---
kind: "section"
citation: "12 U.S.C. § 5385"
title: "12"
title_heading: "Banks and Banking"
number: "5385"
heading: "Orderly liquidation of covered brokers and dealers"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/12/5385"
units:
  - "Chapter 53 — Wall Street Reform and Consumer Protection"
  - "Subchapter II — Orderly Liquidation Authority"
---

# §5385. Orderly liquidation of covered brokers and dealers

- (a) **Appointment of SIPC as trustee—**
  - (1) **Appointment—** Upon the appointment of the [Corporation](/usc/12/5301.md?p=7) as receiver for any [covered broker or dealer](/usc/12/5381.md?p=a-7), the [Corporation](/usc/12/5301.md?p=7) shall appoint, without any need for [court](/usc/12/5381.md?p=a-6) approval, the Securities Investor Protection [Corporation](/usc/12/5301.md?p=7) to act as trustee for the liquidation under the Securities Investor Protection Act of 1970 ([15 U.S.C. 78aaa](/usc/15/78aaa.md) et seq.) of the [covered broker or dealer](/usc/12/5381.md?p=a-7).
  - (2) **Actions by SIPC—**
    - (A) **Filing—** Upon appointment of [SIPC](/usc/12/5381.md?p=a-16) under [paragraph (1)](#a-1), [SIPC](/usc/12/5381.md?p=a-16) shall promptly file with any Federal district [court](/usc/12/5381.md?p=a-6) of competent jurisdiction specified in section [78u](/usc/15/78u.md) or [78aa](/usc/15/78aa.md) of title 15, an application for a protective decree under the Securities Investor Protection Act of 1970 ([15 U.S.C. 78aaa](/usc/15/78aaa.md) et seq.) as to the [covered broker or dealer](/usc/12/5381.md?p=a-7). The Federal district [court](/usc/12/5381.md?p=a-6) shall accept and approve the filing, [including](/usc/12/5301.md?p=18-A) outside of normal business hours, and shall immediately issue the protective decree as to the [covered broker or dealer](/usc/12/5381.md?p=a-7).
    - (B) **Administration by SIPC—** Following entry of the protective decree, and except as otherwise provided in this section, the determination of [claims](/usc/12/5381.md?p=a-4) and the liquidation of assets retained in the receivership of the [covered broker or dealer](/usc/12/5381.md?p=a-7) and not transferred to the [bridge financial company](/usc/12/5381.md?p=a-3) shall be administered under the Securities Investor Protection Act of 1970 ([15 U.S.C. 78aaa](/usc/15/78aaa.md) et seq.) by [SIPC](/usc/12/5381.md?p=a-16), as trustee for the [covered broker or dealer](/usc/12/5381.md?p=a-7).
    - (C) **Definition of filing date—** For purposes of the liquidation proceeding, the term “filing date” means the date on which the [Corporation](/usc/12/5301.md?p=7) is appointed as receiver of the [covered broker or dealer](/usc/12/5381.md?p=a-7).
    - (D) **Determination of claims—** As trustee for the [covered broker or dealer](/usc/12/5381.md?p=a-7), [SIPC](/usc/12/5381.md?p=a-16) shall determine and satisfy, consistent with this subchapter and with the Securities Investor Protection Act of 1970 ([15 U.S.C. 78aaa](/usc/15/78aaa.md) et seq.), all [claims](/usc/12/5381.md?p=a-4) against the [covered broker or dealer](/usc/12/5381.md?p=a-7) arising on or before the filing date.
- (b) **Powers and duties of SIPC—**
  - (1) **In general—** Except as provided in this section, upon its appointment as trustee for the liquidation of a [covered broker or dealer](/usc/12/5381.md?p=a-7), [SIPC](/usc/12/5381.md?p=a-16) shall have all of the powers and duties provided by the Securities Investor Protection Act of 1970 ([15 U.S.C. 78aaa](/usc/15/78aaa.md) et seq.), [including](/usc/12/5301.md?p=18-A), without limitation, all rights of action against third parties, and shall conduct such liquidation in accordance with the terms of the Securities Investor Protection Act of 1970 ([15 U.S.C. 78aaa](/usc/15/78aaa.md) et seq.), except that [SIPC](/usc/12/5381.md?p=a-16) shall have no powers or duties with respect to assets and liabilities transferred by the [Corporation](/usc/12/5301.md?p=7) from the [covered broker or dealer](/usc/12/5381.md?p=a-7) to any [bridge financial company](/usc/12/5381.md?p=a-3) established in accordance with this subchapter.
  - (2) **Limitation of powers—** The exercise by [SIPC](/usc/12/5381.md?p=a-16) of powers and functions as trustee under [subsection (a)](#a) shall not impair or impede the exercise of the powers and duties of the [Corporation](/usc/12/5301.md?p=7) with regard to—
    - (A) any action, except as otherwise provided in this subchapter—
      - (i) to make [funds](/usc/12/5381.md?p=a-12) available under [section 5384(d) of this title](/usc/12/5384.md?p=d);
      - (ii) to organize, establish, operate, or terminate any [bridge financial company](/usc/12/5381.md?p=a-3);
      - (iii) to transfer assets and liabilities;
      - (iv) to enforce or repudiate contracts; or
      - (v) to take any other action relating to such [bridge financial company](/usc/12/5381.md?p=a-3) under [section 5390 of this title](/usc/12/5390.md); or
    - (B) determining [claims](/usc/12/5381.md?p=a-4) under [subsection (e)](#e).
  - (3) **Protective decree—** [SIPC](/usc/12/5381.md?p=a-16) and the [Corporation](/usc/12/5301.md?p=7), in consultation with the [Commission](/usc/12/5301.md?p=5), shall jointly determine the terms of the protective decree to be filed by [SIPC](/usc/12/5381.md?p=a-16) with any [court](/usc/12/5381.md?p=a-6) of competent jurisdiction under section [78u](/usc/15/78u.md) or [78aa](/usc/15/78aa.md) of title 15, as required by [subsection (a)](#a).
  - (4) **Qualified financial contracts—** Notwithstanding any provision of the Securities Investor Protection Act of 1970 ([15 U.S.C. 78aaa](/usc/15/78aaa.md) et seq.) to the contrary ([including](/usc/12/5301.md?p=18-A) [section 5(b)(2)(C)](/usc/15/5.md) of that Act ([15 U.S.C. 78eee(b)(2)(C)](/usc/15/78eee.md?p=b-2-C))), the rights and obligations of any party to a qualified [financial contract](/usc/12/5341.md?p=7) (as that term is defined in [section 5390(c)(8) of this title](/usc/12/5390.md?p=c-8)) to which a [covered broker or dealer](/usc/12/5381.md?p=a-7) for which the [Corporation](/usc/12/5301.md?p=7) has been appointed receiver is a party shall be governed exclusively by [section 5390 of this title](/usc/12/5390.md), [including](/usc/12/5301.md?p=18-A) the limitations and restrictions contained in [section 5390(c)(10)(B) of this title](/usc/12/5390.md?p=c-10-B).
- (c) **Limitation on court action—** Except as otherwise provided in this subchapter, no [court](/usc/12/5381.md?p=a-6) may take any action, [including](/usc/12/5301.md?p=18-A) any action pursuant to the Securities Investor Protection Act of 1970 ([15 U.S.C. 78aaa](/usc/15/78aaa.md) et seq.) or the [Bankruptcy Code](/usc/12/5381.md?p=a-2), to restrain or affect the exercise of powers or functions of the [Corporation](/usc/12/5301.md?p=7) as receiver for a [covered broker or dealer](/usc/12/5381.md?p=a-7) and any [claims](/usc/12/5381.md?p=a-4) against the [Corporation](/usc/12/5301.md?p=7) as such receiver shall be determined in accordance with [subsection (e)](#e) and such [claims](/usc/12/5381.md?p=a-4) shall be limited to money damages.
- (d) **Actions by Corporation as receiver—**
  - (1) **In general—** Notwithstanding any other provision of this subchapter, no action taken by the [Corporation](/usc/12/5301.md?p=7) as receiver with respect to a [covered broker or dealer](/usc/12/5381.md?p=a-7) shall—
    - (A) adversely affect the rights of a [customer](/usc/12/5381.md?p=a-10) to [customer property](/usc/12/5381.md?p=a-10) or [customer name securities](/usc/12/5381.md?p=a-10);
    - (B) diminish the amount or timely payment of [net equity](/usc/12/5381.md?p=a-10) [claims](/usc/12/5381.md?p=a-4) of [customers](/usc/12/5381.md?p=a-10); or
    - (C) otherwise impair the recoveries provided to a [customer](/usc/12/5381.md?p=a-10) under the Securities Investor Protection Act of 1970 ([15 U.S.C. 78aaa](/usc/15/78aaa.md) et seq.).
  - (2) **Net proceeds—** The net proceeds from any transfer, sale, or disposition of assets of the [covered broker or dealer](/usc/12/5381.md?p=a-7), or proceeds thereof by the [Corporation](/usc/12/5301.md?p=7) as receiver for the [covered broker or dealer](/usc/12/5381.md?p=a-7) shall be for the benefit of the estate of the [covered broker or dealer](/usc/12/5381.md?p=a-7), as provided in this subchapter.
- (e) **Claims against the Corporation as receiver—** Any [claim](/usc/12/5381.md?p=a-4) against the [Corporation](/usc/12/5301.md?p=7) as receiver for a [covered broker or dealer](/usc/12/5381.md?p=a-7) for assets transferred to a [bridge financial company](/usc/12/5381.md?p=a-3) established with respect to such [covered broker or dealer](/usc/12/5381.md?p=a-7)—
  - (1) shall be determined in accordance with [section 5390(a)(2) of this title](/usc/12/5390.md?p=a-2); and
  - (2) may be reviewed by the appropriate district or territorial [court](/usc/12/5381.md?p=a-6) of the United States in accordance with [section 5390(a)(5) of this title](/usc/12/5390.md?p=a-5).
- (f) **Satisfaction of customer claims—**
  - (1) **Obligations to customers—** Notwithstanding any other provision of this subchapter, all obligations of a [covered broker or dealer](/usc/12/5381.md?p=a-7) or of any [bridge financial company](/usc/12/5381.md?p=a-3) established with respect to such [covered broker or dealer](/usc/12/5381.md?p=a-7) to a [customer](/usc/12/5381.md?p=a-10) relating to, or [net equity](/usc/12/5381.md?p=a-10) [claims](/usc/12/5381.md?p=a-4) based upon, [customer property](/usc/12/5381.md?p=a-10) or [customer name securities](/usc/12/5381.md?p=a-10) shall be promptly discharged by [SIPC](/usc/12/5381.md?p=a-16), the [Corporation](/usc/12/5301.md?p=7), or the [bridge financial company](/usc/12/5381.md?p=a-3), as applicable, by the delivery of securities or the making of payments to or for the account of such [customer](/usc/12/5381.md?p=a-10), in a manner and in an amount at least as beneficial to the [customer](/usc/12/5381.md?p=a-10) as would have been the case had the actual proceeds realized from the liquidation of the [covered broker or dealer](/usc/12/5381.md?p=a-7) under this subchapter been distributed in a proceeding under the Securities Investor Protection Act of 1970 ([15 U.S.C. 78aaa](/usc/15/78aaa.md) et seq.) without the appointment of the [Corporation](/usc/12/5301.md?p=7) as receiver and without any transfer of assets or liabilities to a [bridge financial company](/usc/12/5381.md?p=a-3), and with a filing date as of the date on which the [Corporation](/usc/12/5301.md?p=7) is appointed as receiver.
  - (2) **Satisfaction of claims by SIPC—** [SIPC](/usc/12/5381.md?p=a-16), as trustee for a [covered broker or dealer](/usc/12/5381.md?p=a-7), shall satisfy [customer](/usc/12/5381.md?p=a-10) [claims](/usc/12/5381.md?p=a-4) in the manner and amount provided under the Securities Investor Protection Act of 1970 ([15 U.S.C. 78aaa](/usc/15/78aaa.md) et seq.), as if the appointment of the [Corporation](/usc/12/5301.md?p=7) as receiver had not occurred, and with a filing date as of the date on which the [Corporation](/usc/12/5301.md?p=7) is appointed as receiver. The [Corporation](/usc/12/5301.md?p=7) shall satisfy [customer](/usc/12/5381.md?p=a-10) [claims](/usc/12/5381.md?p=a-4), to the extent that a [customer](/usc/12/5381.md?p=a-10) would have received more securities or cash with respect to the allocation of [customer property](/usc/12/5381.md?p=a-10) had the [covered financial company](/usc/12/5381.md?p=a-8) been subject to a proceeding under the Securities Investor Protection Act ([15 U.S.C. 78aaa](/usc/15/78aaa.md) et seq.) without the appointment of the [Corporation](/usc/12/5301.md?p=7) as receiver, and with a filing date as of the date on which the [Corporation](/usc/12/5301.md?p=7) is appointed as receiver.
- (g) **Priorities—**
  - (1) **Customer property—** As trustee for a [covered broker or dealer](/usc/12/5381.md?p=a-7), [SIPC](/usc/12/5381.md?p=a-16) shall allocate [customer property](/usc/12/5381.md?p=a-10) and deliver [customer name securities](/usc/12/5381.md?p=a-10) in accordance with section 8(c) of the Securities Investor Protection Act of 1970 ([15 U.S.C. 78fff–2(c)](/usc/15/78fff–2.md?p=c)).
  - (2) **Other claims—** All [claims](/usc/12/5381.md?p=a-4) other than those described in [paragraph (1)](#g-1) ([including](/usc/12/5301.md?p=18-A) any unpaid [claim](/usc/12/5381.md?p=a-4) by a [customer](/usc/12/5381.md?p=a-10) for the allowed [net equity](/usc/12/5381.md?p=a-10) [claim](/usc/12/5381.md?p=a-4) of such [customer](/usc/12/5381.md?p=a-10) from [customer property](/usc/12/5381.md?p=a-10)) shall be paid in accordance with the priorities in [section 5390(b) of this title](/usc/12/5390.md?p=b).
- (h) **Rulemaking—** The [Commission](/usc/12/5301.md?p=5) and the [Corporation](/usc/12/5301.md?p=7), after consultation with [SIPC](/usc/12/5381.md?p=a-16), shall jointly issue rules to implement this section.

## Source credit

(Pub. L. 111–203, title II, § 205, July 21, 2010, 124 Stat. 1456.)

## Notes

### Editorial Notes

### References in Text

The Securities Investor Protection Act of 1970, referred to in text, is Pub. L. 91–598, Dec. 30, 1970, 84 Stat. 1636, which is classified generally to chapter 2B–1 (§ 78aaa et seq.) of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see section 78aaa of Title 15 and Tables.

This subchapter, referred to in text, 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 classification of title II to the Code, see Tables.

### 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.