On February 17, the Securities and Exchange Commission and the Federal Deposit Insurance Corporation “jointly propos[ed] a rule to implement provisions applicable to the orderly liquidation of covered brokers and dealers under Title II of the Dodd-Frank Act[.]” The two government agencies issued the proposed rule pursuant to the Dodd-Frank Act, which specifically empowers them to regulate the liquidation of specific large financial entities. Release.
Title II
SEC Lifts Ban on General Solicitation, Adopts “Bad Actor” Disqualification Rules and Proposes Amendments to Form D Filings
On April 5, 2012, the Jumpstart Our Business Startups Act (the JOBS Act) was enacted. Title II of the JOBS Act mandated the Securities and Exchange Commission to amend applicable rules within 90 days of its enactment (i.e., July 5, 2012) in order to eliminate the prohibitions against general solicitation or general advertising in Rule 506 of Regulation D under the Securities Act of 1933, as amended, and under Rule 144A under the Securities Act. In August 2012, the Commission proposed a new Rule 506(c) and an amendment to Rule 144A to implement Title II. During an open meeting on July 10, 2013, the Commission issued two releases (33-9414 (bad actor) and 33-9415 (Rule 506, Rule 144A and Form D)) which adopted new rules. For more information on the adopted rules, please click here.
FDIC Final Rule on Orderly Liquidation Authority
On July 6, the FDIC adopted a final rule addressing the rights and powers of the FDIC as a receiver of a nonviable systemic financial company under the orderly liquidation provisions of Title II of the Dodd-Frank Act. The rule addresses: (i) recoupment of compensation from senior executives and directors as well as the receiver’s power to avoid fraudulent and preferential transfers; (ii) the priority of claims; and (iii) the receivership administrative claims process as well as secured claims procedures. The linked memorandum contains the version of the rule adopted by the FDIC Board, which may differ from the official version published in the Federal Register. The rule will be effective 30 days after the date of publication in the Federal Register. Memorandum to FDIC Board.
FDIC Report on Lehman Orderly Resolution
On April 18, the FDIC released a report examining how it could have structured an orderly resolution of Lehman Brothers Holdings Inc. using the orderly liquidation authority under Title II of the Dodd-Frank Act. FDIC Release.