12 U.S.C. § 5384 — Orderly liquidation of covered financial

Page 1877 TITLE 12—BANKS AND BANKING § 5384 (D) the likely disruptive effect of the de- termination and such action on the reason- able expectations of creditors, counterparties, and shareholders, taking into account the impact any action under this subchapter would have on financial sta- bility in the United States, including wheth- er the rights of such parties will be dis- rupted. (d) Corporation policies and procedures As soon as is practicable after July 21, 2010, the Corporation shall establish policies and pro- cedures that are acceptable to the Secretary governing the use of funds available to the Cor- poration to carry out this subchapter, including the terms and conditions for the provision and use of funds under sections 5384(d), 5390(h)(2)(G)(iv), and 5390(h)(9) of this title. (e) Treatment of insurance companies and insur- ance company subsidiaries (1) In general Notwithstanding subsection (b), if an insur- ance company is a covered financial company or a subsidiary or affiliate of a covered finan- cial company, the liquidation or rehabilitation of such insurance company, and any sub- sidiary or affiliate of such company that is not excepted under paragraph (2), shall be con- ducted as provided under applicable State law. (2) Exception for subsidiaries and affiliates The requirement of paragraph (1) shall not apply with respect to any subsidiary or affil- iate of an insurance company that is not itself an insurance company. (3) Backup authority Notwithstanding paragraph (1), with respect to a covered financial company described in paragraph (1), if, after the end of the 60-day pe- riod beginning on the date on which a deter- mination is made under section 5382(a) of this title with respect to such company, the appro- priate regulatory agency has not filed the ap- propriate judicial action in the appropriate State court to place such company into or- derly liquidation or rehabilitation under the laws and requirements of the State, the Cor- poration shall have the authority to stand in the place of the appropriate regulatory agency and file the appropriate judicial action in the appropriate State court to place such com- pany into orderly liquidation or rehabilitation under the laws and requirements of the State. (Pub. L. 111–203, title II, § 203, July 21, 2010, 124 Stat. 1450; Pub. L. 114–113, div. O, title VII, § 706(b)(1), Dec. 18, 2015, 129 Stat. 3029.) Editorial Notes REFERENCES IN TEXT This subchapter, referred to in subsecs. (a) to (d), was in the original ‘‘this title’’, meaning title II of Pub. L. 111–203, July 21, 2010, 124 Stat. 1442, which is classified principally to this subchapter. For complete classifica- tion of title II to the Code, see Tables. AMENDMENTS 2015—Subsec. (e)(3). Pub. L. 114–113 inserted ‘‘or reha- bilitation’’ after ‘‘orderly liquidation’’ in two places. Statutory Notes and Related Subsidiaries EFFECTIVE DATE Section effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as a note under section 5301 of this title. § 5384. Orderly liquidation of covered financial companies (a) Purpose of orderly liquidation authority It is the purpose of this subchapter to provide the necessary authority to liquidate failing fi- nancial companies that pose a significant risk to the financial stability of the United States in a manner that mitigates such risk and mini- mizes moral hazard. The authority provided in this subchapter shall be exercised in the manner that best fulfills such purpose, so that— (1) creditors and shareholders will bear the losses of the financial company; (2) management responsible for the condi- tion of the financial company will not be re- tained; and (3) the Corporation and other appropriate agencies will take all steps necessary and ap- propriate to assure that all parties, including management, directors, and third parties, hav- ing responsibility for the condition of the fi- nancial company bear losses consistent with their responsibility, including actions for damages, restitution, and recoupment of com- pensation and other gains not compatible with such responsibility. (b) Corporation as receiver Upon the appointment of the Corporation under section 5382 of this title, the Corporation shall act as the receiver for the covered finan- cial company, with all of the rights and obliga- tions set forth in this subchapter. (c) Consultation The Corporation, as receiver— (1) shall consult with the primary financial regulatory agency or agencies of the covered financial company and its covered subsidiaries for purposes of ensuring an orderly liquidation of the covered financial company; (2) may consult with, or under subsection (a)(1)(B)(v) or (a)(1)(L) of section 5390 of this title, acquire the services of, any outside ex- perts, as appropriate to inform and aid the Corporation in the orderly liquidation process; (3) shall consult with the primary financial regulatory agency or agencies of any subsidi- aries of the covered financial company that are not covered subsidiaries, and coordinate with such regulators regarding the treatment of such solvent subsidiaries and the separate resolution of any such insolvent subsidiaries under other governmental authority, as appro- priate; and (4) shall consult with the Commission and the Securities Investor Protection Corpora- tion in the case of any covered financial com- pany for which the Corporation has been ap- pointed as receiver that is a broker or dealer registered with the Commission under section 78o(b) of title 15 and is a member of the Securi- ties Investor Protection Corporation, for the purpose of determining whether to transfer to Page 1878 TITLE 12—BANKS AND BANKING § 5385 a bridge financial company organized by the Corporation as receiver, without consent of any customer, customer accounts of the cov- ered financial company. (d) Funding for orderly liquidation Upon its appointment as receiver for a covered financial company, and thereafter as the Cor- poration may, in its discretion, determine to be necessary or appropriate, the Corporation may make available to the receivership, subject to the conditions set forth in section 5386 of this title and subject to the plan described in section 5390(n)(9) of this title, funds for the orderly liq- uidation of the covered financial company. All funds provided by the Corporation under this subsection shall have a priority of claims under subparagraph (A) or (B) of section 5390(b)(1) of this title, as applicable, including funds used for— (1) making loans to, or purchasing any debt obligation of, the covered financial company or any covered subsidiary; (2) purchasing or guaranteeing against loss the assets of the covered financial company or any covered subsidiary, directly or through an entity established by the Corporation for such purpose; (3) assuming or guaranteeing the obligations of the covered financial company or any cov- ered subsidiary to 1 or more third parties; (4) taking a lien on any or all assets of the covered financial company or any covered sub- sidiary, including a first priority lien on all unencumbered assets of the covered financial company or any covered subsidiary to secure repayment of any transactions conducted under this subsection, except that, if the cov- ered financial company or covered subsidiary is an insurance company or a subsidiary of an insurance company, the Corporation— (A) shall promptly notify the State insur- ance authority for the insurance company of the intention to take such lien; and (B) may only take such lien— (i) to secure repayment of funds made available to such covered financial com- pany or covered subsidiary; and (ii) if the Corporation determines, after consultation with the State insurance au- thority, that such lien will not unduly im- pede or delay the liquidation or rehabilita- tion of the insurance company, or the re- covery by its policyholders; (5) selling or transferring all, or any part, of such acquired assets, liabilities, or obligations of the covered financial company or any cov- ered subsidiary; and (6) making payments pursuant to sub- sections (b)(4), (d)(4), and (h)(5)(E) of section 5390 of this title. (Pub. L. 111–203, title II, § 204, July 21, 2010, 124 Stat. 1454; Pub. L. 114–113, div. O, title VII, § 706(b)(2), Dec. 18, 2015, 129 Stat. 3029.) Editorial Notes REFERENCES IN TEXT This subchapter, referred to in subsecs. (a) and (b), was in the original ‘‘this title’’, meaning title II of Pub. L. 111–203, July 21, 2010, 124 Stat. 1442, which is classi- fied principally to this subchapter. For complete classi- fication of title II to the Code, see Tables. AMENDMENTS 2015—Subsec. (d)(4). Pub. L. 114–113 inserted ‘‘, except that, if the covered financial company or covered sub- sidiary is an insurance company or a subsidiary of an insurance company, the Corporation—’’ and subpars. (A) and (B) before semicolon at end. Statutory Notes and Related Subsidiaries EFFECTIVE DATE Section effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as a note under section 5301 of this title. § 5385. Orderly liquidation of covered brokers and dealers (a) Appointment of SIPC as trustee (1) Appointment Upon the appointment of the Corporation as receiver for any covered broker or dealer, the Corporation shall appoint, without any need for court approval, the Securities Investor Protection Corporation to act as trustee for the liquidation under the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.) of the covered broker or dealer. (2) Actions by SIPC (A) Filing Upon appointment of SIPC under para- graph (1), SIPC shall promptly file with any Federal district court of competent jurisdic- tion specified in section 78u or 78aa of title 15, an application for a protective decree under the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.) as to the cov- ered broker or dealer. The Federal district court shall accept and approve the filing, in- cluding outside of normal business hours, and shall immediately issue the protective decree as to the covered broker or dealer. (B) Administration by SIPC Following entry of the protective decree, and except as otherwise provided in this sec- tion, the determination of claims and the liquidation of assets retained in the receiv- ership of the covered broker or dealer and not transferred to the bridge financial com- pany shall be administered under the Securi- ties Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.) by SIPC, as trustee for the covered broker or dealer. (C) Definition of filing date For purposes of the liquidation proceeding, the term ‘‘filing date’’ means the date on which the Corporation is appointed as re- ceiver of the covered broker or dealer. (D) Determination of claims As trustee for the covered broker or deal- er, SIPC shall determine and satisfy, con- sistent with this subchapter and with the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.), all claims against the covered broker or dealer arising on or before the filing date.