July 24, 2020

Agencies Finalize Orderly Liquidation Rule for Covered Broker-Dealers

The SEC and the FDIC finalized a rule governing the orderly liquidation of "covered broker-dealers" - large broker-dealers that may be subject to liquidation by the FDIC under the Dodd-Frank Act, rather than dissolution under the Securities Investor Protection Act (or "SIPA") (see also previous coverage).

Under the final rule, the SEC and the FDIC clarified:

  • how the customer protections of SIPA will be integrated with the orderly liquidation provisions of Dodd-Frank;

  • the role of the FDIC as a receiver and that of the Securities Investor Protection Corporation (or "SIPC") as trustee of a failed broker-dealer; and

  • the administration of claims in an orderly liquidation process.

The final rule goes into effect 60 days after publication in the Federal Register.