm to the customer as a result of the liquidation by sale or purchase at the close of business of the securities firm on the date of bankruptcy of the securities firm, of all security positions of the customer in each securities account, other than customer name securities reclaimed by the customer, including any amount in respect of a securities transaction not settled on the date of bankruptcy but settled thereafter, less any indebtedness of the customer to the securities firm on the date of bankruptcy including any amount owing in respect of a securities transaction not settled on the date of bankruptcy but settled thereafter, plus any payment of indebtedness made with the consent of the trustee after the date of bankruptcy;
``open contractual commitment'' « contrat en cours »	``open contractual commitment'' means an enforceable contract of a securities firm to purchase or sell a security that was not completed by payment and delivery on the date of bankruptcy;
``securities firm'' « courtier en valeurs mobilières »	``securities firm'' means a person who carries on the business of buying and selling securities from, to or for a customer, whether or not as a member of an exchange, as principal or agent, and includes any person required to be registered to enter into securities transactions with the public, but does not include a corporate entity that is not a corporation within the meaning of section 2;
``security'' « valeur mobilière » ou « titre »	``security'' means any document, instrument or written or electronic record that is commonly known as a security, and includes, without limiting the generality of the foregoing,
	(a) a document, instrument or written or electronic record evidencing a share, participation right or other right or interest in property or in an enterprise, including an equity share or stock, or a mutual fund share or unit,
	(b) a document, instrument or written or electronic record evidencing indebtedness, including a note, bond, debenture, mortgage, certificate of deposit, commercial paper or mortgage-backed instrument,
	(c) a document, instrument or written or electronic record evidencing a right or interest in respect of an option, warrant or subscription, or under a commodity future, financial future, or exchange or other forward contract, or other derivative instrument, including an eligible financial contract, and
	(d) such other document, instrument or written or electronic record as is prescribed.
	General
Application of other provisions	254. (1) All of the provisions of this Act apply, with such modifications as the circumstances require, in respect of claims by customers for securities and customer name securities as if customers were creditors in respect of such claims.
Application of transaction provisions	(2) Sections 91 to 101 apply, with such modifications as the circumstances require, in respect of transactions of a customer with or through a securities firm relating to securities.
Non- application	(3) This Part does not apply to proceedings under Part III.
Termination, set-off	(4) Nothing in this Part affects the rights of a party to a contract, including an eligible financial contract within the meaning of subsection 65.1(8), with respect to termination or set-off.
Secured creditors	(5) The operation of this Part is subject to the rights of secured creditors.
Conflicts	255. All the provisions of this Act, in so far as they are applicable, apply in respect of bankruptcies under this Part, but if a conflict arises between the application of the provisions of this Part and the other provisions of this Act, the provisions of this Part prevail.
Petitions re securities firm	256. (1) In addition to any creditor who may petition in accordance with sections 43 to 45, a petition for a receiving order against a securities firm may be filed by
	(a) a securities commission established under an enactment of a province, if
	(i) the securities firm has committed an act of bankruptcy referred to in section 42 or subsection (2) of this section within the six months before the filing of the petition and while the securities firm was licensed or registered by the securities commission to carry on business in Canada, and
	(ii) in the case where the act of bankruptcy was that referred to in subsection (2), the suspension referred to in that subsection is in effect when the petition is filed;
	(b) a securities exchange recognized by a provincial securities commission, if
	(i) the securities firm has committed an act of bankruptcy referred to in section 42 or subsection (2) of this section within the six months before the filing of the petition and while the securities firm was a member of the securities exchange, and
	(ii) in the case where the act of bankruptcy was that referred to in subsection (2), the suspension referred to in that subsection is in effect when the petition is filed;
	(c) a customer compensation body, if
	(i) the securities firm has committed an act of bankruptcy referred to in section 42 or subsection (2) of this section within the six months before the filing of the petition and while the securities firm had customers whose securities accounts were protected, in whole or in part, by the customer compensation body, and
	(ii) in the case where the act of bankruptcy was that referred to in subsection (2), the suspension referred to in that subsection is in effect when the petition is filed; and
	(d) a person who, in respect of property of a securities firm, is a receiver, receiver-manager, liquidator or other person with similar functions appointed under a federal or provincial enactment relating to securities that provides for the appointment of such other person, where the securities firm has committed an act of bankruptcy referred to in section 42 within the six months before the filing of the petition.
Interpreta- tion	(2) For the purposes of paragraphs (1)(a) to (c),
	(a) the suspension by a securities commission referred to in paragraph (1)(a) of a securities firm's registration to trade in securities, or
	(b) the suspension by a securities exchange referred to in paragraph (1)(b) of a securities firm's membership in that exchange
	constitutes an act of bankruptcy if the suspension is due to the failure of the firm to meet capital adequacy requirements.
Service on securities commission	(3) Where
	(a) a securities exchange files a petition pursuant to paragraph (1)(b), or
	(b) a customer compensation body files a petition pursuant to paragraph (1)(c),
	a copy of the petition must be served on the securities commission, if any, having jurisdiction in the locality of the securities firm where the petition was filed, before
	(c) such interval preceding the hearing of the petition as may be prescribed; or
	(d) such shorter interval preceding the hearing of the petition as may be fixed by the court.
Statement of customer account	257. The trustee of the estate of a securities firm shall send to customers a statement of customer accounts with the firm together with the notice under subsection 102(1).
Deferred customers	258. (1) Where the trustee is of the opinion that a customer should be treated as a deferred customer, the trustee shall apply to the court for a ruling on the matter and shall send the customer a copy of the application, together with a statement of the reasons why the customer should be so treated, and the court may, on such notice as it considers appropriate, make such order as it considers appropriate in the circumstances.
Application by customer compensation body	(2) Where securities accounts of customers are protected by a customer compensation body, the customer compensation body may apply to the court for a ruling as to whether a customer should be treated as a deferred customer and, in the case of such an application,
	(a) the customer compensation body shall send the customer a copy of the application together with a statement setting out the reasons why the customer should be so treated; and
	(b) the court may, on such notice as it considers appropriate, make such order as it considers appropriate in the circumstances.
Trustee powers	259. The trustee may, in respect of a bankruptcy under this Part, without the permission of inspectors until inspectors are appointed and thereafter with the permission of inspectors,
	(a) exercise a power of attorney in respect of and transfer any security vested in the trustee;
	(b) sell securities, other than customer name securities;
	(c) purchase securities;
	(d) discharge any security interests on securities vested in the trustee;
	(e) complete open contractual commitments;
	(f) maintain customers' securities accounts and meet margin calls;
	(g) distribute cash and securities to customers;
	(h) transfer securities accounts to another securities firm, to the extent practicable, comply with customer requests regarding the disposal of open contractual commitments and the transfer of open contractual commitments to another securities firm, and enter into agreements to indemnify the other securities firm against shortages of cash or securities in transferred accounts;
	(i) liquidate any securities account without notice; and
	(j) sell, without tender, assets of the securities firm essential to the carrying on of its business.
Determi- nation of customer name securities	260. The trustee shall
	(a) determine which of the securities in customers' securities accounts are to be dealt with as customer name securities and those that are not to be dealt with as such; and
	(b) advise customers with securities determined to be customer name securities of the determination as soon as possible thereafter.

Bill C-5

PART XII

SECURITIES FIRM BANKRUPTCIES

Interpretation

General