§ 5384 TITLE 12—BANKS AND BANKING Page 1824

(A) a case has been, or likely will promptly mination is made under section 5382(a) of this be, commenced with respect to the financial title with respect to such company, the appro- company under the Bankruptcy Code; priate regulatory agency has not filed the ap- (B) the financial company has incurred, or propriate judicial action in the appropriate is likely to incur, losses that will deplete all State court to place such company into or- or substantially all of its capital, and there derly liquidation or rehabilitation under the is no reasonable prospect for the company to laws and requirements of the State, the Cor- avoid such depletion; poration shall have the authority to stand in (C) the assets of the financial company the place of the appropriate regulatory agency are, or are likely to be, less than its obliga- and file the appropriate judicial action in the tions to creditors and others; or appropriate State court to place such com- (D) the financial company is, or is likely pany into orderly liquidation or rehabilitation to be, unable to pay its obligations (other under the laws and requirements of the State. than those subject to a bona fide dispute) in (Pub. L. 111–203, title II, § 203, July 21, 2010, 124 the normal course of business. Stat. 1450; Pub. L. 114–113, div. O, title VII, (5) GAO review § 706(b)(1), Dec. 18, 2015, 129 Stat. 3029.)

The Comptroller General of the United REFERENCES IN TEXT States shall review and report to Congress on any determination under subsection (b), that This subchapter, referred to in subsecs. (a) to (d), was in the original ‘‘this title’’, meaning title II of Pub. L. results in the appointment of the Corporation 111–203, July 21, 2010, 124 Stat. 1442, which is classified as receiver, including— principally to this subchapter. For complete classifica- (A) the basis for the determination; tion of title II to the Code, see Tables. (B) the purpose for which any action was taken pursuant thereto; AMENDMENTS (C) the likely effect of the determination 2015—Subsec. (e)(3). Pub. L. 114–113 inserted ‘‘or reha- and such action on the incentives and con- bilitation’’ after ‘‘orderly liquidation’’ in two places. duct of financial companies and their credi- EFFECTIVE DATE tors, counterparties, and shareholders; and (D) the likely disruptive effect of the de- Section effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set termination and such action on the reason- out as a note under section 5301 of this title. able expectations of creditors, counterparties, and shareholders, taking § 5384. Orderly liquidation of covered financial into account the impact any action under companies this subchapter would have on financial sta- (a) Purpose of orderly liquidation authority bility in the United States, including wheth- er the rights of such parties will be dis- It is the purpose of this subchapter to provide rupted. the necessary authority to liquidate failing fi- nancial companies that pose a significant risk (d) Corporation policies and procedures to the financial stability of the United States in As soon as is practicable after July 21, 2010, a manner that mitigates such risk and mini- the Corporation shall establish policies and pro- mizes moral hazard. The authority provided in cedures that are acceptable to the Secretary this subchapter shall be exercised in the manner governing the use of funds available to the Cor- that best fulfills such purpose, so that— poration to carry out this subchapter, including (1) creditors and shareholders will bear the the terms and conditions for the provision and losses of the financial company; use of funds under sections 5384(d), (2) management responsible for the condi- 5390(h)(2)(G)(iv), and 5390(h)(9) of this title. tion of the financial company will not be re- (e) Treatment of insurance companies and insur- tained; and ance company subsidiaries (3) the Corporation and other appropriate agencies will take all steps necessary and ap- (1) In general propriate to assure that all parties, including Notwithstanding subsection (b), if an insur- management, directors, and third parties, hav- ance company is a covered financial company ing responsibility for the condition of the fi- or a subsidiary or affiliate of a covered finan- nancial company bear losses consistent with cial company, the liquidation or rehabilitation their responsibility, including actions for of such insurance company, and any subsidi- damages, restitution, and recoupment of com- ary or affiliate of such company that is not ex- pensation and other gains not compatible with cepted under paragraph (2), shall be conducted such responsibility. as provided under applicable State law. (b) Corporation as receiver (2) Exception for subsidiaries and affiliates Upon the appointment of the Corporation The requirement of paragraph (1) shall not under section 5382 of this title, the Corporation apply with respect to any subsidiary or affili- shall act as the receiver for the covered finan- ate of an insurance company that is not itself cial company, with all of the rights and obliga- an insurance company. tions set forth in this subchapter. (3) Backup authority (c) Consultation Notwithstanding paragraph (1), with respect The Corporation, as receiver— to a covered financial company described in (1) shall consult with the primary financial paragraph (1), if, after the end of the 60-day pe- regulatory agency or agencies of the covered riod beginning on the date on which a deter- financial company and its covered subsidiaries Page 1825 TITLE 12—BANKS AND BANKING § 5385

for purposes of ensuring an orderly liquidation (ii) if the Corporation determines, after of the covered financial company; consultation with the State insurance au- (2) may consult with, or under subsection thority, that such lien will not unduly im- (a)(1)(B)(v) or (a)(1)(L) of section 5390 of this pede or delay the liquidation or rehabilita- title, acquire the services of, any outside ex- tion of the insurance company, or the re- perts, as appropriate to inform and aid the covery by its policyholders; Corporation in the orderly liquidation process; (3) shall consult with the primary financial (5) selling or transferring all, or any part, of regulatory agency or agencies of any subsidi- such acquired assets, liabilities, or obligations aries of the covered financial company that of the covered financial company or any cov- are not covered subsidiaries, and coordinate ered subsidiary; and with such regulators regarding the treatment (6) making payments pursuant to sub- of such solvent subsidiaries and the separate sections (b)(4), (d)(4), and (h)(5)(E) of section resolution of any such insolvent subsidiaries 5390 of this title. under other governmental authority, as appro- (Pub. L. 111–203, title II, § 204, July 21, 2010, 124 priate; and Stat. 1454; Pub. L. 114–113, div. O, title VII, (4) shall consult with the Commission and § 706(b)(2), Dec. 18, 2015, 129 Stat. 3029.) the Securities Investor Protection Corpora- tion in the case of any covered financial com- REFERENCES IN TEXT pany for which the Corporation has been ap- This subchapter, referred to in subsecs. (a) and (b), pointed as receiver that is a broker or dealer was in the original ‘‘this title’’, meaning title II of Pub. registered with the Commission under section L. 111–203, July 21, 2010, 124 Stat. 1442, which is classi- 78o(b) of title 15 and is a member of the Securi- fied principally to this subchapter. For complete classi- ties Investor Protection Corporation, for the fication of title II to the Code, see Tables. purpose of determining whether to transfer to AMENDMENTS a bridge financial company organized by the Corporation as receiver, without consent of 2015—Subsec. (d)(4). Pub. L. 114–113 inserted ‘‘, except any customer, customer accounts of the cov- that, if the covered financial company or covered sub- ered financial company. sidiary is an insurance company or a subsidiary of an insurance company, the Corporation—’’ and subpars. (d) Funding for orderly liquidation (A) and (B) before semicolon at end. Upon its appointment as receiver for a covered financial company, and thereafter as the Cor- EFFECTIVE DATE poration may, in its discretion, determine to be Section effective 1 day after July 21, 2010, except as necessary or appropriate, the Corporation may otherwise provided, see section 4 of Pub. L. 111–203, set make available to the receivership, subject to out as a note under section 5301 of this title. the conditions set forth in section 5386 of this § 5385. Orderly liquidation of covered brokers title and subject to the plan described in section and dealers 5390(n)(9) of this title, funds for the orderly liq- uidation of the covered financial company. All (a) Appointment of SIPC as trustee funds provided by the Corporation under this (1) Appointment subsection shall have a priority of claims under subparagraph (A) or (B) of section 5390(b)(1) of Upon the appointment of the Corporation as this title, as applicable, including funds used receiver for any covered broker or dealer, the for— Corporation shall appoint, without any need (1) making loans to, or purchasing any debt for court approval, the Securities Investor obligation of, the covered financial company Protection Corporation to act as trustee for or any covered subsidiary; the liquidation under the Securities Investor (2) purchasing or guaranteeing against loss Protection Act of 1970 (15 U.S.C. 78aaa et seq.) the assets of the covered financial company or of the covered broker or dealer. any covered subsidiary, directly or through an (2) Actions by SIPC entity established by the Corporation for such (A) Filing purpose; (3) assuming or guaranteeing the obligations Upon appointment of SIPC under para- of the covered financial company or any cov- graph (1), SIPC shall promptly file with any ered subsidiary to 1 or more third parties; Federal district court of competent jurisdic- (4) taking a lien on any or all assets of the tion specified in section 78u or 78aa of title covered financial company or any covered sub- 15, an application for a protective decree sidiary, including a first priority lien on all under the Securities Investor Protection Act unencumbered assets of the covered financial of 1970 (15 U.S.C. 78aaa et seq.) as to the cov- company or any covered subsidiary to secure ered broker or dealer. The Federal district repayment of any transactions conducted court shall accept and approve the filing, in- under this subsection, except that, if the cov- cluding outside of normal business hours, ered financial company or covered subsidiary and shall immediately issue the protective is an insurance company or a subsidiary of an decree as to the covered broker or dealer. insurance company, the Corporation— (B) Administration by SIPC (A) shall promptly notify the State insur- ance authority for the insurance company of Following entry of the protective decree, the intention to take such lien; and and except as otherwise provided in this sec- (B) may only take such lien— tion, the determination of claims and the (i) to secure repayment of funds made liquidation of assets retained in the receiv- available to such covered financial com- ership of the covered broker or dealer and pany or covered subsidiary; and not transferred to the bridge financial com-