August 31, 2020

Federal Register: Agencies Finalize Orderly Liquidation Rule for Covered Broker-Dealers

An SEC and FDIC final rule governing the orderly liquidation of "covered broker-dealers" was published in the Federal Register. The term "covered broker dealers" applies to 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 ("SIPA").

As previously covered, 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 the trustee of a failed broker-dealer; and

  • the administration of claims in an orderly liquidation process.

The rule will go into effect on October 30, 2020.

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