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SEC and FDIC adopt Rule on the Orderly Liquidation of Covered Broker-Dealers

July 30th | 2020



The SEC and the FDIC 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. That part of Dodd-Frank provides an alternative insolvency regime for the orderly liquidation of large broker-dealers that meet specified criteria. Such a liquidation of a covered broker-dealer must be accomplished in a manner at least as beneficial to customers as would have been the case had the broker-dealer been liquidated under the Securities Investor Protection Act of 1970 (SIPA). Accordingly, Dodd-Frank required the SEC and FDIC to coordinate with the Securities Investor Protection Corporation (“SIPC”) on the rule, which clarifies, among other things, how the relevant provisions of SIPA would be incorporated into a Title II proceeding. The rule was adopted mostly as it was proposed in 2016.

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