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1 1 (March 2, 2023)

handle is hein.crs/govektp0001 and id is 1 raw text is: Congressional_______ Research S rvi e Federal Statutory Bankruptcy Alternatives: A Roadmap March 2, 2023 In most cases, a bankrupt entity will either liquidate or reorganize under the U.S. Bankruptcy Code, and the U.S. bankruptcy courts will administer those proceedings. There are, however, certain entities, such as banks and brokerages, that follow a different path when they become insolvent. This Legal Sidebar presents an overview of federal restructuring regimes that operate alongside the Bankruptcy Code. Some of these regimes have been in place for decades, such as those operated by the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA) Board, and the Securities Investor Protection Corporation (SIPC). The Orderly Liquidation Authority (OLA), a product of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) is a newer and untested system. This Sidebar also discusses the subchapter of the Bankruptcy Code that deals with commodities brokers, which incorporates laws and rules from the Commodity Futures Trading Commission (CFTC). For each of these regimes, this Sidebar explains how they differ from a traditional bankruptcy. There also are legal mechanisms under each state's law that govern the resolution of insurance company insolvencies, but this Sidebar discusses only federal bankruptcy alternatives. This sidebar concludes with brief considerations for Congress on how a bankrupt or distressed crypto company may fit into these statutory regimes. The SIPC - A Unique Trustee Program for Brokerage Firms The Bankruptcy Code provides for the liquidation of a stock brokerage, yet these firms have another way to liquidate. The Securities Investor Protection Act of 1970 (SIPA), codified at 15 U.S.C. @@ 78aaa-111, created the SIPC. The SIPC is a nonprofit, private-membership corporation consisting of most brokers and dealers registered under Section 15(b) of the Securities Exchange Act of 1934. As of December 2021, more than 3,400 entities are SIPC members. Of special importance to the SIPC liquidation regime is the SIPC fund. All SIPC members must make payments to the fund, which in turn pays for all SIPC expenditures. Also included in the value of the fund is the fair market value of and interest accrued on U.S. Government securities owned by the SIPC. As of December 2021, the value of the fund was $4.16 billion. The fund reimburses customers of a failed brokerage firm for the value of up to $500,000 in securities, with claims for cash limited to $250,000 per customer. Congressional Research Service https://crsreports.congress.gov LSB10926 CRS Legal Sidebar Prepared for Members and Committees of Congress

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