Blog FinReg + Policy Watch July 29, 2020

Agencies Adopt Final Rule on the Orderly Liquidation of Covered Broker-Dealers under Title II of the Dodd-Frank Act

On July 24, the FDIC and SEC adopted a final rule required by the Dodd-Frank Act clarifying and implementing provisions relating to the orderly liquidation of certain brokers or dealers (covered broker-dealers) in the event the FDIC is appointed receiver under Title II of the Dodd-Frank Act. The FDIC and SEC developed the final rule in consultation with the Securities Investor Protection Corporation (SIPC). The final rule is substantively identical to the proposed rule published in 2016. Among other things, the final rule clarifies how the relevant provisions of the Securities Investor Protection Act of 1970 (SIPA) would be incorporated into a Title II proceeding. Upon the appointment of the FDIC as receiver, the FDIC would appoint SIPC to act as trustee for the broker-dealer. SIPC, as trustee, would determine and satisfy customer claims in the same manner as it would in a proceeding under SIPA. The treatment of the covered broker-dealer’s qualified financial contracts would be governed in accordance with Title II. In addition, the final rule describes the claims process applicable to customers and other creditors of a covered broker-dealer and clarifies the FDIC’s powers as receiver with respect to the transfer of assets of a covered broker-dealer to a bridge broker-dealer. The final rule will be effective 60 days after publication in the Federal Register.

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