111Application of fund

111 Application of fund

(1) Subject to this Part, a fidelity fund of a securities exchange shall be held and applied for the purpose of compensating persons who suffer pecuniary loss:

(a) by reason of a defalcation, or fraudulent misuse of securities or documents of title to securities or of other property, by a member of the securities exchange who, when the loss is suffered, is a sole trader, or by an employee of such a member, in respect of money, securities, documents of title to securities or other property that, in the course of or in connection with that member’s business of dealing in securities, was or were entrusted to or received by the member or an employee of the member (whether before or after the commencement of this Act):

(i) for or on behalf of another person; or

(ii) by reason that the member was a trustee of the money, securities, documents of title or other property; or

(b) by reason of a defalcation, or fraudulent misuse of securities or documents of title to securities or of other property, by a person who, when the loss is suffered, is a partner in a member firm, or by an employee of such a firm, in respect of money, securities, documents of title to securities or other property that, in the course of or in connection with the firm’s business of dealing in securities, was or were entrusted to or received by a partner in the firm or an employee of the firm (whether before or after the commencement of this Act):

(i) for or on behalf of another person; or

(ii) by reason that the firm, or a partner in the firm, was a trustee of the money, securities, documents of title or other property.

(2) Where a right to compensation does not arise under subsection (1), a fidelity fund may, subject to this Part, be applied for the purpose of paying to an official receiver or trustee within the meaning of the Bankruptcy Act 1966 an amount not greater than the amount that he certifies is required to make up or reduce the total deficiency arising by reason of the available assets of a bankrupt, being a member of a securities exchange who is a sole trader or being a partner in a member firm recognized by a securities exchange being insufficient to satisfy the debts arising from dealings in securities that have been proved in the bankruptcy by creditors of the bankrupt. (3) Subsection (2) applies in the case of a member of a securities exchange, or a partner in a member firm recognized by a securities exchange, who has made a composition with his creditors, or has executed a deed of assignment or a deed of arrangement, under Part X of the Bankruptcy Act 1966 in like manner as that subsection applies in the case of such a member or partner who has become bankrupt and, for the purposes of that subsection as so applying by virtue of this subsection: