The SIPA Trustee and his counsel are governed by the SIPA process, which includes:

• Establishing a fund of customer property: All customer-related assets are put into a co-mingled fund of customer property. Allocation of property to the fund of customer property is based on a motion made by the SIPA Trustee subject to approval by the United States Bankruptcy Court for the Southern District of New York.

• Completing determinations of claims, the value of customer property and total net equity prior to distributions: The SIPA Trustee must first determine the number of allowed claimants and the amount and value of the property under the Trustee’s control. Distributions to pay allowed customer claims will be made when there is clarity for reasonable estimates that can be made of both the amount of customer property available for distribution and the total net equity of all allowed customer claims.

• Providing advances from SIPC: Advances from the Securities Investor Protection Corporation (“SIPC”) fund are available to the court-appointed SIPA Trustee to distribute to customers with allowed claims up to maximum of $500,000. To date, SIPC has advanced the SIPA Trustee in the BLMIS liquidation approximately $800 million to distribute to customers with allowed claims.

• Making advances for administrative costs: The SIPA Trustee and SIPC have agreed that, at this time, they have no reasonable expectation that the General Estate will be sufficient to pay administrative expenses of the BLMIS liquidation. Accordingly, any fees and expenses allowed by the United States Bankruptcy Court for the Southern District of New York will be paid from advances by SIPC, a membership organization funded by the securities industry.

• Distributing customer property pro rata based on net equity: Each verified allowed claimant is entitled to a pro rata share, or a percentage of the fund of customer property based on a calculation related to the customer’s individual “net equity.” Distributions may be in stages.

Click on the links for additional information about SIPA, SIPC and orders from the United States Bankruptcy Court for the Southern District of New York on processes related to the case.

BLMIS customers were allowed six months from January 2, 2009 to file claims. The SIPA Trustee published notices to customers in all major newspapers regarding the liquidation of BLMIS, mailed thousands of customer claim forms and made claim forms available for download via the internet.

Claims determinations
Once a claim is determined, a letter of determination is sent to the claimant by the SIPA Trustee. Every six months, the SIPA Trustee files a detailed report on the status of claims in the corresponding interim reports and claims numbers are updated weekly on this website.

Objections
If a claimant disputes the SIPA Trustee’s determination, the claimant may object and request a hearing before the United States Bankruptcy Court for the Southern District of New York. This must be done within 30 days of the date of the determination letter unless the time is extended. If the claimant fails to request a hearing within those 30 days or fails to appear at the scheduled hearing, the SIPA Trustee’s determination is final.

Claims Trading
Customer claims may be transferred in full in the BLMIS liquidation proceeding. On November 10, 2010, the Court entered an order approving certain uniform procedures and forms with respect to the trading of claims. Notice of a claim transfer must be provided in accordance with those procedures.

The SIPA Trustee does not take a position with regard to claims trading.

General Creditor Claims
All “good faith” BLMIS customers were defrauded. Regardless of whether their claims for distributions from the Customer Fund are denied or approved, they will also have general creditor claims against the General Estate in the form of damages. Other creditors in the liquidation, such as service providers and vendors, also have claims against the BLMIS General Estate.

Once the SIPA Trustee fully satisfies the net equity claims of BLMIS customers, the next step in the BLMIS liquidation is to allocate recoveries to the General Estate and to distribute those recoveries pro rata to general creditors in the order of priority established under the Bankruptcy Code.

The SIPA Trustee received more than 400 general creditor claims, separate from customer claims, in keeping with SIPA and §704(a)(5) of the Bankruptcy Code. Those 400 general creditor claims will be considered at such time that the SIPA Trustee has reason to believe there will be a possible distribution from the General Estate to general creditors.

All good faith BLMIS customers who filed claims are deemed general creditors of the BLMIS estate under the auspices of the SIPA Trustee and do not need to file additional claims.