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

The Securities and Exchange Commission and the Federal Deposit Insurance Corporation have 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).

By statute, the orderly liquidation of a covered broker-dealer must be accomplished in a manner that ensures that customers of the covered broker-dealer receive payments or property at least as beneficial to them as would have been the case had the covered broker-dealer been liquidated under the Securities Investor Protection Act of 1970 (SIPA).

Among other things, the final rule clarifies how the relevant provisions of 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 is substantively identical to the proposed rule published in the Federal Register in 2016. It will be effective 60 days after publication in the Federal Register.

Media Contacts: 

Securities and Exchange Commission, Office of Public Affairs, 202-551-4120
Federal Deposit Insurance Corporation, David Barr, 703-622-4790