16324 Federal Register / Vol. 76, No. 56 / Wednesday, March 23, 2011 / Proposed Rules 

the referendum herein ordered have 

been submitted to and approved by the 

Office of Management and Budget 

(OMB) and have been assigned OMB 

No. 0581–0178. It has been estimated 

that it will take an average of 20 minutes 

for each of the approximately 267 

Washington potato growers to cast a 

ballot. Participation is voluntary. Ballots 

postmarked after June 24, 2011, will not 

be included in the vote tabulation. 

Teresa Hutchinson and Gary D. Olson 

of the Northwest Marketing Field Office, 

Fruit and Vegetable Programs, AMS, 

USDA, are hereby designated as the 

referendum agents of the Secretary of 

Agriculture to conduct this referendum. 

The procedure applicable to the 

referendum shall be the ‘‘Procedure for 

the Conduct of Referenda in Connection 

With Marketing Orders for Fruits, 

Vegetables, and Nuts Pursuant to the 

Agricultural Marketing Agreement Act 

of 1937, as Amended’’ (7 CFR 900.400– 

900.407). 

Ballots will be mailed to all growers 

of record and may also be obtained from 

the referendum agents or from their 

appointees. 

List of Subjects in 7 CFR Part 946 

Marketing agreements, Potatoes, 

Reporting and recordkeeping 

requirements. 

Authority: 7 U.S.C. 601–674. 

Dated: March 16, 2011. 

David R. Shipman, 

Associate Administrator, Agricultural 

Marketing Service. 

[FR Doc. 2011–6829 Filed 3–22–11; 8:45 am] 

BILLING CODE 3410–02–P 

DEPARTMENT OF AGRICULTURE 

Agricultural Marketing Service 

7 CFR Part 1218 

[Doc. No. AMS–FV–10–0095] 

Blueberry Promotion, Research, and 

Information Order; Continuance 

Referendum 

AGENCY: Agricultural Marketing Service, 

USDA. 

ACTION: Referendum order. 

SUMMARY: This document directs that a 

referendum be conducted among 

eligible producers and importers of 

highbush blueberries to determine 

whether they favor continuance of the 

Blueberry Promotion, Research, and 

Information Order (Order). 

DATES: This referendum will be 

conducted by mail ballot from July 5, 

2011, through July 26, 2011. To be 

eligible to vote in this referendum, 

blueberry producers and importers must 

have produced or imported 2,000 

pounds or more of highbush blueberries 

annually during the representative 

period of January 1, 2010, through 

December 31, 2010. Ballots must be 

received by the referendum agents no 

later than the close of business on July 

26, 2011, to be counted. 

ADDRESSES: Copies of the Order may be 

obtained from: Referendum Agent, 

Research and Promotion Branch (RPB), 

Fruit and Vegetable Programs (FVP), 

AMS, USDA, Stop 0244, Room 0632–S, 

1400 Independence Avenue, SW., 

Washington, DC 20250–0244, telephone: 

888–720–9917 (toll free), fax: 202–205– 

2800, e-mail: 

Veronica.Douglass@ams.usda.gov; or at 

http://www.ams.usda.gov/fvpromotion. 

SUPPLEMENTARY INFORMATION: Pursuant 

to the Commodity Promotion, Research, 

and Information Act of 1996 (7 U.S.C. 

7411–7425) (Act), it is hereby directed 

that a referendum be conducted to 

ascertain whether continuance of the 

Order is favored by eligible producers 

and importers of highbush blueberries. 

The Order is authorized under the Act. 

The representative period for 

establishing voter eligibility for the 

referendum shall be the period from 

January 1, 2010, through December 31, 

2010. Persons who produced or 

imported 2,000 pounds or more of 

highbush blueberries during the 

representative period are eligible to vote 

in the referendum. Persons who 

received an exemption from 

assessments for the entire representative 

period are ineligible to vote. The 

referendum shall be conducted by mail 

ballot from July 5, 2011, through July 

26, 2011. 

Section 518 of the Act authorizes 

continuance referenda. Under section 

1218.71(b) of the Order, the Department 

of Agriculture (Department) shall 

conduct a referendum every five years 

or when 10 percent or more of the 

eligible voters petition the Secretary of 

Agriculture to hold a referendum to 

determine whether persons subject to 

assessment favor continuance of the 

Order. The Department would continue 

the Order if continuance of the Order is 

approved by a majority of the producers 

and importers voting in the referendum, 

who also represent a majority of the 

volume of blueberries produced or 

imported during the representative 

period determined by the Secretary. 

In accordance with the Paperwork 

Reduction Act of 1995 (44 U.S.C. 

chapter 35), the referendum ballot has 

been approved by the Office of 

Management and Budget (OMB) and 

assigned OMB No. 0581–0093. It has 

been estimated that there are 

approximately 2,000 producers and 50 

importers who will be eligible to vote in 

the referendum. It will take an average 

of 15 minutes for each voter to read the 

voting instructions and complete the 

referendum ballot. 

Referendum Order 

Veronica Douglass, RPB, FVP, AMS, 

USDA, Stop 0244, Room 0632–S, 1400 

Independence Avenue, SW., 

Washington, DC 20250–0244, is 

designated as the referendum agent to 

conduct this referendum. The 

referendum procedures 7 CFR 1218.100 

through 1218.107, which were issued 

pursuant to the Act, shall be used to 

conduct the referendum. 

The referendum agents will mail the 

ballots to be cast in the referendum and 

voting instructions to all known 

highbush blueberry producers and 

importers of 2,000 pounds or more prior 

to the first day of the voting period. 

Persons who are producers and 

importers during the representative 

period are eligible to vote. Persons who 

received an exemption from 

assessments during the entire 

representative period are ineligible to 

vote. Any eligible producer or importer 

who does not receive a ballot should 

contact the referendum agent no later 

than one week before the end of the 

voting period. Ballots must be received 

by the referendum agent by 5 p.m. 

Eastern Daylight Savings Time, July 26, 

2011, in order to be counted. 

List of Subjects in 7 CFR Part 1218 

Administrative practice and 

procedure, Advertising, Consumer 

information, Marketing agreements, 

Blueberry promotion, Reporting and 

recordkeeping requirements. 

Authority: 7 U.S.C. 7411–7425 and 7 

U.S.C. 7401. 

Dated: March 16, 2011. 

David R. Shipman, 

Associate Administrator, Agricultural 

Marketing Service. 

[FR Doc. 2011–6827 Filed 3–22–11; 8:45 am] 

BILLING CODE 3410–02–P 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 380 

RIN 3064–AD73 

Orderly Liquidation Authority 

AGENCY: Federal Deposit Insurance 

Corporation (FDIC). 

ACTION: Notice of proposed rulemaking. 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
Federal Register / Vol. 76, No. 56 / Wednesday, March 23, 2011 / Proposed Rules 16325 

SUMMARY: The FDIC is proposing and 

requests comments on a rule that would 

implement certain provisions of its 

authority to resolve covered financial 

companies under Title II of the DoddFrank Wall Street Reform and Consumer 

Protection Act (the ‘‘Dodd-Frank Act’’ or 

the ‘‘Act’’). This proposed rule 

(‘‘Proposed Rule’’) builds on the interim 

final rule published by the FDIC on 

January 25, 2011 (‘‘Interim Final Rule’’) 

to address additional provisions of Title 

II. The Proposed Rule addresses the 

following issues: the definition of a 

‘‘financial company’’ subject to 

resolution under Title II by establishing 

criteria for determining whether a 

company is ‘‘predominantly engaged in 

activities that are financial in nature or 

incidental thereto;’’ recoupment of 

compensation from senior executives 

and directors, in limited circumstances, 

as provided in section 210(s) of the 

Dodd-Frank Act; application of the 

power to avoid fraudulent or 

preferential transfers; the priorities of 

expenses and unsecured claims; and the 

administrative process for initial 

determination of claims and the process 

for judicial determination of claims 

disallowed by the receiver. 

DATES: Written comments must be 

received by the FDIC not later than May 

23, 2011. 

ADDRESSES: You may submit comments 

by any of the following methods: 

• Agency Web Site: http:// 

www.fdic.gov/regulations/laws/federal/ 

propose.html. Follow instructions for 

submitting comments on the Agency 

Web Site. 

• E-mail: Comments@FDIC.gov. 

Include ‘‘RIN 3064–AD73’’ in the subject 

line of the message. 

• Mail: Robert E. Feldman, Executive 

Secretary, Attention: Comments, Federal 

Deposit Insurance Corporation, 550 17th 

Street, NW., Washington, DC 20429. 

• Hand Delivery/Courier: Guard 

station at the rear of the 550 17th Street 

Building (located on F Street) on 

business days between 7 a.m. and 5 p.m. 

(EDT). 

• Federal eRulemaking Portal: http:// 

www.regulations.gov/. Follow the 

instructions for submitting comments. 

• Public Inspection: All comments 

received will be posted without change 

to http://www.fdic.gov/regulations/laws/ 

federal/propose.html including any 

personal information provided. Paper 

copies of public comments may be 

ordered from the Public Information 

Center by telephone at (703) 562–2200 

or 1–877–275–3342. 

FOR FURTHER INFORMATION CONTACT: 

Marc Steckel, Associate Director, 

Division of Insurance and Research, 

202–898–3618; or R. Penfield Starke, 

Senior Counsel, Legal Division, (703) 

562–2422. For questions to the Legal 

Division concerning the following parts 

of the Proposed Rule contact: 

Definition of predominantly engaged 

in financial activities: Ryan K. 

Clougherty, Senior Attorney (202) 898– 

3843. 

Avoidable transfer provisions: Phillip 

E. Sloan, Counsel (703) 562–6137. 

Compensation recoupment: Patricia 

G. Butler, Counsel (703) 516–5798. 

Subpart A—Priorities of Claims: 

Elizabeth Falloon, Counsel (703) 562– 

6148. 

Subpart B—Receivership 

Administrative Claims Procedures: 

Thomas Bolt, Supervisory Counsel (703) 

562–2046. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Dodd-Frank Act was enacted on 

July 21, 2010. Title II of the Dodd-Frank 

Act provides for the appointment of the 

FDIC as receiver of a covered financial 

company following the prescribed 

recommendation, determination and 

judicial review process set forth in the 

Act. Title II outlines the process for the 

orderly liquidation of such a covered 

financial company following the FDIC’s 

appointment as receiver and provides 

for additional implementation of the 

orderly liquidation authority by 

rulemaking. The Proposed Rule is 

intended to provide clarity and certainty 

with respect to how key components of 

the orderly liquidation authority will be 

implemented and to ensure that the 

liquidation process under Title II 

reflects the Dodd-Frank Act’s mandate 

of transparency in the liquidation of 

covered financial companies. Among 

the significant issues addressed in the 

Proposed Rule are the priority for the 

payment of claims and the process for 

the determination of claims by the 

receiver and for seeking a judicial 

adjudication of any claims disallowed 

in whole or in part. While it is not 

expected that the FDIC will be 

appointed as receiver for a covered 

financial company in the near future, it 

is important for the FDIC to have rules 

in place in a timely manner in order to 

allow stakeholders to plan transactions 

going forward. 

The Proposed Rule is promulgated 

under section 209 of the Act which 

authorizes the FDIC, in consultation 

with the Financial Stability Oversight 

Council, to prescribe such rules and 

regulations as the FDIC considers 

necessary or appropriate to implement 

Title II. Section 209 of the Act also 

provides that, to the extent possible, the 

FDIC shall seek to harmonize such rules 

and regulations with the insolvency 

laws that otherwise would apply to a 

covered financial company. 

This is the second rulemaking for the 

FDIC under section 209. On October 19, 

2010, the FDIC published in the Federal 

Register a notice of proposed 

rulemaking to implement certain 

orderly liquidation provisions of Title II. 

That rulemaking culminated in the 

Interim Final Rule published on January 

25, 2011, to be codified at 12 CFR 

380.1–380.6, that addressed discrete 

topics that were critical for initial 

guidance for the financial industry, 

including the payment of similarly 

situated creditors, the honoring of 

personal services contracts, the 

recognition of contingent claims, the 

treatment of any remaining shareholder 

value in the case of a covered financial 

company that is a subsidiary of an 

insurance company, and limitations on 

liens that the FDIC may take on the 

assets of a covered financial company 

that is an insurance company or covered 

subsidiary. 

The October 19, 2010 notice of 

proposed rulemaking solicited 

comments not only on the first proposed 

rule but also on more general aspects of 

the orderly liquidation authority of Title 

II. This comment period ended on 

January 18, 2011. These comments have 

been considered with respect to the 

determination of the scope and contents 

of the Proposed Rule. 

The Proposed Rule continues to 

develop the framework begun with the 

Interim Final Rule. While the Interim 

Final Rule addressed only certain 

discrete issues under Title II, the 

Proposed Rule enhances the initial 

framework by addressing broader issues 

that define the rights of creditors in 

Title II receiverships. For example, 

while the Interim Final Rule specified 

the treatment of ‘‘similarly situated 

creditors’’ in § 380.2, it did not address 

the treatment of creditors generally 

within the overall structure provided by 

Title II for the payment of creditors. The 

Proposed Rule takes the next step by 

defining the priorities of payment for 

creditors in a single rule clarifying the 

meaning of ‘‘administrative expenses’’ 

and ‘‘amounts owed to the United 

States,’’ detailing the priority of setoff 

claims, specifying how post-insolvency 

interest will be paid, and clarifying the 

payment of claims for contracts and 

agreements expressly assumed by a 

bridge financial company. While the 

Proposed Rule does not alter the rules 

adopted by the Interim Final Rule, 

certain subsections of that latter rule 

likely will be incorporated into Subpart 

A on priorities when the Proposed Rule 

is finalized in order to provide greater 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
16326 Federal Register / Vol. 76, No. 56 / Wednesday, March 23, 2011 / Proposed Rules 

1 12 U.S.C. 1843(k). 

2Section 201(a)(11) also provides that ‘‘financial 

company’’ does not include Farm Credit System 

institutions chartered under and subject to the 

provisions of the Farm Credit Act of 1971, as 

amended (12 U.S.C. 2001 et seq.), or governmental 

or regulated entities as defined under section 

1303(20) of the Federal Housing Enterprises 

Financial Safety and Soundness Act of 1992 (12 

U.S.C. 4502(20)). Consistent with section 201(b) of 

the Dodd-Frank Act, the criteria in the Proposed 

Rule for determining if a company is predominantly 

engaged in financial activities would not apply to 

such entities. 

3 76 FR 7731 (February 11, 2011). 

thematic coherence. New Subpart B 

addresses another key element of 

creditor rights by specifying the process 

for initial determination of claims and 

the steps necessary to seek a judicial 

decision on any disallowed claims. As 

a result, the Proposed Rule will provide 

a ‘‘roadmap’’ for creditors to better 

understand their substantive and 

procedural rights under Title II by 

defining key elements determining how 

their claims will be determined and in 

what priority they will be paid. The 

discrete issues addressed in the IFR 

should be viewed as components that fit 

within this broader framework. 

Other provisions of the Proposed Rule 

address other foundational elements of 

Title II. Section 380.8 of the Proposed 

Rule helps define which companies may 

be subject to resolution under Title II, 

by clarifying the meaning of ‘‘financial 

company’’ in Section 201 of the DoddFrank Act. Section 380.7 and the 

amendments to section 380.1 help 

define how compensation may be 

clawed back from senior executives and 

directors responsible for the failure of 

the covered financial company under 

section 210(s) of the Dodd-Frank Act. 

Section 380.9 of the Proposed Rule will 

clarify the application of the receiver’s 

powers to avoid fraudulent and 

preferential transfers to ensure they 

conform to the similar powers under the 

Bankruptcy Code. 

Some comments revealed 

unfamiliarity with the FDIC’s resolution 

process by stakeholders outside the 

banking industry. By elaborating on the 

details of the orderly liquidation 

process, the Proposed Rule seeks to 

explain the role of the FDIC as receiver 

for a covered financial company. While 

the orderly liquidation process under 

the Dodd-Frank Act resembles the 

process the FDIC undertakes in the 

resolution of insured depository 

institutions in many respects, and 

reflects the experience developed by the 

FDIC in resolving those institutions, 

these regulations implement newly 

enacted provisions of the Dodd-Frank 

Act and do not necessarily inform or 

interpret the provisions of the Federal 

Deposit Insurance Act, 12 U.S.C. 1811 et 

seq. (‘‘FDI Act’’), and the law governing 

the resolution of failed insured 

depository institutions. Thus, some 

provisions implementing the DoddFrank Act may expand the rights and 

duties of parties with an interest in the 

resolution, or otherwise provide rights 

and duties that differ from those under 

the FDI Act. 

A common thread among many 

comments was the nature of the 

relationship between the orderly 

liquidation process under the DoddFrank Act and the Bankruptcy Code. 

Congress mandated that, to the extent 

possible, the FDIC will harmonize the 

rules adopted under section 209 of the 

Act with the Bankruptcy Code or 

otherwise applicable insolvency laws. 

While acknowledging certain express 

differences between the Title II orderly 

liquidation process and other 

insolvency regimes, this Proposed Rule 

was prepared with this statutory 

mandate in mind. 

Finally, many comments emphasized 

the importance of allowing sufficient 

time in the rulemaking process to fully 

consider the complex issues raised 

under the Dodd-Frank Act. This 

Proposed Rule is a second incremental 

step in the rulemaking process and will 

invite input from stakeholders through 

additional questions posed as part of the 

Notice of Proposed Rulemaking. 

Additional rulemaking will follow, 

including certain rules required by the 

Act, such as rules governing 

receivership termination, receivership 

purchaser eligibility requirements, 

records retention requirements, as well 

as the orderly resolution of brokerdealers, including the priority scheme 

and claims process applicable to brokerdealers. 

II. The Proposed Rule 

Companies Predominantly Engaged in 

Financial Activities 

Section 380.8 of the Proposed Rule 

establishes standards for determining if 

a company is predominantly engaged in 

financial activities. If a company is 

determined to be predominantly 

engaged in such activities for purposes 

of the definition of ‘‘financial company’’ 

under Title II of the Act, it may be 

subject to the orderly liquidation 

provisions of Title II. 

Section 201(a)(11) of the Dodd-Frank 

Act defines ‘‘financial company,’’ for 

purposes of Title II of the Act, as any 

company incorporated or organized 

under any provision of Federal law or 

the laws of any State that is: (i) A bank 

holding company, as defined in section 

2(a) of the Bank Holding Company Act 

of 1956 (‘‘BHC Act’’); (ii) a nonbank 

financial company supervised by the 

Board of Governors of the Federal 

Reserve System (‘‘Board of Governors’’); 

(iii) any company that is predominantly 

engaged in activities that the Board of 

Governors has determined are financial 

in nature or incidental thereto for 

purposes of section 4(k) of the BHC 

Act,1 or (iv) any subsidiary of such 

companies that is predominantly 

engaged in activities that the Board of 

Governors has determined are financial 

in nature or incidental thereto for 

purposes of section 4(k) of the BHC Act, 

other than a subsidiary that is an 

insured depository institution or 

insurance company.2

Section 201(b) of the Dodd-Frank Act 

provides that, for the purposes of 

defining the term ‘‘financial company’’ 

under section 201(a)(11), ‘‘[n]o company 

shall be deemed to be predominantly 

engaged in activities that the Board of 

Governors has determined are financial 

in nature or incidental thereto for 

purposes of section 4(k) of the [BHC 

Act], if the consolidated revenues of 

such company from such activities 

constitute less than 85 percent of the 

total consolidated revenues of such 

company, as the Corporation, in 

consultation with the Secretary [of 

Treasury], shall establish by regulation. 

In determining whether a company is a 

financial company under [Title II], the 

consolidated revenues derived from the 

ownership or control of a depository 

institution shall be included.’’ 

Accordingly, the FDIC is issuing a 

regulation that defines the term 

‘‘predominantly engaged’’ and creates a 

new definition of ‘‘financial activity’’ to 

encompass the activities the DoddFrank Act includes in the 85 percent 

calculation. The FDIC consulted with 

the Board of Governors during the 

development of this section of the 

Proposed Rule. The Board of Governors 

has issued a notice of proposed 

rulemaking entitled ‘‘Definitions of 

‘Predominantly Engaged in Financial 

Activities’ and ‘Significant’ Nonbank 

Financial Company and Bank Holding 

Company’’ (Board of Governors’ NPR).3

The Board of Governors’ NPR addresses 

the definition of ‘‘predominantly 

engaged in financial activities’’ for 

purposes of determining if an entity is 

a nonbank financial company under 

Title I of the Dodd-Frank Act. 

Definition of Predominantly Engaged 

The Proposed Rule defines a company 

as being predominantly engaged in 

activities that the Board of Governors 

has determined are financial in nature 

or incidental thereto for purposes of 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
Federal Register / Vol. 76, No. 56 / Wednesday, March 23, 2011 / Proposed Rules 16327 

4The FDIC also contacted the Board of Governors 

and other voting members of the Financial Stability 

Oversight Council (FSOC) in the development of 

this section. The FDIC notes that Title I includes a 

separate definition of ‘‘nonbank financial company’’ 

that is used for purposes of that Title’s provisions 

related to enhanced supervision by the Board of 

Governors following a systemic determination by 

the FSOC. The Board of Governors has 

responsibility for issuing regulations that define the 

term ‘‘predominantly engaged in financial 

activities’’ for purposes of Title I. The Title I 

definition of nonbank financial company does not 

take into account ‘‘incidental’’ activities, but does 

include an asset test in addition to a revenue test. 

See, 12 U.S.C. 5523 et seq.; and 12 U.S.C. 5531. 5See, 76 FR 7731 (February 11, 2001). 

6See, 12 CFR 225.86. 

7See, 12 U.S.C. 1843(k)(1)(A). 

8 12 U.S.C. 1843(k)(1) and (2). 

9Besides authorizing financial holding 

companies to engage in activities that have been 

determined to be ‘‘financial in nature or incidental 

Continued 

section 4(k) of the BHC Act if: (1) At 

least 85 percent of the total consolidated 

revenues of the company for either of its 

two most recent fiscal years were 

derived, directly or indirectly, from 

financial activities or (2) based upon all 

the relevant facts and circumstances, the 

Corporation determines that the 

consolidated revenues of the company 

from financial activities constitute 85 

percent or more of the total consolidated 

revenues of the company. As required 

under section 201(b) of the Act, the 

FDIC consulted with the Secretary of the 

Treasury during the development of this 

portion of the Proposed Rule.4

The case-by-case determination 

provided for in (2) above is designed to 

provide the FDIC the flexibility, in 

appropriate circumstances, to consider 

whether a company meets the 85 

percent consolidated revenue test based 

on the full range of information that 

may be available concerning the 

company’s activities (including 

information obtained from other Federal 

or state financial supervisors or 

agencies) at any time. For example, a 

company’s revenues, as well as the risks 

the company may pose to the U.S. 

financial system, may change 

significantly and quickly as a result of 

various types of transactions or actions, 

such as a merger, consolidation, 

acquisition, establishment of a new 

business line, or the initiation of a new 

activity. Moreover, these transactions 

and actions may occur at any time 

during a company’s fiscal year and, 

accordingly, the effects of the 

transactions or actions may not be 

reflected in the year-end consolidated 

financial statements of the company for 

several months. The Proposed Rule 

allows the FDIC to promptly consider 

the effect of changes in the nature or 

mix of a company’s activities as a result 

of such a transaction or action where 

such changes may affect whether the 

company should be a financial company 

for purposes of Title II. A determination 

based on the facts and circumstances 

would be made by the FDIC Board of 

Directors, unless delegated. The FDIC 

expects to conduct such a case-by-case 

review only when justified by the 

circumstances. 

While section 201(b) of the DoddFrank Act provides that a company’s 

consolidated revenues are to be used in 

determining whether the company is 

predominantly engaged in financial 

activities, it does not specify the time 

period over which such consolidated 

revenues should be considered in 

making such a determination. The FDIC 

is proposing that either of the last two 

fiscal years is the appropriate time 

period for determining whether a 

company meets the 85 percent revenue 

test (the ‘‘two-year test’’). The FDIC 

believes that the two-year test provides 

appropriate flexibility in determining 

whether a company is predominantly 

engaged in financial activities. The twoyear test would capture, for example, a 

company whose revenues have 

traditionally met or exceeded the 85 

percent consolidated revenue test but 

that experienced a temporary decline in 

such revenues during its last fiscal year. 

Additionally, the two-year test is similar 

to a proposal recently promulgated by 

the Board of Governors that addresses 

whether a company is predominantly 

engaged in financial activities for the 

purposes of determining if such a 

company is a nonbank financial 

company under Title I.5

Under the Proposed Rule, a company 

would not be considered to be 

predominantly engaged in financial 

activities under the two-year test, and 

thus would not be a financial company, 

if the level of such company’s financial 

revenues were below the 85 percent 

consolidated revenue threshold in both 

of its two most recent fiscal years. The 

Proposed Rule defines ‘‘total 

consolidated revenues’’ as the total gross 

revenues of a company and all entities 

subject to consolidation by the company 

for a fiscal year, as determined in 

accordance with applicable accounting 

standards. ‘‘Applicable accounting 

standards’’ is defined under the 

Proposed Rule as the accounting 

standards a company uses in the 

ordinary course of business in preparing 

its consolidated financial statements, 

provided those standards are: (i) U.S. 

generally accepted accounting 

principles; (ii) International Financial 

Reporting Standards; or (iii) such other 

accounting standards that the FDIC 

determines to be appropriate. 

The FDIC believes the Proposed 

Rule’s approach to calculating 

consolidated revenue is appropriate for 

several reasons. First, the approach 

reduces the potential for companies to 

arbitrage the 85% consolidated revenue 

test by changing the accounting 

standards used for purposes of this 

Proposed Rule. Specifically, the 

Proposed Rule provides that the 

accounting standards used for 

calculating total consolidated revenues 

must be the same standards that the 

company uses in the ordinary course of 

its business in preparing its 

consolidated financial statements. 

Second, by calculating consolidated 

revenues using the accounting standards 

that a company uses in the ordinary 

course of its business, the Proposed 

Rule also reduces the potential 

regulatory burden on companies. 

Finally, the FDIC believes the 

methodology for calculating 

consolidated revenues under the 

Proposed Rule is likely to provide an 

accurate basis for determining whether 

companies are financial companies for 

the purposes of Title II. 

Definition of Financial Activity 

The Proposed Rule defines ‘‘financial 

activity’’ to include: (i) Any activity, 

wherever conducted, described in 

section 225.86 of the Board of 

Governors’ Regulation Y or any 

successor regulation; 6 (ii) ownership or 

control of one or more depository 

institution[s]; and (iii) any other 

activity, wherever conducted, 

determined by the Board of Governors 

in consultation with the Secretary of the 

Treasury, under section 4(k)(1)(A) of the 

BHC Act,7 to be financial in nature or 

incidental to a financial activity. 

Section 225.86 of the Board of 

Governors’ Regulation Y references the 

activities that have been determined to 

be financial in nature or incidental 

thereto under section 4(k) of the BHC 

Act. Section 4(k) of the BHC Act 

authorizes the Board of Governors, in 

consultation with the Secretary of the 

Treasury, to determine in the future that 

additional activities are ‘‘financial in 

nature or incidental thereto.’’ 8 The 

Proposed Rule recognizes that the Board 

of Governors may determine that 

additional activities, beyond those 

already identified in § 225.86 of the 

Board of Governors’ Regulation Y, are 

financial or incidental activities for the 

purposes of section 4(k) of the BHC Act. 

Upon such a determination with respect 

to an activity, the Proposed Rule 

includes any revenues derived from 

such activity as revenues derived from 

financial or incidental activities.9


jlentini on DSKJ8SOYB1PROD with PROPOSALS
16328 Federal Register / Vol. 76, No. 56 / Wednesday, March 23, 2011 / Proposed Rules 

thereto’’ section 4(k)(1) of the BHC Act also permits 

a financial holding company to engage in activities 

the Board of Governors has determined to be 

‘‘complementary to financial activities and do not 

pose a substantial risk to the safety and soundness 

of depository institutions or the financial system 

generally.’’ See, 12 U.S.C. 1843(k)(1)(B). Because 

section 201(a)(11) refers only to activities that have 

been determined by the Board of Governors to be 

financial in nature or incidental thereto under 

section 4(k), activities that have been (or are) 

determined to be ‘‘complementary’’ to financial 

activities under section 4(k) are not considered 

financial or incidental activities for purposes of 

determining whether a company is predominantly 

engaged in activities that are financial in nature or 

incidental thereto under section 201(a)(11) of the 

Dodd-Frank Act. 

10See, 12 CFR 225.170 et seq. 

11 12 U.S.C. 1843(c)(6). 

12 12 U.S.C. 1851 et seq. 

13See, 76 FR 7731 (February 11, 2011). 14 76 FR 7731 (February 11, 2011). 

Neither section 201(a)(11) nor section 

201(b) of the Dodd-Frank Act impose 

any additional conditions beyond those 

that may apply under section 4(k) of the 

BHC Act or the Board of Governors’ 

Regulation Y for an activity to be 

considered a financial or incidental 

activity for purposes of determining 

whether a company is a financial 

company under Title II. Accordingly, 

the Proposed Rule broadly defines 

‘‘financial activities’’ to include all 

financial or incidental activities, 

regardless of: (i) Where the activity is 

conducted by a company; (ii) whether a 

bank holding company or a foreign 

banking organization could conduct the 

activity under some legal authority 

other than section 4(k) of the BHC Act; 

and (iii) whether any Federal or state 

law other than section 4(k) of the BHC 

Act may prohibit or restrict the conduct 

of the activity by a bank holding 

company. 

For example, all investment activities 

that are permissible for a financial 

holding company under the merchant 

banking authority in section 4(k)(4)(H) 

of the BHC Act and the Board of 

Governors’ implementing regulations 10

are considered financial activities under 

the Proposed Rule even if some portion 

of those activities could be conducted 

by a financial holding company under 

another or more limited investment 

authority (such as the authority in 

section 4(c)(6) of the BHC Act,11 which 

allows bank holding companies to make 

passive, non-controlling investments in 

any company if the bank holding 

company’s aggregate investment 

represents less than five percent of any 

class of voting securities and less than 

25 percent of the total equity of the 

company). Likewise, all securities 

underwriting and dealing activities are 

considered financial activities for 

purposes of the Proposed Rule even if 

a bank holding company or other 

company affiliated with a depository 

institution may be limited in the 

amount of such activity it may conduct 

or may be prohibited from broadly 

engaging in the activity under the 

‘‘Volcker Rule.’’ 12

Rules of Construction 

To further facilitate determinations 

under the Proposed Rule and to reduce 

burden, the Proposed Rule includes two 

rules of construction governing the 

application of the two-year test to 

revenues derived from a company’s 

minority, non-controlling equity 

investments in unconsolidated entities. 

Under the first rule of construction, 

the revenues derived from a company’s 

equity investment in another company 

(investee company), the financial 

statements of which are not 

consolidated with those of the company 

under applicable accounting standards, 

would be considered as revenues 

derived from a financial activity if the 

investee company itself is 

predominantly engaged in financial 

activities under the revenue test set 

forth in the Proposed Rule (nonconsolidated investment rule). Treating 

all of the revenues derived from such an 

investment as derived from a financial 

activity based on the aggregate mix of 

the investee company’s revenues is 

consistent with the statutory definition 

of financial company generally, which 

treats an entire company as a financial 

company if 85 percent of its 

consolidated revenues are derived from 

financial activities. This approach also 

avoids requiring a company to 

determine the precise percentage of an 

investee company’s activities that are 

financial in order to determine the 

portion of the company’s revenues 

derived from the investment that should 

be treated as derived from such 

activities. Lastly, the non-consolidated 

investment rule is similar to the 

approach proposed by the Board of 

Governors for determining whether a 

nonbank company is predominantly 

engaged in financial activities under 

Title I.13

The second rule of construction 

would permit (but not require) a 

company to treat revenues it derives 

from certain de minimis equity 

investments in investee companies as 

not derived from financial activities 

without having to separately determine 

whether the investee company is itself 

predominantly engaged in financial 

activities (‘‘de minimis rule’’). The de 

minimis rule would be subject to several 

conditions designed to limit the 

potential for these de minimis 

investments to substantially alter the 

character of the activities of the 

company. 

Specifically, the de minimis rule 

provides that a company may treat 

revenues derived from an equity 

investment in an investee company as 

revenues not derived from financial 

activities (regardless of the type of 

activities conducted by the investee 

company), if: (i) The company owns less 

than five percent of any class of 

outstanding voting shares, and less than 

25 percent of the total equity, of the 

investee company; (ii) the financial 

statements of the investee company are 

not consolidated with those of the 

company under applicable accounting 

standards; (iii) the company’s 

investment in the investee company is 

not held in connection with the conduct 

of any financial activity (such as, for 

example, investment advisory activities 

or merchant banking investment 

activities) by the company or any of its 

subsidiaries; (iv) the investee company 

is not a bank, bank holding company, 

broker-dealer, insurance company, or 

other regulated financial institution; and 

(v) the aggregate amount of revenues 

treated as nonfinancial under the rule of 

construction in any year does not 

exceed five percent of the company’s 

total consolidated financial revenues. 

The FDIC consulted with the Board of 

Governors during the development of 

this section of the Proposed Rule. The 

Board of Governors has issued a notice 

of proposed rulemaking entitled 

‘‘Definitions of ‘Predominantly Engaged 

in Financial Activities’ and ‘Significant’ 

Nonbank Financial Company and Bank 

Holding Company’’ (‘‘Board of 

Governors’ NPR’’).14 The Board of 

Governors’ NPR addresses the definition 

of ‘‘predominantly engaged in financial 

activities’’ for purposes of determining if 

an entity is a nonbank financial 

company under Title I of the DoddFrank Act. 

Recoupment of Compensation 

Section 380.7 of the Proposed Rule 

establishes criteria for the circumstances 

under which the FDIC as receiver will 

seek to recoup compensation from 

persons who are substantially 

responsible for the failed condition of a 

covered financial company. 

Background 

When appointed receiver for a failed 

covered financial company, the FDIC is 

required to exercise its Title II authority 

to liquidate failing financial companies 

in a manner that furthers the statutory 

purposes of Title II as set forth in 

section 204(a) of the Act: mitigation of 


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15Section 204(a)(3) of the Act. 

significant risk to the financial stability 

of the United States and minimization 

of moral hazard. In fulfilling these goals, 

the FDIC must ‘‘* * * take all steps 

necessary and appropriate to assure that 

all parties, including management, 

directors, and third parties, having 

responsibility for the condition of the 

financial company bear losses 

consistent with their responsibility, 

including actions for damages, 

restitution, and recoupment of 

compensation and other gains not 

compatible with such responsibility.’’ 15

In order to carry out this mandate, the 

FDIC as receiver may recover from 

senior executives and directors who 

were substantially responsible for the 

failed condition of a covered financial 

company any compensation that they 

received during the two-year period 

preceding the date on which the FDIC 

was appointed as receiver of the covered 

financial company, or during an 

unlimited time period in the case of 

fraud. Section 210(s)(3) of the Act 

directs the FDIC to promulgate 

regulations to implement the 

compensation recoupment requirements 

of section 210(s) of the Act. The purpose 

of this section is to provide guidance on 

how the FDIC will implement its 

authority by identifying the 

circumstances in which the FDIC as 

receiver will seek to recoup 

compensation from persons who are 

substantially responsible for the failed 

condition of a covered financial 

company. 

Substantially Responsible 

In assessing whether a senior 

executive or director is substantially 

responsible for the failed condition of 

the covered financial company, the 

FDIC as receiver will investigate: (1) 

How the senior executive or director 

performed his or her duties and 

responsibilities, and (2) the results of 

that performance. Senior executives and 

directors who perform their 

responsibilities with the requisite 

degree of skill and care will not be 

required to forfeit their compensation. 

The health of the financial industry 

depends on these persons remaining 

committed to the industry. If a senior 

executive or director fails to meet the 

requisite degree of skill and care, 

however, the FDIC as receiver will 

determine what results that failure had 

on the covered financial company, by 

considering any loss to the covered 

financial company caused individually 

or collectively by the senior executive or 

director. Furthermore, to be held 

responsible, the loss to the financial 

condition must have materially 

contributed to the failure of the covered 

financial company. The FDIC is 

considering the use of additional 

qualitative and quantitative benchmarks 

to establish that the loss materially 

contributed to the failure of the covered 

financial company. Financial indicators 

under consideration as possible 

benchmarks are assets, net worth and 

capital, and the percentage or 

magnitude of loss associated with these 

benchmarks that would establish a 

material loss and trigger substantial 

responsibility. The FDIC solicits 

comments on these and other potential 

benchmarks that may be used to 

effectively evaluate loss. 

Presumptions 

In the event that the FDIC is 

appointed as receiver for a covered 

financial company, certain persons will 

be presumed substantially responsible 

for the financial condition of the 

company. Substantial responsibility 

shall be presumed when the senior 

executive or director is the chairman of 

the board of directors, chief executive 

officer, president, chief financial officer, 

or acts in any other similar role 

regardless of his or her title if in this 

role he or she had responsibility for the 

strategic, policymaking, or companywide operational decisions of the 

covered financial company. The FDIC as 

receiver also will presume the 

substantial responsibility of a senior 

executive or director who has been 

adjudged by a court or tribunal to have 

breached his or her duty of loyalty to 

the covered financial company. Finally, 

in order to ensure consistency this 

presumption also extends to a senior 

executive or director who has been 

removed from his or her position with 

a covered financial company under 

section 206(4) or section 206(5) of the 

Act. 

An individual presumed to be 

substantially responsible for the failed 

condition of a covered financial 

company based on his or her position or 

role in the covered financial company 

may rebut the presumption of 

substantial responsibility for the 

condition of the covered financial 

company by proving that he or she 

performed his or her duties with the 

requisite degree of skill and care 

required by the position. This 

determination will be made on a caseby-case basis. A senior executive or 

director presumed to be substantially 

responsible for the failed condition of a 

covered financial company based on his 

or her removal from his or her position 

under sections 206(4) or 206(5) of the 

Act, or based on an adjudication that he 

or she breached his or her duty of 

loyalty to the covered financial 

company may rebut the presumption by 

proving that he or she did not did not 

cause, either individually or in 

conjunction with others, a loss to the 

covered financial company that 

materially contributed to the failure of 

the covered financial company. 

Exceptions to Presumptions 

Senior executives or directors who 

join a covered financial company 

specifically for the purpose of 

improving its financial condition are 

exempted from this presumption if they 

were employed by the covered financial 

company for this purpose within the 

two years preceding the appointment of 

the FDIC as receiver. However, although 

they are not subject to the presumption, 

the FDIC as receiver may still seek 

recoupment of their compensation if 

their actions nevertheless establish that 

they are substantially responsible for the 

failed condition of the covered financial 

company. 

The use of a rebuttable presumption 

of substantial responsibility under 

certain circumstances is consistent with 

its use in other regulatory and common 

law areas. The Office of the Comptroller 

of the Currency uses rebuttable 

presumptions to determine when an 

individual’s acquisition of bank stock 

will result in the acquisition by that 

individual of the power to direct the 

bank’s management or policies. 12 CFR 

5.50. The Social Security 

Administration uses presumptions to 

establish total disability. 20 CFR part 

410. At common law, the existence of 

certain facts, such as exclusive control 

in negligence cases or disparate impact 

in discrimination cases, is viewed as 

sufficient to require some form of 

rebuttal evidence. 

The authority of the FDIC as receiver 

to recoup compensation from senior 

executives and directors is separate 

from the authority granted to the FDIC 

as receiver in other sections of Title II 

to pursue recovery from senior 

executives and directors for losses 

suffered by a failed covered financial 

company. The FDIC as receiver is not 

precluded from pursuing recovery based 

on other grants of authority in Title II of 

the Act because it recoups 

compensation from senior executives 

and directors under Section 210(s). 

Section 380.1 of the Proposed Rule 

amends the existing § 380.1 

promulgated pursuant to the January 25, 

2011 Interim Final Rule to add 

definitions of the terms ‘‘compensation’’ 

and ‘‘director,’’ and to apply the 

definition of ‘‘senior executive’’ 

included in § 380.3 of the Interim Final 


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16The term ‘‘judicial lien’’ is defined in section 

101(36) of the Bankruptcy Code as a lien obtained 

by judgment, levy, sequestration or other legal or 

equitable process or proceeding. A similar, but 

abbreviated, formulation is found in section 

547(e)(1)(B) of the Bankruptcy Code. 

17These provisions conform with the letter dated 

December 29, 2010 from the FDIC’s Acting General 

Counsel to the Securities Industry and Financial 

Markets Association (‘‘SIFMA’’) and the American 

Securitization Forum available on SIFMA’s Web 

site at http://www.sifma.org/issues/ 

item.aspx?id=22820. 

Rule wherever the phrase ‘‘senior 

executive’’ is used in the Proposed Rule 

and throughout part 380. The definition 

of the term ‘‘compensation’’ incorporates 

the definition mandated in section 

210(s)(3) of the Act. The Proposed 

Rule’s definition for the term ‘‘director’’ 

includes those persons who are in a 

position to affect the activities of the 

covered financial company and who 

have a material effect on the financial 

condition of the covered financial 

company. 

Treatment of Fraudulent and 

Preferential Transfers 

Section 380.9 of the Proposed Rule 

addresses the powers granted to the 

FDIC as receiver in section 210(a)(11) of 

the Act to avoid certain fraudulent and 

preferential transfers and seeks to 

harmonize the application of these 

powers with the analogous provisions of 

the Bankruptcy Code so that the 

transferees of assets will have the same 

treatment in a liquidation under the 

Dodd-Frank Act as they would in a 

bankruptcy proceeding. 

There are two areas in which there is 

a potential for inconsistent treatment of 

transferees under a Title II orderly 

liquidation as compared to a Chapter 7 

bankruptcy liquidation. The first issue 

relates to the standard used in 

determining whether the FDIC as 

receiver can avoid a transfer as 

fraudulent or preferential under Title II. 

For purposes of this determination, 

section 210(a)(11)(H)(i)(II) of the Act 

provides that a transfer is made when 

the transfer is so perfected that a bona 

fide purchaser cannot acquire a superior 

interest, or if the transfer has not been 

so perfected before the FDIC is 

appointed as receiver, immediately 

before the date of appointment. This 

section could be read to apply the bona 

fide purchaser construct to all 

fraudulent transfers and to all 

preferential transfers pursuant to section 

210(a)(11)(B) of the Dodd-Frank Act. By 

contrast, the Bankruptcy Code uses the 

bona fide purchaser construct only for 

fraudulent transfers and for preferential 

transfers of real property other than 

fixtures. Section 547(e)(1)(B) of the 

Bankruptcy Code provides that in the 

case of preferential transfers of personal 

property and fixtures, a transfer occurs 

at the time the transferee’s interest in 

the transferred property is so perfected 

that a creditor on a simple contract 

cannot acquire a judicial lien 16 that is 

superior to the interest of the transferee. 

This section of the Proposed Rule makes 

clear that under section 210(a)(11)(H) of 

the Dodd-Frank Act, the FDIC could not, 

in a proceeding under Title II, avoid as 

preferential the grant of a security 

interest perfected by the filing of a 

financing statement in accordance with 

the provisions of the Uniform 

Commercial Code or other nonbankruptcy law where a security 

interest so perfected could not be 

avoided in a case under the Bankruptcy 

Code. 

The second issue relates to the 30-day 

grace period, provided in section 

547(e)(2) of the Bankruptcy Code, in 

which a security interest in transferred 

property may be perfected after such 

transfer has taken effect between the 

parties. Section 547(e)(2) of the 

Bankruptcy Code generally states that a 

transfer of property is made (i) when the 

transfer takes effect between the 

transferor and the transferee, if the 

transfer is perfected at or within 30 days 

after that time (or within 30 days of the 

transferor receiving possession of the 

property, in the case of certain purchase 

money security interests), (ii) when the 

transfer is perfected, if the transfer is 

perfected after the 30-day period, or (iii) 

if such transfer is not perfected before 

the later of the commencement of the 

bankruptcy case or 30 days after the 

transfer takes effect, immediately before 

the date when the bankruptcy petition 

is filed. Section 210(a)(11)(H) of the 

Dodd-Frank Act does not contain any 

express grace period. Consistent with 

the direction provided in section 209 of 

the Dodd-Frank Act to harmonize the 

regulations with otherwise applicable 

insolvency law to the extent possible, 

and to facilitate implementation of the 

avoidable transfer provisions of sections 

210(a)(11)(A) and (B) of the Dodd-Frank 

Act, § 380.9 of the Proposed Rule 

includes provisions that would result in 

the following:17

• The avoidance provisions in section 

210(a)(11) would apply the bona fide 

purchaser construct only in the case of 

fraudulent transfers under subparagraph 

(A) thereof and preferential transfers of 

real property (other than fixtures) under 

subparagraph (B) thereof; 

• The avoidance provisions in section 

210(a)(11)(B) would apply the 

‘‘hypothetical lien creditor’’ construct as 

applied under section 547(e)(1)(B) of the 

Bankruptcy Code to any preferential 

transfers of personal property and 

fixtures; and 

• the avoidance provisions in section 

210(a)(11)(B) would apply the 30-day 

grace period as provided in section 

547(e)(2) of the Bankruptcy Code, 

including any exceptions or 

qualifications contained therein. 

Subpart A—Priorities 

The Proposed Rule adds a Subpart A 

consisting of §§ 380.20–26 relating to 

the priorities of expenses and unsecured 

claims in the receivership of a covered 

financial company. Subpart A integrates 

all of the various provisions of the 

Dodd-Frank Act that determine the 

nature and priority of payments. First, 

the Subpart integrates the various 

statutory references to administrative 

expenses throughout the Act including 

identification of claims for amounts due 

to the United States, to ensure 

consistent application of those 

provisions. Second, the Subpart 

confirms the statutory preference for 

claims arising out of the loss of setoff 

rights over other general unsecured 

creditors if the loss of the setoff is due 

to the receiver’s sale or transfer of an 

asset. Third, the Proposed Rule clarifies 

the payment of obligations of bridge 

financial companies and the rights of 

receivership creditors to remaining 

value. Finally, the Proposed Rule 

provides for the payment of postinsolvency interest on claims and for 

the determination of the index by which 

the limit applicable to certain claims for 

wages and benefits will be increased. 

Subpart A of the Proposed Rule 

organizes and clarifies provisions 

throughout Title II of the Dodd-Frank 

Act dealing with the relative priorities 

of various creditors with claims against 

a failed financial company. These 

various provisions are based on the 

fundamental principle that any orderly 

liquidation should fairly treat similarly 

situated creditors and should ensure 

that the ultimate risk of loss for a failure 

of a systemically important financial 

company rests with the stockholders of 

the failed company. Although tools 

were put into place to ensure that 

temporary financing would be available 

to facilitate an orderly liquidation of the 

company to preserve its going concern 

value and to avoid cost-increasing 

disruptions of operations, the DoddFrank Act’s resolution regime makes 

clear that there will be no more bailouts. 

The responses to the request for broad 

comments in the October 19, 2010 

Notice of Proposed Rulemaking raised a 

number of issues regarding the priorities 

of expenses and unsecured claims in a 

covered financial company receivership. 

Among the suggestions for future 


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Federal Register / Vol. 76, No. 56 / Wednesday, March 23, 2011 / Proposed Rules 16331 

rulemakings, the topic of priorities of 

claims appeared often. One specific 

topic raised by several commenters 

included section 210(a)(12)(F) of the 

Dodd-Frank Act regarding the priority 

for creditors who are deprived of setoff 

rights. Another was the treatment of 

post-solvency interest, particularly with 

respect to oversecured creditors. Other 

comments requested that the FDIC 

clarify the relationship between a bridge 

financial company and creditors of the 

covered financial company. Subpart A 

of the Proposed Rule addresses these 

and other issues with respect to 

priorities. Other suggestions will be 

taken up in future rulemakings, and 

further comments are solicited in 

response to this Notice of Proposed 

Rulemaking. 

Definitions 

Section 380.20 of the Proposed Rule 

contains a definition of the term 

‘‘allowed claim’’ which is used 

throughout Subpart A to mean a claim 

in the amount allowed by the FDIC as 

receiver in accordance with the 

procedures established in Subpart B of 

the Proposed Rule, or as determined by 

the final order of a court of competent 

jurisdiction. Definitions that apply 

throughout part 380 are found in 

§ 380.1, including the definitions of 

‘‘senior executive’’ (previously included 

in § 380.3), ‘‘compensation,’’ and 

‘‘director.’’ 

Priority of Unsecured Claims 

Section 380.21 lists each of the eleven 

priority classes of claims established 

under the Dodd-Frank Act in the order 

of its relative priority. In addition to the 

specified priorities listed in section 

210(b), the Proposed Rule integrates 

additional levels of priority established 

under section 210(c)(13)(d) (certain 

post-receivership debt); section 

210(a)(13) (claims for loss of setoff 

rights); and section 210(a)(7)(D) (post 

insolvency interest). In order, the eleven 

classes of priority of claims are as 

follows: 

(1) Claims with respect to postreceivership debt extended to the 

covered financial company where such 

credit is not otherwise available, 

(2) Other administrative costs and 

expenses, 

(3) Amounts owed to the United 

States, 

(4) Wages, salaries and commissions 

earned by an individual within 6 

months prior to the appointment of the 

receiver up to the amount of $11,725 (as 

adjusted for inflation), 

(5) Contributions to employee benefit 

plans due with respect to such 

employees up to the amount of $11,725 

(as adjusted for inflation) times the 

number of employees, 

(6) Claims by creditors who have lost 

setoff rights by action of the receiver, 

(7) Other general unsecured creditor 

claims, 

(8) Subordinated debt obligations, 

(9) Wages, salaries and commissions 

owed to senior executives and directors, 

(10) Post-insolvency interest, which 

shall be distributed in accordance with 

the priority of the underlying claims, 

and (1) Distributions on account of 

equity to shareholders and other equity 

participants in the covered financial 

company. 

Paragraph (b) of § 380.21 conforms the 

method of adjusting certain payments 

for inflation to the similar provisions of 

the Bankruptcy Code. Paragraph (c) 

provides that each class will be paid in 

full before payment of the next priority, 

and that if funds are insufficient to pay 

any class of creditors, the funds will be 

allocated among creditors in that class, 

pro rata. 

This Proposed Rule establishes the 

general rule for the priority of claims of 

different classes of creditors. The DoddFrank Act provides for limited 

exceptions to this general rule of similar 

treatment for similarly-situated 

creditors, and any exception to the 

priorities established by this section 

must meet the statutory grounds for 

such an exception and the related 

regulations, including § 380.2 of this 

part. 

Administrative Expenses 

There are several references 

throughout the Act to the administrative 

expenses of the receiver. In section 

201(a)(1) of the Dodd-Frank Act, the 

term is defined as including both ‘‘the 

actual, necessary costs and expenses’’ 

incurred by the receiver in liquidating a 

covered financial company, as well as 

‘‘any obligations’’ that the FDIC as 

receiver determines are ‘‘necessary and 

appropriate to facilitate the smooth and 

orderly liquidation of the covered 

financial company.’’ Section 210(b)(2) of 

the Dodd-Frank Act provides that the 

receiver may grant first priority 

administrative expense status to 

unsecured debt obtained by the receiver 

in the event that credit is not otherwise 

available from commercial sources. 

Administrative expense priority is given 

to debt incurred by the FDIC as receiver 

in enforcing an existing contract to 

extend credit to the covered financial 

company under section 210(c)(13)(D). 

The Act also expressly confers 

administrative expense status on claims 

for payment for services performed 

under a service contract of the covered 

financial company after appointment of 

the receiver (§ 210(c)(7)(B)(ii)) and for 

payment of ongoing contractual rent for 

leases under which the covered 

financial company is lessee (§ 210(c)(4)) 

in harmony with bankruptcy practice as 

well as current practice under the FDI 

Act. In addition, pursuant to section 

211(d)(4) of the Dodd-Frank Act, the 

expenses of the Inspector General of the 

FDIC incurred in connection with the 

conduct of an investigation of the 

liquidation of any covered financial 

company shall be funded as an 

administrative expense of the receiver of 

that covered financial company. Section 

210(a)(15) of the Dodd-Frank Act 

expressly provides that damages for 

breach of a contract ‘‘executed or 

approved’’ by the FDIC as receiver for a 

covered financial company shall be paid 

as an administrative expense. 

Subparagraph 380.22(a)(3) clarifies that 

the phrase ‘‘executed or approved’’ 

includes only (i) contracts that are 

affirmatively entered into by the FDIC as 

receiver in writing after the date of its 

appointment, or (ii) contracts that predate the appointment of the FDIC as 

receiver that have been expressly 

approved in writing by the receiver. 

Damages for breach of a pre-receivership 

contract cannot attain administrative 

expense priority merely by the inaction 

of the receiver, such as the absence of 

a formal repudiation. Similarly, a 

contract inherited by the FDIC as 

receiver will not be deemed to have 

been approved based upon an alleged 

course of conduct by the receiver. 

Affirmative action by the receiver by 

formally approving the contract in 

writing is the prerequisite for 

administrative expenses treatment of 

damages for breach of a contract entered 

into by the covered financial company 

prior to appointment of the receiver. 

In addition to consolidating all of 

these statutory references to the 

administrative expenses of the receiver 

into a single rule, proposed § 380.22(a) 

makes clear that expenses of the 

receiver that are necessary and 

appropriate to facilitate a smooth and 

orderly liquidation may be incurred by 

the FDIC pre-failure as well as after the 

appointment of the FDIC as receiver, 

and that all such expenses are 

administrative expenses of the receiver. 

The inclusion of both pre-failure and 

post-failure administrative expenses 

under the same standard is consistent 

with the treatment of administrative 

expenses under the FDI Act. See 12 CFR 

360.4. In a bankruptcy case, the prepetition expenses of preparing a petition 

must be paid prior to filing or await 

confirmation. All fees, compensation 

and expenses of liquidation and 


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16332 Federal Register / Vol. 76, No. 56 / Wednesday, March 23, 2011 / Proposed Rules 

administration shall be fixed by the 

FDIC. Such fees, compensation and 

expenses include amounts that the 

Corporation charges the receivership for 

services rendered by the FDIC. 

Amounts Owed to the United States 

Section 210(b)(1)(B) of the DoddFrank Act establishes a priority class for 

‘‘amounts owed to the United States’’ 

immediately following the priority class 

for ‘‘administrative expenses of the 

receiver.’’ Section 380.23 of the 

Proposed Rule establishes a definition 

for the phrase ‘‘amounts owed to the 

United States’’ and makes clear that it 

includes amounts advanced by the 

Department of Treasury or by any other 

department, agency or instrumentality 

of the United States, whether such 

amounts are advanced before or after the 

appointment of the receiver. For the 

sake of clarity, in addition to expressly 

listing advances by the FDIC for funding 

the orderly liquidation of the covered 

financial company pursuant to section 

204(d)(4) as amounts owed to the 

United States, the Proposed Rule also 

expressly includes other sums advanced 

by departments, agencies and 

instrumentalities of the United States 

such as amounts owed to the FDIC for 

payments made pursuant to guarantees 

including payments to satisfy any 

guarantee of debt under the FDIC’s 

Temporary Liquidity Guarantee 

Program, 12 CFR part 370, as well as 

unsecured accrued and unpaid taxes 

owed to the United States. Unsecured 

claims for net realized losses by a 

Federal reserve bank also are included, 

consistent with the mandate under 

section 1101 of the Act that requires 

such advances to have the same priority 

as amounts due to the United States 

Department of Treasury. The DoddFrank Act does not similarly specifically 

include government-sponsored entities 

such as FNMA, FHMLC or Federal 

Home Loan Banks, and the regulation 

therefore does not provide that 

obligations to those entities would be 

among the class of claims included 

among amounts owed to the United 

States under subsection 380.21(a)(3). 

Although section 204(d)(4) of the 

Dodd-Frank Act provides that the FDIC 

has the power to take liens upon assets 

of the covered financial company to 

secure advances and guarantees made 

under that section, and provides that 

such advances will be repaid as 

administrative expenses ‘‘as 

appropriate,’’ the Proposed Rule makes 

clear that the FDIC will treat all such 

amounts as amounts owed to the United 

States payable at the level of priority 

immediately following administrative 

expenses. This priority will apply 

regardless of whether or not such 

advance is treated as debt or equity on 

the books of the covered financial 

company. It will also apply whether or 

not such advance is secured by a lien 

under section 204(d)(4) in recognition of 

the FDIC’s authority to impose 

assessments under section 210(o), 

which effectively guarantees repayment 

of such advances whether or not they 

are secured. Similarly, although the 

statute permits a distinction between 

advances for the purpose of funding 

administrative expenses (which are 

repayable at the administrative expense 

priority level) and other advances that 

are repaid as amounts owed to the 

United States, there will be little 

practical difference in the treatment of 

obligations for amounts advanced under 

section 204(d) of the Act because the 

power to impose additional assessments 

under section 210(o) assures that these 

amounts always will be repaid, thereby 

rendering unnecessary the need to track 

the actual use of such advances. As a 

practical matter, the only potential 

difference in the payment of a claim at 

the administrative expense priority 

under § 380.21(a)(2) and a claim at the 

priority class level for amounts owed to 

the United States under § 380.21(a)(3) 

would be the timing of the payment, 

and that potential differential would be 

addressed by the payment of interest at 

the post-insolvency rate as described in 

§ 380.25. 

Section 380.23(b) acknowledges that 

the United States may consent to 

subordination of its right to repayment 

of any specified debt or obligation 

provided that all unsecured claims of 

the United States shall, at a minimum, 

have a higher priority than equity or 

other liabilities of the covered financial 

company that count as regulatory 

capital. This is consistent with the 

mandatory requirement of section 206 of 

the Dodd-Frank Act that the 

shareholders of a covered financial 

company shall not receive payment 

until after all other claims are fully met. 

Setoff 

Section 210(a)(12) of the Dodd-Frank 

Act permits a creditor to offset certain 

qualified mutual debts between the 

covered financial company and the 

creditor. To allow the FDIC as receiver 

the flexibility to maximize the return 

from the disposition of assets of the 

covered financial company and to 

transfer assets to a bridge financial 

company so as to preserve the going 

concern value of the company, the 

Dodd-Frank Act specifically empowers 

the receiver to transfer assets of a 

covered financial company ‘‘free and 

clear of the setoff rights of any third 

party.’’ Section 380.24 of the Proposed 

Rule addresses the claims of creditors 

who have lost a right of setoff due to the 

exercise of the receiver’s right to sell or 

transfer assets of the covered financial 

company free and clear. Normally, a 

transfer of the assets without the claim 

will prevent setoff because the transfer 

destroys the mutuality of obligations 

that is the prerequisite of any ability to 

offset a claim directly against an 

obligation. The Dodd-Frank Act 

includes section 210(a)(12)(F) to provide 

a claimant with a preferred recovery as 

a general creditor and, thereby, achieve 

comparable protection. In the Proposed 

Rule, § 380.24 ensures that the claim of 

a creditor based upon the loss of an 

otherwise valid right of setoff due to a 

transfer of assets of the receiver will be 

paid at the level of priority immediately 

prior to all other general unsecured 

creditors. 

Under the Dodd-Frank Act, the 

receiver is expressly authorized to sell 

assets free and clear of setoff claims, and 

the resulting claim for loss of those 

rights is expressly given a priority above 

other general unsecured creditors—but 

below administrative claims, amounts 

owed to the United States and certain 

employee-related claims. This 

preferential treatment should normally 

provide value to setoff claimants 

equivalent to the value of setoff under 

the Bankruptcy Code. While in 

bankruptcy setoff claims are 

functionally treated similarly to a 

security interest, the Bankruptcy Code 

treatment would severely impair the 

FDIC’s ability to transfer assets of the 

covered financial company for value. 

The provisions of the Dodd-Frank Act 

and the implementing provisions in the 

Proposed Rule do provide adequate 

protection for the claimant in the 

context of the necessity for prompt 

transfer of the underlying asset. The 

Proposed Rule establishes that the FDIC 

as receiver will pay claimants for their 

loss of setoff rights in accordance with 

the express provisions of the DoddFrank Act. 

Post-Insolvency Interest 

Section 380.25 of the Proposed Rule 

establishes a post-insolvency interest 

rate, as required by section 210(a)(7)(D) 

of the Dodd-Frank Act. That rate is 

based on the coupon equivalent yield of 

the average discount rate set on the 

three-month U.S. Treasury Bill. Postinsolvency interest is computed 

quarterly and is not compounded. This 

is the rate that has been used by the 

FDIC in connection with claims under 

the FDI Act, and the same rate was 

chosen for the Dodd-Frank Act for ease 

of administration. In contrast, the 


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Bankruptcy Code provides in section 

726(a)(5) for post-petition interest at the 

‘‘legal rate;’’ however, in interpreting 

this provision, bankruptcy courts have 

not established a uniform post-petition 

interest rate. For the purpose of uniform 

treatment, the Proposed Rule computes 

post-insolvency interest in the same 

manner as provided for under the FDI 

Act pursuant to 12 CFR 360.7. 

The Proposed Rule makes it clear that 

the post-insolvency interest is applied 

to the entire claim amount, which may 

include pre-receivership interest. In 

addition, if the claim is for damages 

arising out of repudiation of an 

obligation, the claim amount may 

include interest through the date of 

repudiation as required under section 

210(c)(3)(D) of the Act. The Dodd-Frank 

Act does not contain a provision similar 

to section 506(b) of the Bankruptcy 

Code allowing interest at the contract 

rate and certain fees and expenses to be 

paid to oversecured creditors to the 

extent of the value of their collateral. 

Comment is sought on whether this is 

an area in which the FDIC should seek 

to harmonize orderly resolution practice 

with the Bankruptcy Code. 

Transfers to Bridge Financial 

Companies 

Section 380.26 of the Proposed Rule 

addresses and clarifies the treatment of 

assets and liabilities that are transferred 

to a bridge financial company by the 

FDIC as receiver by providing that any 

obligation that is expressly purchased or 

assumed by the bridge financial 

company will be paid by the bridge 

financial company in accordance with 

the terms of such obligation. The 

Proposed Rule similarly addresses the 

treatment of contracts or agreements 

expressly entered into by the bridge 

financial company. As an operating 

company, a bridge financial company 

will make payments on valid and 

enforceable obligations as they become 

due and not pursuant to a claims 

process. In short, valid and enforceable 

obligations purchased or assumed by 

the express agreement of the bridge 

financial company, as well as valid and 

enforceable obligations under contracts 

or agreements expressly agreed to by the 

bridge financial company will be paid 

in full as part of the normal operations 

of the bridge financial company. 

Certain rights and obligations of the 

covered financial company will be 

transferred and assumed by the express 

agreement of the bridge financial 

company in the purchase and 

assumption agreement with the receiver 

for that covered financial company. The 

terms and conditions under which those 

rights and obligations are transferred 

and assumed will, of course, be 

governed by the terms of the purchase 

and assumption agreement. Thus, if an 

obligation is conditionally transferred to 

a bridge financial company subject to 

due diligence, put-back rights or other 

contingencies, the assumption of the 

obligation would be subject to these 

contingencies. Section 380.26 should 

not be read to eliminate express 

contingencies to the assumption of 

obligations nor any right to terminate an 

obligation or to put it back to the 

receiver of the covered financial 

company. 

Several comments requested that a 

rule be promulgated to clarify the 

relationship between the bridge 

financial company and the creditors of 

the covered financial company. A bridge 

financial company will be a solvent 

company when it is formed in 

accordance with the express 

requirements of section 210(h)(5)(F) of 

the Act. The Dodd-Frank Act provides, 

however, that a bridge financial 

company has a finite existence pursuant 

to section 210(h)(12), and section 210(n) 

contemplates several means of 

disposing of the assets and liabilities of 

a bridge financial company and 

terminating its existence. A bridge 

financial company can be sold via 

merger, consolidation or a sale of stock, 

whereupon the bridge financial 

company’s federal charter is terminated 

and any remaining assets liquidated. A 

bridge financial company also can be 

liquidated by a sale of its assets and 

assumption of its liabilities. If a bridge 

financial company is not liquidated, 

dissolved and terminated within two 

years of the date it is chartered (subject 

to not more than three one-year 

extensions), the FDIC shall act as 

receiver for the bridge financial 

company and shall wind up the affairs 

of the bridge financial company in 

conformity with the liquidation of 

covered financial companies under Title 

II of the Act, including the priorities and 

claims provisions. The Proposed Rule 

makes clear that the proceeds that 

remain following sale, liquidation and 

dissolution of the bridge financial 

company will be distributed to the FDIC 

as receiver for the covered financial 

company and will be made available to 

the creditors of the covered financial 

company after all administrative 

expenses and other creditor claims of 

the receiver for the bridge financial 

company have been satisfied. 

Subpart B—Receivership Administrative 

Claims Process 

The Proposed Rule also includes 

Subpart B, consisting of §§ 380.30–39 

and §§ 380.50–55, to clarify how 

creditors can file claims against the 

receivership estate, how the FDIC as 

receiver will determine those claims, 

and how creditors can pursue their 

claims in Federal court. 

Section 210(a)(2)–(5) of the DoddFrank Act provides for the resolution of 

claims against a covered financial 

company through an administrative 

process conducted by the FDIC as 

receiver. Generally, this process calls for 

creditors to file their claims with the 

receiver by a claims bar date. The 

receiver will determine whether to 

allow or disallow a claim no later than 

180 days after the claim is filed (subject 

to any extension agreed to by the 

claimant). If the claim is disallowed, the 

claimant may seek de novo judicial 

review of the claim by filing a lawsuit 

(or continuing a pending lawsuit) 

within a prescribed 60-day time period. 

No court has jurisdiction to hear any 

claim against either the covered 

financial company or the receiver unless 

the claimant has first obtained a 

determination of the claim from the 

receiver. 

Congress has established an exclusive, 

separate set of procedures for the 

presentation and determination of 

claims against a covered financial 

company or the FDIC as receiver. The 

statute is clear that the claimant must 

exhaust the administrative claims 

process as a jurisdictional prerequisite 

before any court can adjudicate the 

claim. While harmonization with other 

insolvency laws may be worthwhile and 

achievable in many other aspects of the 

orderly liquidation of a covered 

financial company, the FDIC cannot 

promulgate rules that materially diverge 

from or are inconsistent with the claims 

procedures set forth in the Dodd-Frank 

Act. Nevertheless, the FDIC believes 

that it is appropriate to look to the 

Bankruptcy Code to fill gaps in the Act, 

for example, where the Title II claims 

procedures lack specific directives 

regarding how the receiver should 

handle property that serves as collateral 

for a secured claim. 

The administrative claims process of 

Title II is closely modeled after the 

claims process set forth in the FDI Act 

for receiverships of insured depository 

institutions. Like the FDI Act claims 

process, the Title II administrative 

process for claims against a covered 

financial company is designed to 

maximize efficiency while reducing the 

delay and additional costs that could be 

incurred in a different insolvency 

regime. Creditors’ rights are protected 

by the availability of judicial review if 

the claim is disallowed, in whole or in 

part, by the receiver. This is a de novo 

determination of the claim by the court 


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on its merits and not a review of 

whether the receiver abused its 

discretion in disallowing the claim. 

Because many parties may be 

unfamiliar with the resolution process 

for a failed insured depository 

institution generally and the 

administrative claims process in 

particular, the FDIC has undertaken in 

the Proposed Rule to explain certain 

important aspects of the claims process 

for a covered financial company 

receivership. While the Proposed Rule 

reflects all the statutory procedures, it 

also organizes those procedures in a 

step-by-step manner in order to promote 

greater understanding and clarity. In 

some instances, the Proposed Rule 

interprets the statutory procedures to 

address issues that are not addressed in 

the statute. For example, the statute 

does not provide notice procedures for 

claimants who are discovered after the 

claims bar date; the Proposed Rule fills 

this gap by providing for a 90-day 

claims filing period for such claimants. 

In other instances, the Proposed Rule 

supplements the statutory procedures in 

order to facilitate programs that have 

been instituted by the FDIC for greater 

efficiency, such as the electronic filing 

of claims. 

The following sections appear under 

Subpart B of the Proposed Rule: 

Receivership Administrative Claims 

Process 

Section 380.30 of the Proposed Rule 

reflects the express authorization under 

the Dodd-Frank Act that the FDIC as 

receiver shall determine all claims in 

accordance with the statutory 

procedures and with the regulations 

promulgated by the FDIC. This section 

also clarifies that the administrative 

claims process will not apply to claims 

transferred to a bridge financial 

company or to third parties. 

Definitions 

Section 380.31 of the Proposed Rule 

defines the term ‘‘claim’’ to have the 

same meaning as in section 201(a)(4) of 

the Dodd-Frank Act, specifically, ‘‘any 

right to payment, whether or not such 

right is reduced to judgment, liquidated, 

unliquidated, fixed, contingent, 

matured, unmatured, disputed, 

undisputed, legal, equitable, secured, or 

unsecured.’’ (This definition is generally 

consistent with the definition of the 

term in the Bankruptcy Code.) The 

Proposed Rule uses the definition of 

‘‘claim’’ as set forth in section 201(a)(4) 

of the Act, but adds language to the 

definition to specify that a claim is a 

right to payment from either the covered 

financial company or the FDIC as 

receiver. The clarification that claims 

against the receiver are subject to the 

administrative claims process is 

necessary because section 210(a)(9)(D) 

divests a court of jurisdiction over 

claims against the receiver until the 

administrative claims process has been 

exhausted. If claims against the receiver 

were not first determined pursuant to 

the administrative claims process, no 

court would ever have jurisdiction over 

these claims. The terms ‘‘Corporation,’’ 

‘‘Corporation as receiver,’’ and ‘‘receiver’’ 

are used interchangeably in the statute, 

and the Proposed Rule clarifies that 

such terms refer to the FDIC in its 

capacity as receiver of a covered 

financial company. 

Claims Bar Date 

Section 380.32 of the Proposed Rule 

reflects the statutory requirement that 

the FDIC as receiver establish a ‘‘claims 

bar date’’ by which creditors of the 

covered financial company are to file 

their claims with the receiver. The 

claims bar date must be identified in 

both the published notices and the 

mailed notices required by the statutory 

procedures. The Proposed Rule clarifies 

that the claims bar date is calculated 

from the date of the first published 

notice to creditors, not from the date of 

appointment of the receiver. 

Notice Requirements 

Section 380.33 of the Proposed Rule 

reiterates the statutory procedures for 

notice to creditors of the covered 

financial company. As required by the 

statute, upon its appointment as 

receiver of a covered financial company, 

the FDIC as receiver will promptly 

publish a first notice; subsequently, the 

receiver will publish a second and third 

notice one month and two months, 

respectively, after the first notice is 

published. The notices must inform 

creditors to present their claims to the 

receiver, together with proof, by no later 

than the claims bar date. The Proposed 

Rule provides that the notices shall be 

published in one or more newspapers of 

general circulation in the market where 

the covered financial company had its 

principal place of business. In 

recognition of the public’s growing 

reliance on communication using the 

Internet as well as the prevalence of 

online commerce, the Proposed Rule 

provides that in addition to the 

published and mailed notices, the FDIC 

may post the notice on its public Web 

site. 

In addition to the publication notice 

required by paragraph (a) of this section, 

the receiver must mail a notice that is 

similar to the publication notice to each 

creditor appearing on the books and 

records of the covered financial 

company. The mailed notice will be 

sent at the same time as the first 

publication notice to the last address of 

the creditor appearing on the books or 

in any claim filed by a claimant. The 

Proposed Rule provides that after 

sending the initial mailed notice 

required under paragraph (b), the FDIC 

may communicate by electronic media 

(such as e-mail) with any claimant who 

agrees to such means of communication. 

Paragraph (d) of § 380.33 clarifies the 

treatment of creditors that are 

discovered after the initial publication 

and mailing has taken place. The FDIC 

as receiver shall mail a notice similar to 

the publication notice to any claimant 

not appearing on the books and records 

of the covered financial company no 

later than 30 days after the date that the 

name and address of such claimant is 

discovered. If the name and address of 

the claimant is discovered prior to the 

claims bar date, such claimant will be 

required to file the claim by the claims 

bar date. There may be instances when 

notice to the discovered claimant is sent 

immediately before the claims bar date, 

possibly giving the claimant insufficient 

time to prepare and file a claim before 

the claims bar date. In such a case, the 

claimant may invoke the statutory 

exception for late-filed claims set forth 

in section 210(a)(3)(C)(ii) and 

§ 380.35(b)(3) of the Proposed Rule in 

order to overcome the claims bar date 

filing requirement. 

When a claimant is discovered by the 

receiver after the claims bar date, the 

receiver must still provide mailed notice 

that is similar in content to the 

publication notice required by section 

210(a)(2)(C). Such a discovered claimant 

cannot comply with a claims bar date 

that has already passed. Therefore, the 

Proposed Rule adopts a procedure for 

providing another time frame for filing 

a claim which parallels the statutory 

time frame mandated by section 

210(a)(2)(B); i.e., no earlier than 90 days 

from the first publication notice. Thus, 

although a claimant discovered after the 

claims bar date will be given 90 days to 

file its claim, the failure to file a claim 

by the end of that 90 day period will 

result in disallowance of the claim. 

Procedures for Filing Claims 

Section 380.34 of the Proposed Rule 

provides guidance to potential 

claimants regarding certain aspects of 

filing a claim. The FDIC as receiver has 

determined to provide creditors with 

instructions as to how to file a claim in 

several different formats. These will 

include providing FDIC contact 

information in the publication notice, 

providing a proof of claim form and 

filing instructions with the mailed 


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notice, and posting a link to the FDIC’s 

on-line non-deposit claims processing 

Web site. A claim will be deemed filed 

with the receiver as of the date of 

postmark if the claim is mailed or as of 

the date of successful transmission if the 

claim is submitted by facsimile or 

electronically. 

This section also confirms existing 

law that each individual claimant must 

submit its own claim and that no single 

party may assert a claim on behalf of a 

class of litigants. On the other hand, a 

trustee named or appointed in 

connection with a structured financial 

transaction or securitization is 

permitted to file a claim on behalf of the 

investors as a group because in such a 

case the trustee legally owns the claim. 

The Proposed Rule reiterates the 

statutory provision that the filing of a 

claim constitutes the commencement of 

an action for purposes of any applicable 

statute of limitations and does not 

prejudice a claimant’s right to continue 

any legal action filed prior to the date 

of the receiver’s appointment. The 

Proposed Rule clarifies, however, that 

the claimant cannot continue its legal 

action until after the receiver 

determines the claim. 

Determination of Claims 

Section 380.35 of the Proposed Rule 

reflects the receiver’s statutory authority 

to allow and disallow claims. The FDIC 

as receiver may disallow all or any 

portion of a claim, including a claim 

based on security, preference, setoff or 

priority, which is not proved to the 

receiver’s satisfaction. Pursuant to the 

statutory directive, the receiver must 

disallow any claim that is filed after the 

claims bar date, subject to the statutory 

exception for late-filed claims. Under 

this exception, a late-filed claim will not 

be disallowed if (i) the claimant did not 

have notice of the appointment of the 

receiver in time to file by the claims bar 

date, and (ii) the claim is filed in time 

to permit payment by the receiver. 

The Proposed Rule establishes that 

claims that do not accrue until after the 

claims bar date may not be disallowed 

by the receiver as untimely filed. Claims 

of this type may include claims based 

on the post-claims bar date repudiation 

of a contract, or acts or omissions of the 

receiver. In this regard, the Proposed 

Rule adopts the FDIC’s interpretation of 

the application of the late-filed claim 

exception of the FDI Act to these types 

of claims. See Heno v. Federal Deposit 

Insurance Corporation, 20 F.3d 1204 

(1st Cir. 1994). The Proposed Rule 

confirms that such claims will be 

deemed to satisfy the statutory late-filed 

claim exception. In addition, the 

Proposed Rule provides a definition of 

the phrase ‘‘filed in time to permit 

payment’’ to refer to a claim that is filed 

at any time before the FDIC as receiver 

makes a final distribution from the 

receivership of the covered financial 

company. 

Decision Period 

Section 380.36 of the Proposed Rule 

reflects that under the statute the 

receiver must notify a claimant of its 

decision to allow or disallow a claim 

prior to the 180th day after the claim is 

filed. The Proposed Rule also provides 

that the claimant and the receiver may 

extend the claims determination period 

by mutual agreement in writing. In 

accordance with the statute, the receiver 

must notify the claimant regarding its 

determination of the claim prior to the 

end of the extended claims 

determination period. 

Notification of Determination 

Section 380.37 of the Proposed Rule 

requires the receiver to notify the 

claimant of the determination of the 

claim as required by the statute. The 

notification may be mailed to the 

claimant as set forth in section 

210(a)(3)(A). The receiver may use 

electronic media to notify claimants 

who file their claims electronically. If 

the receiver disallows the claim, the 

receiver’s notification shall explain each 

reason for the disallowance and advise 

the claimant of the procedures required 

to file or continue an action in court. 

Consistent with the statute, the 

Proposed Rule provides that for 

purposes of triggering the procedures for 

seeking a judicial determination of the 

claim, a claim shall be deemed to be 

disallowed if the receiver does not 

notify the claimant prior to the end of 

the 180-day determination period or any 

extended claims determination period 

agreed to by the receiver and the 

claimant. 

Procedures for Seeking Judicial Review 

of Disallowed Claim 

Section 380.38 of the Proposed Rule 

implements the statutory procedures for 

a claimant to seek a judicial 

determination of its claim after the 

claim has been disallowed by the FDIC 

as receiver. The court’s standard of 

judicial review would be a de novo 

consideration of the merits of the claim, 

not a judicial review of the receiver’s 

determination of the claim. The statute 

states that a claimant may (i) file a 

lawsuit on its disallowed claim in the 

district court where the covered 

financial company’s principal place of 

business is located, or (ii) continue a 

previously pending lawsuit. The 

Proposed Rule clarifies that if the 

claimant continues a pending action, 

the claimant may continue such action 

in the court in which the action was 

pending before the appointment of the 

receiver, resolving any uncertainty 

whether the action should be 

‘‘continued’’ in the district court where 

the covered financial company’s 

principal place of business is located. 

(In the case of an action pending in state 

court, the receiver would have the 

authority to remove the action to 

Federal court if it chose to do so.) 

As provided by statute, § 308.38(c) of 

the Proposed Rule provides that the 

claimant has 60 days to commence or 

continue an action regarding the 

disallowed claim. The time period for 

commencing or continuing a lawsuit 

would be calculated, as applicable, from 

the date of the notification of 

disallowance, the end of the 180-day 

claims determination date, or the end of 

the extended determination date, if any. 

If a claimant fails to file suit on a claim 

(or continue a pre-receivership suit) 

before the end of the 60-day period, the 

claimant will have no further rights or 

remedies with respect to the claim. This 

time period is not subject to a tolling 

agreement between the FDIC and the 

claimant. The Proposed Rule reiterates 

the statutory provision that exhaustion 

of the administrative claims process is 

a jurisdictional prerequisite for any 

court to adjudicate a claim against a 

covered financial company or the 

receiver. 

Secured Claims 

Sections 380.50–55 of the Proposed 

Rule address the treatment of secured 

claims, which include covered bonds. 

The Dodd-Frank Act, like the 

Bankruptcy Code and the receivership 

provisions of the FDI Act, provides that 

a claimant holding a security interest in 

property is entitled to the value of its 

collateral up to the amount of the claim. 

Under section 210(a)(3)(D)(ii) of the Act, 

a claim that is secured by any property 

of the covered financial company may 

be treated as an unsecured claim to the 

extent that the claim exceeds the fair 

market value of the property, effectively 

bifurcating the claim into a secured 

component (‘‘the secured claim’’) and an 

unsecured component. The unsecured 

component is treated like an unsecured 

claim and paid along with other 

unsecured claims. The Dodd-Frank Act 

is less specific about the treatment of 

the secured claim, however. Section 

210(a)(1)(D) provides that subject to all 

legally enforceable security interests 

(and security entitlements), the receiver 

shall take steps to realize upon the 

assets of the covered financial company, 

including through the sale of assets. The 


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Proposed Rule attempts to clarify how 

the receiver will recognize and treat 

secured claims during this process. 

Section 380.50 of the Proposed Rule 

reflects the receiver’s authority in 

section 210(a)(3)(D)(ii) of the DoddFrank Act to recognize a claim as 

secured to the extent of the value of the 

collateral. The Proposed Rule further 

provides that in reviewing a secured 

claim, the receiver will determine the 

amount of the claim, the relative 

priority of the security interest, whether 

the claimant’s security interest is legally 

enforceable and perfected, and the fair 

market value of the property or other 

asset that is subject to the security 

interest. 

Section 380.51 of the Proposed Rule 

relates to two provisions of the DoddFrank Act that affect secured claimants, 

subparagraphs 210(c)(13)(C) and 

(q)(1)(B). Subparagraph 210(c)(13)(C) 

precludes most secured claimants from 

exercising rights against the pledged 

collateral during the 90-day period after 

the FDIC is appointed receiver of a 

covered financial company without the 

consent of the FDIC as receiver. The 

provision also requires the receiver’s 

consent during this 90-day period before 

a creditor can exercise any right to 

terminate, accelerate, or declare a 

default under any contract to which the 

covered financial company is a party, or 

obtain possession of or exercise control 

over any property of the covered 

financial company, or affect any 

contractual rights of the covered 

financial company. Subparagraph 

210(q)(1)(B) affects claimants who are 

secured by a mortgage or other lien by 

providing that no property of the FDIC 

as receiver shall be subject to levy, 

attachment, garnishment, foreclosure, or 

sale without the consent of the receiver. 

Such property includes the property of 

the covered financial company in 

receivership. The Proposed Rule 

establishes that the FDIC may grant 

consent under subparagraphs 

210(c)(13)(C) or (q)(1)(B) to a secured 

creditor to obtain possession of or 

exercise control over property of the 

covered financial company that serves 

as its collateral, or to foreclose upon or 

sell such collateral. The Proposed Rule 

sets forth several important limitations 

on consents that may be granted by the 

FDIC including that any consent is 

solely at the discretion of the FDIC and 

that such consent does not constitute a 

waiver, relinquishment or limitation on 

any rights, powers or remedies granted 

to the FDIC in any capacity. 

Furthermore, the consent right is not 

assignable to a purchaser of property 

from the FDIC. 

Section 380.52 of the Proposed Rule 

confirms that under section 

210(c)(12)(A) of the Dodd-Frank Act, the 

authority of the FDIC to repudiate a 

contract of the covered financial 

company will not have the effect of 

avoiding any legally enforceable and 

perfected security interests in the 

property (except those avoidable as 

fraudulent or preferential transfers 

under section 210(a)(11)). The Proposed 

Rule further provides that after 

repudiation the security interest will no 

longer secure the contractual obligation 

that was repudiated but will instead 

secure a claim for repudiation damages. 

Accordingly, the receiver may consent 

to the claimant’s liquidation of the 

collateral and application of the 

proceeds to the claim for repudiation 

damages. 

Section 380.53 of the Proposed Rule 

implements the requirement under 

section 210(a)(5) of the Dodd-Frank Act 

that the FDIC establish an expedited 

claims determination procedure for 

secured creditors who allege that they 

will suffer irreparable injury if they are 

compelled to follow the ordinary claims 

process. The expedited claims 

procedure established by the Proposed 

Rule tracks the statutory procedures and 

time frames set forth in section 

210(a)(5). Under such procedures, the 

receiver has 90 days to review the 

secured claim, and the secured creditor 

has 30 days to file or continue an action 

for judicial review of the claim at the 

earlier of the end of the 90-day period 

or the date the receiver denies all or a 

portion of the claim. 

Section 380.54 of the Proposed Rule 

addresses how the receiver may treat 

property that serves as collateral for a 

secured claim. A number of comments 

were received on the topic of the 

receiver’s valuation and disposition of 

collateral, and this section of the 

Proposed Rule addresses this issue. 

Section 380.54 of the Proposed Rule 

provides an alternative to the voluntary 

surrender of collateral by the receiver 

set forth in § 380.51 by providing that 

the receiver may sell the collateral. The 

receiver will then consent to the 

security interest’s attachment to the 

proceeds of the sale. The receiver may 

want to sell the collateral if its value 

exceeds the amount of the claim it 

secures. In the event of a sale by the 

receiver, the secured creditor will be 

permitted to bid and acquire the 

collateral by offsetting the amount of its 

claim against the purchase price of the 

collateral. 

Section 380.55 of the Proposed Rule 

provides that the FDIC as receiver may 

redeem the property of the covered 

financial company from a lien held by 

a secured creditor by paying the creditor 

in cash the fair market value of the 

property up to the value of its lien. The 

receiver’s ability to exercise this power 

may be important when the use or 

possession of the property would be 

necessary to the orderly liquidation of 

the covered financial company. 

III. Solicitation of Comments 

The FDIC solicits comments on all 

aspects of the Proposed Rule. The FDIC 

also solicits responses to the following 

questions: 

1. The FDIC has proposed a two-year 

period for applying the 85 percent 

consolidated revenue test. Is there 

another more appropriate timeframe 

that the FDIC should use to determine 

whether a company meets the 85 

percent consolidated revenue test for 

the purposes of Title II? 

2. Is there a more appropriate 

definition of ‘‘applicable accounting 

standards’’ than that used in the 

Proposed Rule? 

3. The Proposed Rule includes a rule 

of construction regarding investments 

that are not consolidated. Is this rule of 

construction appropriate? 

4. The Proposed Rule includes a rule 

of construction regarding de minimis 

investments. Is there a more appropriate 

approach to calculating and accounting 

for revenues that are derived from such 

de minimis investments? 

5. Section 380.7 of the Proposed Rule 

establishes standards for a 

determination that a senior executive or 

director is substantially responsible for 

the failure of a covered financial 

company. Under the Proposed Rule, the 

loss to the financial condition of the 

covered financial company must have 

materially contributed to the failure of 

the covered financial company. The 

FDIC is considering the use of 

additional qualitative and quantitative 

benchmarks to establish that the loss 

materially contributed to the failure of 

the covered financial company. 

Financial indicators under 

consideration as possible benchmarks 

are assets, net worth and capital, and 

the percentage or magnitude of loss 

associated with these benchmarks that 

would establish a material loss and 

trigger substantial responsibility. The 

FDIC solicits comments on these and 

other potential benchmarks that may be 

used to effectively evaluate loss. 

6. Section 380.8 of the Proposed Rule 

generally establishes the criteria for 

determining whether a company is 

predominantly engaged in activities that 

are financial in nature or incidental 

thereto. Should § 380.8 of the Proposed 

Rule be limited so that it only 

encompasses entities that, individually 


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or on a consolidated basis, are eligible 

under section 102 of the Dodd-Frank 

Act for designation as nonbank financial 

companies supervised by the Board of 

Governors? 

7. Should § 380.8 of the Proposed 

Rule be limited to companies that, 

individually or on a consolidated basis, 

are designated as systemically important 

under the Dodd-Frank Act? 

8. In what ways can the definition of 

administrative expenses under the 

Dodd-Frank Act be further harmonized 

with bankruptcy law and practice? 

Section 503(b)(4) of the Bankruptcy 

Code expressly provides for the 

payment of attorneys’ and accountants’ 

fees and expenses. Is there a need for a 

comparable provision in these rules, in 

light of the procedures for 

administration of the claims process 

described in the Proposed Rule? 

9. Should ‘‘amounts due to the United 

States’’ be limited to obligations backed 

by the full faith and credit of the United 

States? To the extent that amounts due 

to the United States includes amounts 

that are not obligations issued by the 

FDIC to the Secretary of the Department 

of Treasury under the Dodd-Frank Act, 

how will the additional assessments 

authorized by section 210(o) of the Act 

be applied? 

10. How should the value of lost setoff 

rights be determined? 

11. How do the differences in the post 

insolvency interest rules contained in 

§ 380.25 and those established under 

bankruptcy law and practice materially 

affect creditors? How would the 

provisions of section 506(b) of the 

Bankruptcy Code allowing certain fees 

and expenses to be paid to oversecured 

creditors to the extent of the value of 

their collateral be implemented in an 

orderly resolution under the DoddFrank Act, if it is applicable? What 

would be the impact on creditors if a 

similar rule is adopted under the DoddFrank Act? Or if one is not adopted? 

12. What, if any, additional provisions 

should be included in the Proposed 

Rule regarding the administrative 

process for the determination of claims? 

13. Proposed section 380.33 requires 

the FDIC to publish a notice to creditors 

to present their claims and specifies that 

the notice shall be published in one or 

more newspapers of general circulation 

where the covered financial company 

has its principal place or places of 

business. If the covered financial 

company is a multi-national 

organization, how should the principal 

place(s) of business be determined? 

Should a publication notice be 

published in each country in which the 

covered financial company does 

business? 

14. In the event that publication 

notices are published in other countries, 

what standards should be applied to 

identify appropriate ‘‘newspapers of 

general circulation’’ to satisfy this 

regulatory requirement? 

15. Should the consent provisions of 

subparagraphs 210(c)(13)(C) and 

(q)(1)(B) of the Act be interpreted as not 

applying to a secured creditor who has 

possession of or control over collateral 

before the appointment of the receiver 

pursuant to a security arrangement? 

16. What, if any, additional provisions 

should be included in the Proposed 

Rule governing the treatment of secured 

claims and property that serves as 

security? Specifically, are there any 

additional provisions that are necessary 

or appropriate regarding obtaining 

consent from the receiver to exercise 

rights against the collateral, and the sale 

or redemption of collateral by the 

receiver? Should collateral be valued at 

the time it is surrendered, sold, or 

redeemed by the receiver, or some other 

time? Is it necessary to provide that after 

repudiation a security interest will no 

longer secure the contractual repayment 

obligation but will instead secure any 

claims for repudiation damages? 

17. What, if any, provisions should be 

changed or added to the expedited relief 

procedures for secured creditors who 

allege irreparable injury if the ordinary 

claims process is followed? 

IV. Regulatory Analysis and Procedure 

A. Paperwork Reduction Act 

The Proposed Rule would not involve 

any new collections of information 

pursuant to the Paperwork Reduction 

Act (44 U.S.C. 3501 et seq.). 

Consequently, no information has been 

submitted to the Office of Management 

and Budget for review. 

B. Regulatory Flexibility Act 

The Regulatory Flexibility Act (U.S.C. 

601 et seq.) requires an agency that is 

issuing a final rule to prepare and make 

available a regulatory flexibility analysis 

that describes the impact of the final 

rule on small entities. (5 U.S.C. 603(a)). 

The Regulatory Flexibility Act provides 

that an agency is not required to prepare 

and publish a regulatory flexibility 

analysis if the agency certifies that the 

final rule will not have a significant 

economic impact on a substantial 

number of small entities. 

Pursuant to section 605(b) of the 

Regulatory Flexibility Act, the FDIC 

certifies that the Proposed Rule will not 

have a significant economic impact on 

a substantial number of small entities. 

The Proposed Rule will clarify rules and 

procedures for the liquidation of a failed 

systemically important financial 

company, which will provide internal 

guidance to FDIC personnel performing 

the liquidation of such a company and 

will address any uncertainty in the 

financial system as to how the orderly 

liquidation of such a company would 

operate. As such, the Proposed Rule will 

not have a significant economic impact 

on small entities. 

C. The Treasury and General 

Government Appropriations Act, 1999— 

Assessment of Federal Regulations and 

Policies on Families 

The FDIC has determined that the 

Proposed Rule will not affect family 

well-being within the meaning of 

section 654 of the Treasury and General 

Government Appropriations Act, 

enacted as part of the Omnibus 

Consolidated and Emergency 

Supplemental Appropriations Act of 

1999 (Pub. L. 105–277, 112 Stat. 2681). 

D. Plain Language 

Section 722 of the Gramm-LeachBliley Act (Pub. L. 106–102, 113 Stat. 

1338, 1471) requires the Federal 

banking agencies to use plain language 

in all proposed and final rules 

published after January 1, 2000. The 

FDIC has sought to present the Proposed 

Rule in a simple and straightforward 

manner. 

List of Subjects in 12 CFR Part 380 

Holding companies, Insurance 

companies. 

For the reasons stated above, the 

Board of Directors of the Federal 

Deposit Insurance Corporation amends 

title 12 part 380 of the Code of Federal 

Regulations as follows: 

PART 380—ORDERLY LIQUIDATION 

AUTHORITY 

1. The authority citation for part 380 

continues to read as follows: 

Authority: 12 U.S.C. 5301 et seq. 

2. Revise 380.1 by to read as follows: 

§ 380.1 Definitions. 

(a) For purposes of this part, the 

following terms are defined as follows: 

(1) The term ‘‘bridge financial 

company’’ means a new financial 

company organized by the Corporation 

in accordance with 12 U.S.C. 5390(h) for 

the purpose of resolving a covered 

financial company. 

(2) The term ‘‘Corporation’’ means the 

Federal Deposit Insurance Corporation. 

(3) The term ‘‘covered financial 

company’’ means: 

(i) A financial company for which a 

determination has been made under 12 

U.S.C. 5383(b) and 


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(ii) Does not include an insured 

depository institution. 

(4) The term ‘‘covered subsidiary’’ 

means a subsidiary of a covered 

financial company, other than: 

(i) An insured depository institution; 

(ii) An insurance company; or 

(iii) A covered broker or dealer. 

(5) The term ‘‘insurance company’’ 

means any entity that is: 

(i) Engaged in the business of 

insurance; 

(ii) Subject to regulation by a State 

insurance regulator; and 

(iii) Covered by a State law that is 

designed to specifically deal with the 

rehabilitation, liquidation or insolvency 

of an insurance company. 

(b) The following words shall be 

defined as follows: 

(1) Compensation. The word 

compensation means any direct or 

indirect financial remuneration received 

from the covered financial company, 

including, but not limited to, salary; 

bonuses; incentives; benefits; severance 

pay; deferred compensation; golden 

parachute benefits; benefits derived 

from an employment contract, or other 

compensation or benefit arrangement; 

perquisites; stock option plans; postemployment benefits; profits realized 

from a sale of securities in the covered 

financial company; or any cash or noncash payments or benefits granted to or 

for the benefit of the senior executive or 

director. 

(2) Director. The word director means 

any director of a covered financial 

company with authority to vote on 

matters before the board of directors. 

(3) Senior executive. The term senior 

executive has the meaning set forth in 

12 CFR 380.3(a)(2). 

3. Add §§ 380.7, 380.8, and 380.9 to 

read as follows: 

§ 380.7 Recoupment of compensation 

from senior executives and directors. 

(a) Substantially Responsible. The 

Corporation, as receiver of a covered 

financial company, may recover from 

any current or former senior executive 

or director substantially responsible for 

the failed condition of the covered 

financial company any compensation 

received during the 2-year period 

preceding the date on which the 

Corporation was appointed as the 

receiver of the covered financial 

company, except that, in the case of 

fraud, no time limit shall apply. A 

senior executive or director shall be 

deemed to be substantially responsible 

for the failed condition of a covered 

financial company that is placed into 

receivership under the orderly 

liquidation authority of the Dodd-Frank 

Act if: 

(1) He or she failed to conduct his or 

her responsibilities with the requisite 

degree of skill and care required by that 

position, and 

(2) As a result, individually or 

collectively, caused a loss to the covered 

financial company that materially 

contributed to the failure of the covered 

financial company under the facts and 

circumstances. 

(b) Presumptions. The following 

presumptions shall apply for purposes 

of assessing whether a senior executive 

or director is substantially responsible 

for the failed condition of a covered 

financial company: 

(1) It shall be presumed that a senior 

executive or director is substantially 

responsible for the failed condition of a 

covered financial company that is 

placed into receivership under the 

orderly liquidation authority of the 

Dodd-Frank Act under any of the 

following circumstances: 

(i) The senior executive or director 

served as the chairman of the board of 

directors, chief executive officer, 

president, chief financial officer, or in 

any other similar role regardless of his 

or her title if in this role he or she had 

responsibility for the strategic, 

policymaking, or company-wide 

operational decisions of the covered 

financial company prior to the date that 

it was placed into receivership under 

the orderly liquidation authority of the 

Dodd-Frank Act; 

(ii) The senior executive or director is 

adjudged liable by a court or tribunal of 

competent jurisdiction for having 

breached his or her duty of loyalty to 

the covered financial company; 

(iii) The senior executive was 

removed from the management of the 

covered financial company under 12 

U.S.C. 5386(4); or 

(iv) The director was removed from 

the board of directors of the covered 

financial company under 12 U.S.C. 

5386(5). 

(2) The presumption under paragraph 

(b)(1)(i) of this section may be rebutted 

by evidence that the senior executive or 

director performed his or her duties 

with the requisite degree of skill and 

care required by that position. The 

presumptions under paragraphs 

(b)(1)(ii),)(iii) and (iv) of this section 

may be rebutted by evidence that the 

senior executive or director did not 

cause a loss to the covered financial 

company that materially contributed to 

the failure of the covered financial 

company under the facts and 

circumstances. 

(3) The presumptions do not apply to: 

(i) A senior executive hired by the 

covered financial company during the 

two years prior to the Corporation’s 

appointment as receiver to assist in 

preventing further deterioration of the 

financial condition of the covered 

financial company; or 

(ii) A director who joined the board of 

directors of the covered financial 

company during the two years prior to 

the Corporation’s appointment as 

receiver under an agreement or 

resolution to assist in preventing further 

deterioration of the financial condition 

of the covered financial company. 

(4) Notwithstanding that the 

presumption does not apply under 

paragraphs (b)(3)(i) and (ii) of this 

section, the Corporation as receiver still 

may pursue recoupment of 

compensation from a senior executive or 

director in paragraphs (b)(3)(i) and (ii) of 

this section if they are substantially 

responsible for the failed condition of 

the covered financial company. 

(c) Actions by the Corporation as 

receiver for Losses to the Covered 

Financial Company. Pursuing 

recoupment of compensation under this 

section shall not in any way limit or 

impair the ability of the Corporation as 

receiver to pursue any other claims or 

causes of action it may have against 

senior executives and directors of the 

covered financial company for losses 

they cause to the covered financial 

company in the same or separate 

actions. 

§ 380.8 Predominantly engaged in 

activities that are financial or incidental 

thereto. 

(a) For purposes of sections 201(a)(11) 

and 201(b) of the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act (12 U.S.C. 5381(a)(11) and (b)) and 

this section, a company is 

predominantly engaged in activities that 

the Board of Governors has determined 

are financial in nature or incidental 

thereto for purposes of section 4(k) of 

the Bank Holding Company Act of 1956 

(12 U.S.C. 1843(k)), if: 

(1) At least 85 percent of the total 

consolidated revenues of such company 

(determined in accordance with 

applicable accounting standards) for 

either of its two most recent fiscal years 

were derived, directly or indirectly, 

from financial activities, or 

(2) Based upon all of the relevant facts 

and circumstances, the Corporation 

determines that the consolidated 

revenues of the company from financial 

activities constitute 85 percent or more 

of the total consolidated revenues of the 

company. 

(b) For purposes of paragraph (a) of 

this section, the following definitions 

apply: 

(1) The term ‘‘total consolidated 

revenues’’ means the total gross 


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revenues of the company and all entities 

subject to consolidation by the company 

for a fiscal year. 

(2) The term ‘‘financial activity’’ 

means: 

(i) Any activity, wherever conducted, 

described in 12 CFR 225.86 or any 

successor regulation; 

(ii) Ownership or control of one or 

more depository institutions; or 

(iii) Any other activity, wherever 

conducted, determined by the Board of 

Governors of the Federal Reserve 

System, in consultation with the 

Secretary of the Treasury, under section 

4(k)(1)(A) of the Bank Holding Company 

Act (12 U.S.C. 1843(k)(1)(A)) to be 

financial in nature or incidental to a 

financial activity. 

(3) The term ‘‘applicable accounting 

standards’’ means the accounting 

standards utilized by the company in 

the ordinary course of business in 

preparing its consolidated financial 

statements, provided that those 

standards are: 

(i) U.S. generally accepted accounting 

principles, 

(ii) International Financial Reporting 

Standards, or 

(iii) Such other accounting standards 

that the FDIC determines to be 

appropriate. 

(c) Effect of other authority. Any 

activity described in paragraph (b)(2) of 

this section is considered financial in 

nature or incidental thereto for purposes 

of this section regardless of whether— 

(1) A bank holding company 

(including a financial holding company 

or a foreign bank) may be authorized to 

engage in the activity, or own or control 

shares of a company engaged in such 

activity, under any other provisions of 

the BHC Act or other Federal law 

including, but not limited to, section 

4(a)(2), section 4(c)(5), section 4(c)(6), 

section 4(c)(7), section 4(c)(9), or section 

4(c)(13) of the Bank Holding Company 

Act (12 U.S.C. 1843(a)(2), (c)(5), (c)(6), 

(c)(7), (c)(9), or (c)(13)) and the Board’s 

implementing regulations; or 

(2) Other provisions of Federal or 

state law or regulations prohibit, 

restrict, or otherwise place conditions 

on the conduct of the activity by a bank 

holding company (including a financial 

holding company or foreign bank) or 

bank holding companies generally. 

(d) Rules of construction. For 

purposes of determining whether a 

company is predominantly engaged in 

financial activities under this section, 

the following rules shall apply— 

(1) Investments that are not 

consolidated. Except as provided in 

paragraph (d)(2) of this section, 

revenues derived from an equity 

investment by the company in another 

company, the financial statements of 

which are not consolidated with those 

of the company under applicable 

accounting standards, shall be treated as 

revenues derived from financial 

activities, if the other company is 

predominantly engaged in financial 

activities as defined in paragraph (a)(1) 

of this section. 

(2) Treatment of de minimis 

investments. A company may treat 

revenues derived from an equity 

investment by the company in another 

company as revenues not derived from 

financial activities, regardless of the 

type of activities conducted by the other 

company, if 

(i) The company’s aggregate 

ownership interest in the other 

company constitutes less than five 

percent of any class of outstanding 

voting shares, and less than 25 percent 

of the total equity, of the other 

company; 

(ii) The financial statements of the 

other company are not consolidated 

with those of the company under 

applicable accounting standards; 

(iii) The company’s investment in the 

other company is not held in connection 

with the conduct by the company or any 

of its subsidiaries of an activity that is 

considered to be financial in nature or 

incidental thereto for purposes of this 

section (such as, for example, 

investment advisory activities or 

merchant banking activities); 

(iv) The other company is not— 

(A) A depository institution or a 

subsidiary of a depository institution; 

(B) A bank holding company or 

savings and loan holding company; 

(C) A foreign bank (as defined in 

section 1(b)(7) of the International 

Banking Act of 1978 (12 U.S.C. 3101(7)); 

(D) Any of the following entities 

registered with the Securities and 

Exchange Commission under the 

Securities Exchange Act of 1934 (15 

U.S.C. 78a et seq.)— 

(1) A broker or dealer; 

(2) A clearing agency; 

(3) A nationally recognized statistical 

rating organization; 

(4) A transfer agent; 

(5) An exchange registered as a 

national securities exchange; or 

(6) A security-based swap execution 

facility, security-based swap data 

repository, or security-based swap 

dealer; 

(E) An investment advisor registered 

with the Securities and Exchange 

Commission under the Investment 

Advisers Act of 1940 (15 U.S.C. 80b–1 

et seq.); 

(F) Any of the following entities 

registered with the Commodity Futures 

Trading Commission under the 

Commodity Exchange Act (7 U.S.C. 1 

et seq.)— 

(1) A futures commission merchant; 

(2) A commodity pool operator; 

(3) A commodity trading advisor; 

(4) An introducing broker; 

(5) A derivatives clearing 

organization; 

(6) A retail foreign exchange dealer; or 

(7) A swap execution facility, swap 

data repository, or swap dealer. 

(G) A board of trade designated as a 

contract market by the Commodity 

Futures Trading Commission under the 

Commodity Exchange Act (7 U.S.C. 1 et 

seq.); or 

(H) An insurance company subject to 

supervision by a state or foreign 

insurance authority; and 

(v) The aggregate dollar amount of 

revenues treated by the company as not 

financially related under this paragraph 

(d)(2) of this section does not exceed 

five percent of the total consolidated 

financial revenues of the company in 

that year. 

§ 380.9 Treatment of fraudulent and 

preferential transfers. 

(a) Coverage. This section shall apply 

to all receiverships in which the FDIC 

is appointed as receiver under 12 U.S.C. 

5382(a) or 5390(a)(1)(E) of a covered 

financial company or a covered 

subsidiary, respectively, as defined in 

12 U.S.C. 5381(a)(8) and (9). 

(b) Avoidance Standard for Transfer 

of Property. (1) In applying 12 U.S.C. 

5390(a)(11)(H)(i)(II) to a transfer of 

property for purposes of 12 U.S.C. 

5390(a)(11)(A), the Corporation, as 

receiver of a covered financial company 

or a covered subsidiary, which is 

thereafter deemed to be a covered 

financial company pursuant to 12 U.S.C. 

5390(a)(1)(E)(ii), shall determine 

whether the transfer has been perfected 

such that a bona fide purchaser from 

such covered financial company or such 

covered subsidiary, as applicable, 

against whom applicable law permits 

such transfer to be perfected cannot 

acquire an interest in the property 

transferred that is superior to the 

interest in such property of the 

transferee. 

(2) In applying 12 U.S.C. 

5390(a)(11)(H)(i)(II) to a transfer of real 

property, other than fixtures, but 

including the interest of a seller or 

purchaser under a contract for the sale 

of real property, for purposes of 12 

U.S.C. 5390(a)(11)(B), the Corporation, 

as receiver of a covered financial 

company or a covered subsidiary, which 

is thereafter deemed to be a covered 

financial company pursuant to 12 U.S.C. 

5390(a)(1)(E)(ii), shall determine 

whether the transfer has been perfected 


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such that a bona fide purchaser from 

such covered financial company or such 

covered subsidiary, as applicable, 

against whom applicable law permits 

such transfer to be perfected cannot 

acquire an interest in the property 

transferred that is superior to the 

interest in such property of the 

transferee. For purposes of this section, 

the term fixture shall be interpreted in 

accordance with U.S. Federal 

bankruptcy law. 

(3) In applying 12 U.S.C. 

5390(a)(11)(H)(i)(II) to a transfer of a 

fixture or property, other than real 

property, for purposes of 12 U.S.C. 

5390(a)(11)(B), the Corporation, as 

receiver of a covered financial company 

or a covered subsidiary which is 

thereafter deemed to be a covered 

financial company pursuant to 12 U.S.C. 

5390(a)(1)(E)(ii), shall determine 

whether the transfer has been perfected 

such that a creditor on a simple contract 

cannot acquire a judicial lien that is 

superior to the interest of the transferee, 

and the standard of whether the transfer 

is perfected such that a bona fide 

purchaser cannot acquire an interest in 

the property transferred that is superior 

to the interest in such property of the 

transferee of such property shall not 

apply to any such transfer under this 

subparagraph (b)(3). 

(c) Grace period for perfection. In 

determining when a transfer occurs for 

purposes of 12 U.S.C. 5390(a)(11)(B), the 

Corporation, as receiver of a covered 

financial company or a covered 

subsidiary, which is thereafter deemed 

to be a covered financial company 

pursuant to 12 U.S.C. 5390(a)(1)(E)(ii), 

shall apply the following standard: 

(1) Except as provided in paragraph 

(c)(2) of this section, a transfer shall be 

deemed to have been made: 

(i) At the time such transfer takes 

effect between the transferor and the 

transferee, if such transfer is perfected 

at, or within 30 days after, such time, 

except as provided in paragraph 

(c)(1)(ii) of this section; 

(ii) At the time such transfer takes 

effect between the transferor and the 

transferee, with respect to a transfer of 

an interest of the transferor in property 

that creates a security interest in 

property acquired by the transferor— 

(A) To the extent such security 

interest secures new value that was: 

(1) Given at or after the signing of a 

security agreement that contains a 

description of such property as 

collateral; 

(2) Given by or on behalf of the 

secured party under such agreement; 

(3) Given to enable the transferor to 

acquire such property; and 

(4) In fact used by the transferor to 

acquire such property; and 

(B) That is perfected on or before 30 

days after the transferor receives 

possession of such property; 

(iii) At the time such transfer is 

perfected, if such transfer is perfected 

after the 30-day period described in 

paragraph (c)(1)(i) or (ii) of this section, 

as applicable; or 

(iv) Immediately before the 

appointment of the Corporation as 

receiver of a covered financial company 

or a covered subsidiary which is 

thereafter deemed to be a covered 

financial company pursuant to 12 U.S.C. 

5390(a)(1)(E)(ii), if such transfer is not 

perfected at the later of— 

(A) The earlier of the date of the 

filing, if any, of a petition by or against 

the transferor under Title 11 of the 

United States Code and the date of the 

appointment of the Corporation, as 

receiver of such covered financial 

company or such covered subsidiary; or 

(B) 30 days after such transfer takes 

effect between the transferor and the 

transferee. 

(2) For the purposes of this paragraph 

(c), a transfer is not made until the 

covered financial company or a covered 

subsidiary, which is thereafter deemed 

to be a covered financial company 

pursuant to 12 U.S.C. 5390(a)(1)(E)(ii), 

has acquired rights in the property 

transferred. 

(d) Limitations. The provisions of this 

section do not act to waive, relinquish, 

limit or otherwise affect any rights or 

powers of the Corporation in any 

capacity, whether pursuant to 

applicable law or any agreement or 

contract. 

§ 380.10–380.19 [Reserved] 

4. Add reserved §§ 380.10 through 

380.19; 

5. Add subpart A, consisting of 

§§ 380.20 through 380.29, to read as 

follows: 

Subpart A—Priorities 

Sec. 

380.20 Definitions. 

380.21 Priorities. 

380.22 Administrative expenses of the 

receiver. 

380.23 Amounts owed to the United States. 

380.24 Priority of claims arising out of loss 

of setoff rights. 

380.25 Post-insolvency interest. 

380.26 Effect of transfer of assets and 

obligations to a bridge financial 

company. 

380.27–380.29 [Reserved] 

§ 380.20 Definitions. 

Allowed claim. The term allowed 

claim means a claim against the 

receivership that is allowed by the 

Corporation as receiver or upon which 

a final non-appealable judgment has 

been entered in favor of a claimant 

against a receivership by a court with 

jurisdiction to adjudicate the claim. 

§ 380.21 Priorities. 

(a) Unsecured claims against the 

covered financial company or the 

receiver that are proved to the 

satisfaction of the Corporation as 

receiver for the covered financial 

company shall be paid in the following 

order of priority: 

(1) Repayment of debt incurred by or 

credit obtained by the Corporation as 

receiver for a covered financial 

company, provided that the Corporation 

as receiver has determined that it is 

otherwise unable to obtain unsecured 

credit for the covered financial company 

from commercial sources. 

(2) Administrative expenses of the 

receiver, as defined in § 380.22, other 

than those described in paragraph (a)(1) 

of this subsection. 

(3) Any amounts owed to the United 

States, as defined in § 380.23. 

(4) Wages, salaries, or commissions, 

including vacation, severance, and sick 

leave pay earned by an individual (other 

than an individual described in 

paragraph (a)(9) of this subsection), but 

only to the extent of $11,725 for each 

individual (as adjusted for inflation in 

accordance with paragraph (b) of this 

section) earned not later than 180 days 

before the date of appointment of the 

receiver. 

(5) Contributions owed to employee 

benefit plans arising from services 

rendered not later than 180 days before 

the date of appointment of the receiver, 

to the extent of the number of 

employees covered by each such plan 

multiplied by $11,725 (as adjusted for 

inflation in accordance with paragraph 

(b) of this section); less the sum of: 

(i) The aggregate amount paid to such 

employees under paragraph (a)(4) of this 

section, plus 

(ii) The aggregate amount paid by the 

Corporation as receiver on behalf of 

such employees to any other employee 

benefit plan. 

(6) Any amounts due to creditors who 

have an allowed claim for loss of setoff 

rights as described in § 380.24. 

(7) Any other general or senior 

liability of the covered financial 

company (which is not a liability 

described under paragraphs (a)(8), (9) or 

(11) of this section). 

(8) Any obligation subordinated to 

general creditors (which is not an 

obligation described under paragraph 

(a)(9) or (11) of this section). 

(9) Any wages, salaries, or 

commissions, including vacation, 


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severance, and sick leave pay earned, 

owed to senior executives and directors 

of the covered financial company. 

(10) Post-insolvency interest in 

accordance with § 380.25, provided that 

interest shall be paid on allowed claims 

in the order of priority of the claims set 

forth in paragraphs (a)(1) through (9) of 

this section. 

(11) Any amount remaining shall be 

distributed to shareholders, members, 

general partners, limited partners, or 

other persons with interests in the 

equity of the covered financial company 

arising as a result of their status as 

shareholders, members, general 

partners, limited partners, or other 

persons with interests in the equity of 

the covered financial company, in 

proportion to their relative equity 

interests. 

(b) All payment under subparagraphs 

(a)(4) and (5) of this section shall be as 

adjusted for inflation in the same 

manner that claims under 11 U.S.C. 

507(a)(1)(4) are adjusted for inflation by 

the Judicial Conference of the United 

States pursuant to 11 U.S.C. 104. 

(c) All unsecured claims of any 

category or priority described in 

paragraphs (a)(1) through (10) of this 

section shall be paid in full or provision 

made for such payment before any 

claims of lesser priority are paid. If there 

are insufficient funds to pay all claims 

of a particular category or priority of 

claims in full, then distributions to 

creditors in such category or priority 

shall be made pro rata. 

§ 380.22 Administrative expenses of the 

receiver. 

(a) The term ‘‘administrative expenses 

of the receiver’’ includes those actual 

and necessary pre- and post-failure costs 

and expenses incurred by the 

Corporation as receiver in liquidating 

the covered financial company; together 

with any obligations that the 

Corporation as receiver for the covered 

financial company determines to be 

necessary and appropriate to facilitate 

the smooth and orderly liquidation of 

the covered financial company. 

Administrative expenses of the 

Corporation as receiver for a covered 

financial company include: 

(1) Contractual rent pursuant to an 

existing lease or rental agreement 

accruing from the date of the 

appointment of the Corporation as 

receiver until the later of: 

(i) The date a notice of the 

dissafirmance or repudiation of such 

lease or rental agreement is mailed, or 

(ii) The date such disaffirmance or 

repudiation becomes effective; provided 

that the lesser of such lease is not in 

default or breach of the terms of the 

lease. 

(2) Amounts owed pursuant to the 

terms of a contract for services 

performed and accepted by the receiver 

after the date of appointment of the 

receiver up to the date the receiver 

repudiates, terminates, cancels or 

otherwise discontinues such contract or 

notifies the counterparty that it no 

longer accepts performance of such 

services; 

(3) Amounts owed under the terms of 

a contract or agreement executed in 

writing and entered into by the 

Corporation as receiver for the covered 

financial company after the date of 

appointment, or any contract or 

agreement entered into by the covered 

financial company before the date of 

appointment of the Corporation as 

receiver that has been expressly 

approved in writing by the Corporation 

as receiver after the date of 

appointment; and 

(4) Expenses of the Inspector General 

of the Corporation incurred in carrying 

out its responsibilities under 12 U.S.C. 

5391(d). 

(b) Obligations to repay any extension 

of credit obtained by the Corporation as 

receiver through enforcement of any 

contract to extend credit to the covered 

financial company that was in existence 

prior to appointment of the Corporation 

as receiver pursuant to 12 U.S.C. 

5390(c)(13)(D) shall be treated as 

administrative expenses of the receiver. 

Other unsecured credit extended to the 

receivership shall be treated as 

administrative expenses except with 

respect to debt incurred by or credit 

obtained by the Corporation as receiver 

for a covered financial company as 

described in § 380.21(a)(1). 

§ 380.23 Amounts owed to the United 

States. 

(a) The term ‘‘amounts owed to the 

United States’’ as used in § 380.21(a)(3) 

of this subpart includes all amounts due 

to the United States or any department, 

agency or instrumentality of the United 

States government, without regard for 

whether such amount is included as 

debt or capital on the books and records 

of the covered financial company. Such 

amounts shall include obligations 

incurred before and after the 

appointment of the receiver. Without 

limitation, ‘‘amounts owed to the United 

States’’ include all of the following, 

which all shall have equal priority 

under § 380.21(a)(3): 

(1) Amounts owed to the Corporation 

for any extension of credit by the 

Corporation, including any amounts 

made available under 12 U.S.C. 5384(d), 

whether such extensions of credit are 

secured or unsecured; 

(2) Unsecured amounts paid or 

payable by the Corporation pursuant to 

its guarantee of any debt issued by the 

covered financial company under the 

Temporary Liquidity Guaranty Program, 

12 CFR part 370, any widely available 

debt guarantee program authorized 

under 12 U.S.C. 5612, or any other debt 

or obligation of any kind or nature that 

is guaranteed by the Corporation; 

(3) Amounts owed to the Department 

of Treasury on account of unsecured tax 

liabilities of the covered financial 

company that directly result from the 

income or activities of the covered 

financial company; and 

(4) The amount of any unsecured debt 

owed to a Federal reserve bank. 

(b) The United States may, in its sole 

discretion, consent to subordinate the 

repayment of any amount due to the 

United States to any other obligation of 

the covered financial company provided 

that such consent shall be in writing by 

the appropriate Department, agency or 

instrumentality and shall specify the 

particular debt, obligation or other 

amount to be subordinated including 

the amount thereof and shall reference 

this section or 12 U.S.C. 5390(b)(1); and 

provided further that unsecured claims 

of the United States shall, at a 

minimum, have a higher priority than 

liabilities of the covered financial 

company that count as regulatory 

capital on the books and records of the 

covered financial company. 

§ 380.24 Priority of claims arising out of 

loss of setoff rights. 

(a) Notwithstanding any right of any 

creditor to offset a mutual debt owed by 

such creditor to any covered financial 

company that arose before the date of 

appointment the receiver against a claim 

of such creditor against the covered 

financial company, the Corporation 

acting as receiver for the covered 

financial company may sell or transfer 

any assets of the covered financial 

company to a bridge financial company 

or to a third party free and clear of any 

such rights of setoff. 

(b) If the Corporation as receiver sells 

or transfers any asset free and clear of 

the setoff rights of any party, such party 

shall have a claim against the receiver 

in the amount of the value of such setoff 

established as of the date of the sale or 

transfer of such assets, provided that the 

setoff rights meet all of the criteria 

established under 12 U.S.C. 3590(a)(12). 

(c) Any allowed claim pursuant to 12 

U.S.C. 5390(a)(12) shall be paid prior to 

any other general or senior liability of 

the covered financial company 

described in § 380.21(a)(7) of this 


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subpart. In the event that the setoff 

amount is less than the amount of the 

allowed claim, the balance of the 

allowed claim shall be paid at the 

otherwise applicable level of priority for 

such category of claim under § 380.21. 

§ 380.25 Post-insolvency interest. 

(a) Date of accrual. Post-insolvency 

interest shall be paid at the postinsolvency interest rate calculated on 

the principal amount of an allowed 

claim from the later of: 

(1) The date of the appointment of the 

Corporation as receiver for the covered 

financial company; or 

(2) In the case of a claim arising or 

becoming fixed and certain after the 

date of the appointment of the receiver, 

the date such claim arises or becomes 

fixed and certain. 

(b) Interest rate. Post-insolvency 

interest rate shall equal, for any 

calendar quarter, the coupon equivalent 

yield of the average discount rate set on 

the three-month Treasury bill at the last 

auction held by the United States 

Treasury Department during the 

preceding calendar quarter. Postinsolvency interest shall be computed 

quarterly and shall be computed using 

a simple interest method of calculation. 

(c) Principal amount. The principal 

amount of an allowed claim shall be the 

full allowed claim amount, including 

any interest that may have accrued to 

the extent such interest is included in 

the allowed claim. 

(d) Post-insolvency interest 

distributions. (1) Post-insolvency 

interest shall only be distributed 

following satisfaction of the principal 

amount of all creditor claims set forth in 

§ 380.21(a)(1) through (9) of this subpart 

and prior to any distribution pursuant to 

§ 380.21(a)(11). 

(2) Post-insolvency interest 

distributions shall be made at such time 

as the Corporation as receiver 

determines that such distributions are 

appropriate and only to the extent of 

funds available in the receivership 

estate. Post-insolvency interest shall be 

calculated on the outstanding principal 

amount of an allowed claim, as reduced 

from time to time by any interim 

distributions on account of such claim 

by the Corporation as receiver. 

§ 380.26 Effect of transfer of assets and 

obligations to a bridge financial company. 

(a) The purchase of any asset or 

assumption of any asset or liability of a 

covered financial company by a bridge 

financial company, through the express 

agreement of such bridge financial 

company, constitutes assumption of the 

contract or agreement giving rise to such 

asset or liability. Such contracts or 

agreements, together with any contract 

the bridge financial company may 

through its express agreement enter into 

with any other party, shall become the 

obligation of the bridge financial 

company from and after the effective 

date of the purchase, assumption or 

agreement, and the bridge financial 

company shall have the right and 

obligation to observe, perform and 

enforce their terms and provisions. In 

the event that the Corporation shall act 

as receiver of the bridge financial 

company any claim arising out of any 

breach of such contract or agreement by 

the bridge financial company shall be 

paid as an administrative expense of the 

receiver of the bridge financial 

company. 

(b) In the event that the Corporation 

as receiver of a bridge financial 

company shall act to dissolve the bridge 

financial company, it shall wind up the 

affairs of the bridge financial company 

in conformity with the laws, rules and 

regulations relating to the liquidation of 

covered financial companies, including 

the laws, rules and regulations 

governing priorities of claims, subject 

however to the authority of the 

Corporation to authorize the bridge 

financial company to obtain unsecured 

credit or issue unsecured debt with 

priority over any or all of the other 

unsecured obligations of the bridge 

financial company, provided that 

unsecured debt is not otherwise 

generally available to the bridge 

financial company. 

(c) Upon the final dissolution or 

termination of the bridge financial 

company whether following a merger or 

consolidation, a stock sale, a sale of 

assets, or dissolution and liquidation at 

the end of the term of existence of such 

bridge financial company, any proceeds 

that remain after payment of all 

administrative expenses of the bridge 

financial company and all other claims 

against such bridge financial company 

will be distributed to the receiver for the 

related covered financial company. 

§§ 380.27–380.29 [Reserved] 

6. Add subpart B, consisting of 

§§ 380.30 through 380.55, to read as 

follows: 

Subpart B—Receivership Administrative 

Claims Process 

Sec. 

380.30 Receivership administrative claims 

process. 

380.31 Definitions. 

380.32 Claims bar date. 

380.33 Notice requirements. 

380.34 Procedures for filing claim. 

380.35 Determination of claims. 

380.36 Decision period. 

380.37 Notification of determination. 

380.38 Procedures for seeking judicial 

review of disallowed claim. 

380.39–380.49 [Reserved] 

380.50 Determination of secured claims. 

380.51 Consent to certain actions. 

380.52 Repudiation of secured contract. 

380.53 Expedited relief. 

380.54 Sale of collateral by receiver. 

380.55 Redemption from security interest. 

Subpart B—Receivership 

Administrative Claims Process 

§ 380.30 Receivership administrative 

claims process. 

The Corporation as receiver of a 

covered financial company shall 

determine claims against the company 

and the receiver in accordance with the 

procedures set forth in 12 U.S.C. 

5390(a)(2) through (5) and the 

regulations promulgated by the 

Corporation. The receivership 

administrative claims process shall not 

apply to any claim against a covered 

financial company that has been 

transferred to a bridge financial 

company or other party. 

§ 380.31 Definitions. 

(a) Claim means any right to payment 

from either the covered financial 

company or the Corporation as receiver, 

whether or not such right is reduced to 

judgment, liquidated, unliquidated, 

fixed, contingent, matured, unmatured, 

disputed, undisputed, legal, equitable, 

secured, or unsecured. 

(b) Corporation, Corporation as 

receiver, and receiver each means the 

Federal Deposit Insurance Corporation 

acting as receiver for a covered financial 

company. 

(c) Creditor means a person asserting 

a claim. 

§ 380.32 Claims bar date. 

Upon its appointment as receiver for 

a covered financial company, the 

Corporation shall establish a claims bar 

date by which date creditors of the 

covered financial company shall present 

their claims, together with proof, to the 

receiver. The claims bar date shall be 

not less than 90 days after the date on 

which the notice to creditors to file 

claims is first published under 

§ 380.33(a) of this subpart. 

§ 380.33 Notice requirements. 

(a) Notice by publication. Promptly 

after its appointment as receiver for a 

covered financial company, the 

Corporation shall publish a notice to the 

creditors of the covered financial 

company to file their claims with the 

receiver no later than the claims bar 

date. The Corporation as receiver shall 

republish such notice 1 month and 2 

months, respectively, after the date the 

notice is first published. The notice to 


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creditors shall be published in one or 

more newspapers of general circulation 

where the covered financial company 

has its principal place or places of 

business. In addition to such 

publication in a newspaper, the 

Corporation may post the notice on the 

FDIC’s Web site at http://www.fdic.gov. 

(b) Notice by mailing. At the time of 

the first publication of the notice to 

creditors, the Corporation as receiver 

shall mail a notice to present claims no 

later than the claims bar date to any 

creditor shown in the books and records 

of the covered financial company. Such 

notice shall be sent to the last known 

address of the creditor appearing in the 

books and records or appearing in any 

claim found in the records of the 

covered financial company. 

(c) Notice by electronic media. After 

publishing and mailing notice as 

required by paragraphs (a) and (b) of 

this section, the Corporation may 

communicate by electronic media with 

any claimant who expressly agrees to 

such form of communication. 

(d) Discovered claimants. Upon 

discovery of the name and address of a 

claimant not appearing in the books and 

records of the covered financial 

company, the Corporation as receiver 

shall, not later than 30 days after the 

discovery of such name and address, 

mail a notice to such claimant to file 

claims no later than the claims bar date. 

Any claimant not appearing on the 

books and records that is discovered 

before the claims bar date shall be 

required to file a claim before the claims 

bar date, subject to the exception of 

§ 380.35(b)(2) of this subpart. If a 

claimant not appearing on the books 

and records is discovered after the 

claims bar date, the Corporation shall 

notify the claimant to file a claim by a 

date not later than 90 days from the date 

appearing on the notice that is mailed 

to such creditor. Any claim filed after 

such date shall be disallowed, and such 

disallowance shall be final. 

§ 380.34 Procedures for filing claim. 

(a) In general. The Corporation as 

receiver shall provide, in a reasonably 

practicable manner, instructions for 

filing a claim, including by the 

following means: 

(1) Providing contact information in 

the publication notice; 

(2) Including in the mailed notice a 

proof of claim form that has filing 

instructions; and (3) Posting filing 

instructions on the Corporation’s public 

Web site at http://www.fdic.gov. 

(b) When claim is deemed filed. A 

claim that is mailed to the receiver in 

accordance with the instructions 

established under paragraph (a) of this 

section shall be deemed to be filed as of 

the date of postmark. A claim that is 

sent to the receiver by electronic media 

or fax in accordance with the 

instructions established under 

paragraph (a) of this section shall be 

deemed to be filed as of the date of 

transmission by the claimant. 

(c) Class claimants. If a claimant is a 

member of a class for purposes of a class 

action lawsuit, whether or not the class 

has been certified by a court, each 

claimant must file its claim with the 

Corporation as receiver separately. 

(d) Indenture trustee. A trustee 

appointed under an indenture or other 

applicable trust document related to 

investments or other financial activities 

may file a claim on behalf of the persons 

who appointed the trustee. 

(e) Legal effect of filing. (1) Pursuant 

to 12 U.S.C. 5390(a)(3)(E)(i), the filing of 

a claim with the receiver shall 

constitute a commencement of an action 

for purposes of any applicable statute of 

limitations. 

(2) No prejudice to continuation of 

action. Pursuant to 12 U.S.C. 

5390(a)(3)(E)(ii) and subject to 12 U.S.C. 

5390(a)(8), the filing of a claim with the 

receiver shall not prejudice any right of 

the claimant to continue, after the 

receiver’s determination of the claim, 

any action which was filed before the 

date of appointment of the receiver for 

the covered financial company. 

§ 380.35 Determination of claims. 

(a) In general. The Corporation as 

receiver shall allow any claim received 

by the receiver on or before the claims 

bar date if such claim is proved to the 

satisfaction of the Corporation. The 

Corporation as receiver may disallow 

any portion of any claim by a creditor 

or claim of a security, preference, setoff, 

or priority which is not proved to the 

satisfaction of the Corporation. 

(b) Disallowance of claims filed after 

the claims bar date. (1) Except as 

otherwise provided in this section, any 

claim filed after the claims bar date 

shall be disallowed, and such 

disallowance shall be final, as provided 

by 12 U.S.C. 5390(a)(3)(C)(i). 

(2) Certain exceptions. Paragraph 

(b)(1) of this section shall not apply 

with respect to any claim filed by a 

claimant after the claims bar date and 

such claim shall be considered by the 

receiver if: 

(i) The claimant did not receive notice 

of the appointment of the receiver in 

time to file such claim before the claims 

bar date, or the claim did not accrue 

until after the claims bar date, and 

(ii) The claim is filed in time to 

permit payment. A claim is ‘‘filed in 

time to permit payment’’ when it is filed 

before a final distribution is made by the 

receiver. 

§ 380.36 Decision period. 

(a) In general. Prior to the 180th day 

after the date on which a claim against 

a covered financial company or the 

Corporation as receiver is filed with the 

Corporation, the Corporation shall 

notify the claimant whether it allows or 

disallows the claim. 

(b) Extension of time. The 180-day 

period described in subsection (a) of 

this section may be extended by a 

written agreement between the claimant 

and the Corporation executed not later 

than 180 days after the date on which 

the claim against the covered financial 

company or the Corporation as receiver 

is filed with the Corporation (the 

‘‘extended claims determination 

period’’). If an extension is agreed to, the 

Corporation shall notify the claimant 

whether it allows or disallows the claim 

prior to the end of the extended claims 

determination period. 

§ 380.37 Notification of determination. 

(a) In general. The Corporation as 

receiver shall notify the claimant by 

mail of the decision to allow or disallow 

the claim. Notice shall be mailed to the 

address of the claimant as it last appears 

on the books, records, or both of the 

covered financial company; in the claim 

filed by the claimant with the 

Corporation as receiver; or in 

documents submitted in the proof of the 

claim. If the claimant has filed the claim 

electronically, the receiver may notify 

the claimant of the determination by 

electronic means. 

(b) Contents of notice of disallowance. 

If the Corporation as receiver disallows 

a claim, the notice to the claimant shall 

contain a statement of each reason for 

the disallowance, and the procedures 

required to file or continue an action in 

court. 

(c) Failure to notify deemed to be 

disallowance. If the Corporation does 

not notify the claimant before the end of 

the 180-day claims determination 

period, or before the end of any 

extended claims determination period, 

the claim shall be deemed to be 

disallowed, and the claimant may file or 

continue an action in court. 

§ 308.38 Procedures for seeking judicial 

determination of disallowed claim. 

(a) In general. In order to seek a 

judicial determination of a claim that 

has been disallowed, in whole or in 

part, by the Corporation as receiver, the 

claimant, pursuant to 12 U.S.C. 

5390(a)(4)(A), may either: 

(1) File suit on such claim in the 

district or territorial court of the United 


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States for the district within which the 

principal place of business of the 

covered financial company is located; or 

(2) Continue an action commenced 

before the date of appointment of the 

receiver, in the court in which the 

action was pending. 

(b) Timing. Pursuant to 12 U.S.C. 

5390(a)(3)(A), a claimant who seeks a 

judicial determination of a claim 

disallowed by the Corporation must file 

suit on such claim before the end of the 

60-day period beginning on the earlier 

of: 

(1) The date of any notice of 

disallowance of such claim; 

(2) The end of the 180-day claims 

determination period (unless such 

period has been extended with respect 

to such claim under § 380.36(b) of this 

subpart); or 

(3) If the claims determination period 

was extended with respect to such claim 

under § 380.36(b), the end of such 

extended claims determination period. 

(c) Statute of limitations. Pursuant to 

12 U.S.C. 5390(a)(4)(C), if any claimant 

fails to file suit on such claim (or to 

continue an action on such claim 

commenced before the date of 

appointment of the Corporation as 

receiver) prior to the end of the 60-day 

period described in 12 U.S.C. 

5390(a)(4)(B), the claim shall be deemed 

to be disallowed (other than any portion 

of such claim which was allowed by the 

receiver) as of the end of such period, 

such disallowance shall be final, and 

the claimant shall have no further rights 

or remedies with respect to such claim. 

(d) Jurisdiction. Pursuant to 12 U.S.C. 

5390(a)(9)(D), unless the claimant has 

first exhausted its administrative 

remedies by obtaining a determination 

from the receiver regarding a claim filed 

with the receiver, no court shall have 

jurisdiction over: 

(1) Any claim or action for payment 

from, or any action seeking a 

determination of rights with respect to, 

the assets of any covered financial 

company for which the Corporation has 

been appointed receiver, including any 

assets which the Corporation may 

acquire from itself as such receiver; or 

(2) Any claim relating to any act or 

omission of such covered financial 

company or the Corporation as receiver. 

§§ 380.39–380.49 [Reserved] 

§ 380.50 Determination of secured claims. 

In the case of a claim against a 

covered financial company that is 

secured by any property of the covered 

financial company, the receiver shall 

determine the amount of the claim; 

whether the claimant’s security interest 

is legally enforceable and perfected; the 

priority of the claimant’s security 

interest; and the fair market value of the 

property that is subject to the security 

interest. The receiver shall treat the 

portion of the claim that exceeds an 

amount equal to the fair market value of 

such property or other asset as an 

unsecured claim. 

§ 380.51 Consent to certain actions. 

(a) A secured creditor may seek the 

consent of the Corporation as receiver to 

obtain possession of or exercise control 

over any property of the covered 

financial company that serves as 

collateral for the secured claim. Such 

consent may include the liquidation of 

such property by commercially 

reasonable methods taking into account 

existing market conditions, provided no 

involvement of the receiver is required. 

(b) A party may seek the consent of 

the Corporation as receiver to the 

foreclosure or sale of any property of the 

covered financial company that serves 

as collateral for the secured claim. 

When the consent of the Corporation is 

sought hereunder, the secured creditor 

shall submit to the Corporation by 

certified mail a written request for the 

consent of the Corporation to the 

proposed action by the secured creditor. 

After the Corporation has gathered and 

analyzed the necessary information, the 

Corporation shall notify the secured 

creditor of its determination whether to 

grant consent as expeditiously as 

possible. If the Corporation determines 

not to grant consent, the Corporation 

shall include in the notification each 

reason why consent is not being given. 

(c) Consents to be granted under this 

section are to be provided solely at the 

discretion of the Corporation. No person 

shall have any right to bring any action 

to direct or compel the granting of any 

consent under this section, or to pursue 

any claim or cause of action based on 

the alleged failure of the Corporation or 

any person acting on its behalf to take 

any action whatsoever under this 

section. Any consent granted by the 

Corporation as receiver under this 

section shall not act to waive or 

relinquish any rights granted to the 

Corporation in any capacity, pursuant to 

any other applicable law or any 

agreement or contract, and shall not be 

construed as waiving, limiting or 

otherwise affecting the rights or powers 

of the Corporation to take any action or 

to exercise any power not specifically 

mentioned, including but not limited to 

any rights, powers or remedies of the 

Corporation regarding transfers taken in 

contemplation of the institution’s 

insolvency or with the intent to hinder, 

delay or defraud the institution or the 

creditors of such institution, or that is 

a fraudulent transfer under applicable 

law. The right to consent under this 

section may not be assigned or 

transferred to any purchaser of property 

from the Corporation. 

§ 380.52 Repudiation of secured contract. 

(a) To the extent that a contract to 

which a covered financial company is a 

party is secured by property of the 

company, the repudiation of the 

contract by the Corporation as receiver 

shall not be construed as permitting the 

avoidance of any legally enforceable and 

perfected security interest in the 

property, but the security interest shall 

be deemed to secure any claim for 

repudiation damages. 

(b) The Corporation as receiver may 

consent to the exercise of any legal or 

contractual rights against the property, 

including liquidation, for the purpose of 

applying the value of the property or its 

proceeds up to the amount of the 

allowed claim for damages for 

repudiation. 

§ 380.53 Expedited relief. 

(a) In general. A secured creditor may 

seek expedited relief outside the 

administrative claims process upon 

alleging: 

(1) A legally valid and enforceable or 

perfected security interest in property of 

a covered financial company or control 

of any legally valid and enforceable 

security entitlement in respect of any 

asset held by the covered financial 

company for which the Corporation has 

been appointed receiver; and 

(2) That irreparable injury will occur 

if the claims procedure established 

under this subpart is followed. 

(b) Determination period. No later 

than the end of the 90-day period 

beginning on the date on which a 

request for expedited relief is filed, the 

Corporation shall determine: 

(1) Whether to allow or disallow such 

claim, or any portion thereof; or 

(2) Whether such claim should be 

determined pursuant to the procedures 

established pursuant to this subpart. 

(c) Notice to claimant. The 

Corporation shall notify the claimant of 

the determination made under this 

section and if the claim is disallowed, 

provide a statement of each reason for 

the disallowance and the procedure for 

obtaining a judicial determination. 

(d) Period for filing or renewing suit. 

Any claimant who files a request for 

expedited relief shall be permitted to 

file suit (or continue a suit filed before 

the date of appointment of the 

Corporation as receiver) seeking a 

determination of the rights of the 

claimant with respect to such security 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
Federal Register / Vol. 76, No. 56 / Wednesday, March 23, 2011 / Proposed Rules 16345 

interest (or such security entitlement) 

after the earlier of: 

(1) The end of the 90-day period 

beginning on the date of the filing of a 

request for expedited relief; or 

(2) The date on which the Corporation 

denies the claim or a portion thereof. 

(e) Statute of limitations. If an action 

described in paragraph (d) of this 

section is not filed, or the motion to 

renew a previously filed suit is not 

made, before the end of the 30-day 

period beginning on the date on which 

such action or motion may be filed in 

accordance with paragraph (d) of this 

section, the claim shall be deemed to be 

disallowed as of the end of such period 

(other than any portion of such claim 

which was allowed by the receiver), 

such disallowance shall be final, and 

the claimant shall have no further rights 

or remedies with respect to such claim. 

§ 380.54 Sale of collateral by receiver. 

(a) The Corporation as receiver may 

sell property of the covered financial 

company that is subject to a security 

interest. In such a case, the purchaser of 

such property shall take free and clear 

of the security interest, and the security 

interest shall attach to the proceeds of 

the sale. Such proceeds, up to the 

allowed amount of the secured claim, 

shall be remitted to the claimant within 

a reasonable time after the sale. 

(b) If the receiver sells property 

subject to a security interest under 

subsection (a) of this section, a holder 

of such security interest may purchase 

the property from the receiver, and may 

offset its claim against the purchase 

price of such property. 

(c) This section shall not apply with 

respect to any property that is subject to 

a security interest described in 12 U.S.C. 

5390(a)(3)(D)(iii)(II). 

§ 380.55 Redemption from security 

interest. 

The Corporation as receiver may pay 

the secured creditor the fair market 

value of the property subject to a 

security interest up to the amount of the 

allowed secured claim in full and retain 

such property free and clear of such 

security interest. 

By order of the Board of Directors. 

Dated at Washington, DC, this 15th day of 

March 2011. 

Federal Deposit Insurance Corporation. 

Robert E. Feldman, 

Executive Secretary. 

[FR Doc. 2011–6705 Filed 3–22–11; 8:45 am] 

BILLING CODE P 

NATIONAL CREDIT UNION 

ADMINISTRATION 

12 CFR Parts 700, 701, 702, and 741 

RIN 3133–AD87 

Net Worth and Equity Ratio 

AGENCY: National Credit Union 

Administration (NCUA). 

ACTION: Proposed rule. 

SUMMARY: On January 4, 2011, President 

Obama signed Senate Bill 4036 into law, 

which, among other things, amends the 

statutory definitions of ‘‘net worth’’ and 

‘‘equity ratio’’ in the Federal Credit 

Union Act. NCUA proposes to make 

conforming amendments to the 

definition of ‘‘net worth’’ as it appears in 

NCUA’s Prompt Corrective Action 

regulation and the definition of ‘‘equity 

ratio’’ as it appears in NCUA’s 

Requirements for Insurance regulation. 

NCUA also proposes to make technical 

changes in other regulations to ensure 

clarity and consistency in the use of the 

term ‘‘net worth,’’ as it is applied to 

federally-insured credit unions. 

DATES: Comments must be received on 

or before May 23, 2011. 

ADDRESSES: You may submit comments 

by any of the following methods (Please 

send comments by one method only): 

• NCUA Web Site: http:// 

www.ncua.gov/news/proposed_regs/ 

proposed_regs.html. Follow the 

instructions for submitting comments. 

• E-mail: Address to 

regcomments@ncua.gov. Include ‘‘[Your 

name] Comments on Notice of Proposed 

Rulemaking (Net Worth and Equity 

Ratio)’’ in the e-mail subject line. 

• Fax: (703) 518–6319. Use the 

subject line described above for e-mail. 

• Mail: Address to Mary Rupp, 

Secretary of the Board, National Credit 

Union Administration, 1775 Duke 

Street, Alexandria, Virginia 22314– 

3428. 

• Hand Delivery/Courier: Same as 

mail address. 

FOR FURTHER INFORMATION CONTACT: 

Justin M. Anderson, Staff Attorney, 

Office of General Counsel, at the above 

address or telephone (703) 518–6540. 

SUPPLEMENTARY INFORMATION: 

A. Background 

On January 4, 2011, President Obama 

signed Senate Bill 4036 (the Bill) into 

law. S. 4036, 111th Cong., Public Law 

111–382 (2011). The Bill amends the 

Federal Credit Union Act (the Act) to 

clarify NCUA’s authority to make 

stabilization fund expenditures without 

borrowing from the Treasury, amends 

the definitions of ‘‘equity ratio’’ and ‘‘net 

worth,’’ and requires the Comptroller 

General of the United States to conduct 

a study on NCUA’s handling of the 

recent corporate credit union crisis. The 

Bill is divided into four sections, each 

of which is discussed briefly below. The 

amendments in this proposed rule 

implement the changes made to the Act 

by sections two and three of the Bill. 

1. Section One—Stabilization Fund 

This section amends the Temporary 

Corporate Credit Union Stabilization 

Fund (TCCUSF) provisions of the Act in 

12 U.S.C. 1795e. Specifically, the 

amendments add a new provision 

authorizing NCUA to make premium 

assessments of federally-insured credit 

unions to pay pending or future 

TCCUSF expenses directly, in addition 

to the existing authority to make 

assessments to repay Treasury advances. 

Public Law 111–382. Exercise of this 

direct assessment authority requires the 

NCUA Board ‘‘take into consideration 

any potential impact on credit union 

earnings such an assessment may have’’ 

and requires the premium be paid not 

later than 60 days following the 

assessment. The amendments also make 

clear that, during the period of time in 

which the Treasury agrees to extend the 

life of the TCCUSF, the NCUA can 

obtain additional advances from the 

Treasury. Id. NCUA does not have 

regulations on the TCCUSF, so no 

changes to NCUA regulations are 

necessary. 

2. Section Two—Equity Ratio 

Section two of the Bill amends 

§ 202(h)(2) of the Act (12 U.S.C. 

1782(h)(2)) by redefining the equity 

ratio for the National Credit Union 

Share Insurance Fund (NCUSIF or 

Fund). Under the amended definition, 

the equity ratio will be calculated ‘‘using 

the financial statements of the Fund 

alone, without any consolidation or 

combination with the financial 

statements of any other fund or entity.’’ 

Public Law 111–382. The term ‘‘equity 

ratio’’ is defined in § 741.4(b) of NCUA’s 

regulations and is used in several places 

throughout that section. As discussed 

more fully below, the Board, is 

proposing to amend the definition of 

‘‘equity ratio’’ in NCUA’s regulations to 

mirror the recent statutory change. 

Section Three—Net Worth Definition 

Section three of the Bill amends 

section 216(o)(2) of the Act (12 U.S.C. 

1790(o)(2)) by redefining the term ‘‘net 

worth’’ as it applies to federally insured 

credit unions for purposes of prompt 

corrective action (PCA). The amended 

definition retains all of the existing 

elements of net worth and includes the 


jlentini on DSKJ8SOYB1PROD with PROPOSALS