Abstract
Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act gives the government the Orderly Liquidation Authority (“OLA”) to seek the liquidation of failing financial companies with the appointment of the Federal Deposit Insurance Corporation (“the FDIC”) as receiver. When applied to securities broker-dealers, the OLA calls into question the incorporation of the Securities Investor Protection Act of 1970 (“SIPA”) that provides for the orderly liquidation of an insolvent broker-dealer under the oversight of the Securities Investor Protection Corporation (“the SIPC”). The result is a conflict of control between the FDIC and the SIPC in the event of an OLA broker-dealer liquidation and investor uncertainty regarding the incorporation of SIPA protections for customer property. Problematically, the OLA and its implementing rules leave the FDIC with discretion to modify SIPA protections for customer property.
Highlights
The division of regulatory responsibility for financial institutions and financial products once relied on clear categorical distinctions made along industry lines.[1]
When applied to securities broker-dealers, the Orderly Liquidation Authority (OLA) calls into question the incorporation of the Securities Investor Protection Act of 1970 (“SIPA”) that provides for the orderly liquidation of an insolvent broker-dealer under the oversight of the Securities Investor Protection Corporation (“the SIPC”)
The result is a conflict of control between the FDIC and the SIPC in the event of an OLA broker-dealer liquidation and investor uncertainty regarding the incorporation of SIPA protections for customer property
Summary
* J.D. Candidate 2021, Columbia Law School; B.F.A. 2015, New York University. Many thanks to Professor Ronald Mann for his guidance throughout the Note-writing process and to Roy Haynes for his comments and suggestions. My sincerest gratitude to the staff and editorial board of the Columbia Business Law Review for their assistance in preparing this Note for publication
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