After more than four years, agencies finalize Dodd-Frank rule for orderly liquidation of covered broker-dealers

A proposed rule from 2016 on the orderly liquidation of certain brokers or dealers in the event the Federal Deposit Insurance Corp. (FDIC) is appointed receiver under Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) was finalized Friday, the FDIC and Securities and Exchange Commission (SEC) said Friday.

The agencies said they developed the final rule in consultation with the Securities Investor Protection Corporation (SIPC). Set to take effect 60 days after publication in the Federal Register, the final rule is “substantively similar” to the proposed rule issued in February 2016, the agencies said.

The agencies noted that 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 1970 SIPA.

The agencies said, the final rule, among other things, 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,” the agencies stated.

They said 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.

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

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