SEC and FDIC Adopt Final Rule on the Orderly Liquidation of Covered Broker-Dealers Under Dodd-Frank

On July 24, the Securities and Exchange Commission announced that the SEC and the Federal Deposit Insurance Corporation (FDIC) have adopted a final rule 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 Wall Street Reform and Consumer Protection Act.

The liquidation of a covered broker-dealer must be accomplished in a manner that ensures that customers of such covered broker-dealer receive payments at least as beneficial to them as they would have received had the liquidation occurred under the Securities Investor Protection Act of 1970 (SIPA). The final rule clarifies how the relevant provisions of SIPA would be incorporated into a Title II proceeding. Specifically, upon the appointment of the FDIC as receiver, the FDIC would appoint Securities Investor Protection Corporation (SIPC) to act as trustee for the broker-dealer. SIPC would determine and satisfy customer claims in the same manner as it would in a proceeding under SIPA.

The final rule will be effective 60 days after publication in the Federal Register.

The SEC press release is available here.

SEC Announces Creation of the Event and Emerging Risk Examination Team in the Office of Compliance Inspections and Examinations

On July 28, the Securities and Exchange Commission announced the creation of the Event and Emerging Risks Examination Team (EERT) in the Office of Compliance Inspections and Examinations (OCIE). The EERT will engage with financial firms about emerging threats and current market events so that it can provide expertise and resources to the SEC’s regional offices when critical matters, such as exchange outages, liquidity events, or cybersecurity or other operational resiliency concerns, arise. The EERT, through examinations and other engagement, also will ensure that firms are better prepared to address such threats and risks.

The SEC press release is available here.