RECOVERIES AND SETTLEMENT AGREEMENTS
$9.795 Billion

CUSTOMER FUND, including required reserves
$4.567 Billion

AMOUNT DISTRIBUTED FROM CUSTOMER FUND
$4.888 Billion

SIPC COMMITTED FUNDS SUBJECT TO SUBROGATION*
$708.9 Million

AMOUNT UNAVAILABLE DUE TO APPEALS AND RESERVES
$339.7 Million

DISTRIBUTIONS

- Fourth Pro Rata Interim Distribution
- Third Pro Rata Interim Distribution
- Second Pro Rata Interim Distribution
- First Pro Rata Interim Distribution
- Interim Distribution Calculation
- Required Reserves
- Advances Reimbursed to SIPC on Fully Satisfied Accounts
- Claims Calculations - Example One
- Claims Calculations - Example Two

Fourth Pro Rata Interim Distribution

On March 25, 2014, the SIPA Trustee for the liquidation of Bernard L. Madoff Investment Securities LLC (BLMIS) filed a motion in the United States Bankruptcy Court for the Southern District of New York seeking approval for an allocation of recoveries to the BLMIS Customer Fund and an authorization for a fourth pro rata interim distribution from the Customer Fund to BLMIS customers with allowed claims. The fourth pro rata interim distribution will total approximately $349 million, if approved at a Bankruptcy Court hearing scheduled for April 17, 2014 at 10:00 a.m.

Third Pro Rata Interim Distribution

The third pro rata interim distribution from the Bernard L. Madoff Investment Securities LLC (BLMIS) Customer Fund to eligible customers commenced March 29, 2013. As of March 25, 2014, approximately $523.0 million has been distributed to BLMIS accounts with allowed claims in the third distribution, representing approximately 4.721 percent of the allowed claim amount of each individual account, unless the claim is fully satisfied. After the third pro rata interim distribution, 1,080 accounts with allowed claims remain partially satisfied and entitled to participate in future interim distributions.

Second Pro Rata Interim Distribution

As of March 25, 2014, distributions from the BLMIS Customer Fund via the second pro rata interim distribution to BLMIS customers whose claims have been allowed by the SIPA Trustee totaled $3.746 billion, representing approximately 33.556 percent of the allowed claim amount of each individual account, unless the claim is fully satisfied. The second pro rata interim distribution commenced on September 19, 2012, based on August 22, 2012 approval by the United States Bankruptcy Court for the Southern District of New York

First Pro Rata Interim Distribution

As of March 25, 2014, distributions from the BLMIS Customer Fund via the first pro rata interim distribution to BLMIS customers whose claims have been allowed by the SIPA Trustee totaled $516.2 million, representing approximately 4.602 percent of the allowed claim amount of each individual account, unless the claim is fully satisfied. The first pro rata interim distribution commenced on October 5, 2011, based on July 12, 2011 approval by the United States Bankruptcy Court for the Southern District of New York.

Interim Distribution Calculation

To make interim distributions from the BLMIS Customer Fund, the SIPA Trustee must determine or estimate both the total value of customer property available for distribution (including reserves for disputed recoveries) and the total net equity of all allowed claims (including reserves for disputed claims).

There are unresolved issues that require maintenance of substantial reserves with respect to both the customer property “numerator” and the net equity claims “denominator.” This includes the expected increase of several billion dollars in the value of allowed claims due to the 155 additional claims that have been deemed determined by the SIPA Trustee pending the outcome of litigation, the time value of money and appeals of other settlements.

Nevertheless, even when taking reserves into account, it is possible for the SIPA Trustee, on an interim basis, to determine the (a) allocation of property to the BLMIS Customer Fund or the “numerator”; (b) amount of allowable net equity claims or the “denominator”; and (c) calculation of each allowed claimant’s minimum pro rata share of the Customer Fund.

The equation is as follows:

 

For the purposes of interim distributions, the SIPA Trustee’s calculations must take into consideration all unresolved issues and establish sufficient reserves to ensure that he would be able to make a pro rata distribution to all potentially eligible claimants, whether or not their claims are allowed at the time of distribution.

There are two primary reasons why significant funds are not available for distribution at this time: required reserves and ongoing appeals.

Required BLMIS Customer Fund Reserves for Deemed Determined Claims

As of March 25, 2014, while there are 2,517 allowed claims and the dollar amount of allowed claims is approximately $11.402 billion, both the number of allowed claims and the dollar amount will increase over time. There remain 155 claims, which have been "deemed determined" by the SIPA Trustee, but their status as "allowed" claims is not yet final, pending the outcome of ongoing litigation. If allowed, these claims would become eligible for all pro rata distributions to date. For this potential scenario, the SIPA Trustee must set aside a reserve for the three interim distributions of 42.879 percent of potential payments, and has therefore to date reserved approximately $2.668 billion. The ultimate amount of additional allowed claims depends on the outcome of litigation or negotiation and could add billions of dollars to the total amount of allowed claims.

Court-Ordered Time-Based Damages Reserve

The United States Supreme Court announced on June 25, 2012, that it had denied two writs for certiorari that asked the Supreme Court to review the net equity methodology, thereby making the “cash-in, cash-out” formula for determining eligibility for pro rata distributions from the BLMIS customer fund final.

On July 26, 2012, the SIPA Trustee for the liquidation of Bernard L. Madoff Investment Securities LLC (BLMIS) filed a motion in the United States Bankruptcy Court for the Southern District of New York seeking approval for an allocation of recovered monies to the BLMIS Customer Fund and for a second pro rata interim distribution from the Customer Fund to BLMIS customers with allowed claims.

On August 22, 2012, the Honorable Burton R. Lifland approved the motion for the allocation and distribution and ordered the SIPA Trustee to reserve 3 percent for the time-based damages issue, which allowed for the distribution of approximately 33.5 percent of the allowed claim amount of each individual account, unless the claim is fully satisfied. The second pro rata interim distribution commenced on September 19, 2012 with a record date of September 12, 2012.

More than 1,200 objections have been filed relating to the time-based damages issue. On September 10, 2013, the United States Bankruptcy Court for the Southern District of New York approved the SIPA Trustee’s motion to deny time-based damages adjustments to customer claims. That decision was appealed by objecting parties on September 24, 2013 and on the same day an order was filed by the Bankruptcy Court certifying the order of September 10, 2013 for immediate appeal to the United States Court of Appeals. The immediate appeal was accepted by the Second Circuit on January 22, 2014, where it is currently pending.

Until a final, unappealable order is reached on the issue of time-based damages, the SIPA Trustee must hold the 3 percent court-ordered reserve of approximately $1.375 billion (as of March 25, 2014). Upon final court approval of the fourth pro rata interim distribution, that reserve amount will increase to $2.865 billion.

Other Customer Fund Required Reserves

Other reserves, including reserve for deferred payments and unallocated funds: $524.3 million.

Amount Unavailable to the BLMIS Customer Fund Due to Required Reserves and Appeals

Portions of recoveries and settlement agreements have not yet been collected, due to appeals, the timing of payments of certain settlement monies and other issues. Therefore, these funds cannot be either allocated to the Customer Fund or distributed to BLMIS customers with allowed claims until these issues are resolved. As of March 25, 2014, approximately $339.7 million relating to settlement reserves and other matters must be held in reserve.

Advances Reimbursed to SIPC on Fully Satisfied Accounts

In the Bernard L. Madoff Investment Securities LLC (BLMIS) liquidation, the Securities Investor Protection Corporation (SIPC) has made cash advances – up to a maximum of $500,000 – available to the court-appointed Securities Investor Protection Act (SIPA) Trustee to distribute to customers with allowed claims, as a way to expedite financial relief to these customers. As of March 25, 2014, SIPC has committed approximately $811.7 million to the BLMIS liquidation for this purpose. SIPC-committed advances will continue to increase as claims that are currently in litigation are allowed as a result of settlements or the conclusion of litigation.

According to the provisions of SIPA, SIPC is reimbursed for its advances to customers once each respective customer claim is fully satisfied. As of the third pro rata interim distribution in the BLMIS liquidation proceeding, SIPC received $102.81 million in reimbursement from the Customer Fund for advances paid on fully satisfied accounts.

Reimbursement payments to SIPC are calculated as follows:

On a claim that has been allowed in the amount of $700,000:

In another example, if a claim were allowed in the amount of $2 million, distributions to date would be as follows: