April 25, 2011

Re: Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Act") -Title n (Orderly Liquidation Authority)

Gentlemen:

The National Bankruptcy Conference (the "Conference") is setting forth in this letter for your consideration suggested amendments to Title II of the Act dealing with the orderly liquidation authority supervised by the Federal Deposit Insurance Corporation (the "FDIC").

The Conference is a voluntary, non-profit, non-partisan, self-supporting organization of approximately sixty lawyers, law professors and bankruptcy judges who are leading scholars and practitioners in the field of bankruptcy law. Its primary purpose is to advise Congress on the operation of bankruptcy and related laws and any proposed changes to those laws. As a non-profit, non-partisan and self-supporting organization, the Conference is able to take impartial, principled positions on issues implicating bankruptcy law and policy. The Conference does not act on behalf of any specific client, organization or interest group, but rather seeks to reach consensus among its members (who represent a broad spectrum of political and economic perspectives) based on their knowledge and experience as leading bankruptcy practitioners, judges and scholars. The Conference has identified certain provisions of Title II where it believes that further clarification by technical statutory amendments to Title II may be desirable. In some cases, the provisions identified appear to be inconsistent with the provisions of the Bankruptcy Code without an apparent policy justification. In other cases, the Conference has identified provisions ofthe Bankruptcy Code that resolve issues for which no resolution is indicated in Title II. Furthermore,various ambiguities, technical concerns and typographical errors have been noted for your consideration.

We suggest that the following provisions may benefit from statutory amendment to Title II ofthe Dodd-Frank Act. Where we do not have a view on the resolution of an issue that we think should be addressed by statutory amendment, we have set forth the issue with a question. Where we have a view of what we think the amendment should say, we have stated that view.

Suspension of legal actions.

Should section 21 0(a)(8) be amended so that the stay under that section excludes the exercise of police powers like those excluded from the automatic stay under Bankruptcy Code § 362(b)?

Should section 210(a)(8) be amended so that the FDIC is able to request an extension of the stay under that section beyond 90 days?

Should section 210(a)(8) be amended so that the FDIC may request the stay under that section from a single court rather than from each court in which a judicial action is pending?

The section 210(a)(8) stay is to be granted "as to all parties". Section 210(a)(8) should be amended to provide in multi-party litigation that the stay does not cover claims asserted neither by nor against the covered financial company unless the court orders otherwise for just cause.

Section 21 O(a)( 13) allows any court of competent jurisdiction to issue injunctions even where no litigation is currently pending. In contrast, section 205(a)(2) refers to a "Federal district court of competent jurisdiction." Should section 210(a)(l3) be amended to specify relevant courts, whether federal or state, that have jurisdiction under section 2 1O(a)(l 3) where no litigation is currently pending? Beyond jurisdiction, should section 205(a)(2) be amended to provide venue rules for the issuance of such injunctions?

Claims estimation and guaranties; valuation.

Section 21 O(a)(4) refers to 'judicial determination of claims". Should section 21 O(a) be amended to clarify whether judicial review or de novo determination by the court is contemplated? If judicial review rather than de novo determination is contemplated, should the section be further amended to specify what form of judicial review is contemplated?

Unlike Bankruptcy Code § 1129(a)(7) (which ties the hypothetical liquidation date to the effective date ofthe plan) and section 21 O(d)(3) (which ties the hypothetical liquidation date in a SIPC proceeding to the date on which the FDIC is appointed receiver), section 21O(d)(2)(B) does not specify a date of the hypothetical liquidation. Section 210(d)(2)(B) should be amended to specify a date. Pre-commencement contracts subject to repudiation.

Section 21 O(c) should be amended to specify the effect of the receiver failing to repudiate or approve a contract within a reasonable time, i.e., whether the contract is repudiated or is approved if the receiver takes no action within a reasonable time. The section should also be amended to specify whether the receiver's inaction causes the contract to become an administrative liability of the receivership estate.

In order to avoid a negative implication that the acceptance of performance under a contract other than a services contract will preclude a subsequent repudiation of the non-services contract, the provision in section 21 O(c)(7) that the receiver's acceptance of services in connection with a services contract will not affect the receiver's right to repudiate that contract after such performance should be broadened by amendment to include the acceptance of performance under any contract. Financial contracts.

Section 210(c)(8)(C) contains avoidance protection for certain transfers in connection with a qualified financial contract. However, under section 21 O(c)(8)(C)(ii) there is no protection "if the transferee had actual intent, to hinder, delay, or defraud" (emphasis added). The parallel provision in Bankruptcy Code § 548(a)(1)(A) is based on the intent of the transferor. The reference to the transferee instead of the transferor appears to be a drafting error and should be corrected by amendment to section 21 O(c)(8)(C)(ii).

Under the Bankruptcy Code definitions of protected financial contracts (repurchase agreements, swap agreements, securities contracts, forward contracts and commodity contracts), a security agreement may be a protected financial contract "not to exceed the damages in connection with any such agreement or transaction, measured in accordance with section 562". That phrase is omitted from the definitions of qualified financial contracts in section 21 O(c)(8). A similar phrase should be inserted by amendment to section 21 O(c)(8) so that it is clear that a security agreement is a protected contract itself only to the extent that it secures claims arising from a protected contract. Avoidance powers.

The language of clause (II) of section 21 0(a)(11 )(A)(i), including the "and" at the end, should have been inserted in the lead-in to (A)(ii) in order to be consistent with Bankruptcy Code § 548 and any applicable state fraudulent transfer law. See, e.g., Bankruptcy Code § 548(a)(1) and the Uniform Fraudulent Transfer Act § 4. Clause (II) of section 21 0(a)(11)(A)(i) should read "transfer or obligation" rather than "transferor obligation". These appear to be drafting errors and should be corrected by amendment.

The rule of construction in section 21 0(a)(11 )(H) for determining when a transfer is made applies a "good faith purchaser" test for all fraudulent transfers and preferences. However, Bankruptcy Code § 547(e)(1)(B) applies a "judicial lien creditor" test for preferences of personal property and fixtures. In addition, Bankruptcy Code § 547(e)(2)(A) provides a 30-day post-attachment grace period for an alleged preferential transfer to be considered to have been made at the time of attachment if perfection is achieved in the grace period. Section 210(a)(11)(H) contains no such grace period. Section 210(a)(II) should be amended to conform to Bankruptcy Code §§ 547(e)(1)(B) and (2)(A) for preference purposes.

Title II does not appear to have a provision similar to Bankruptcy Code § 544(b). If it is intended that the receiver has the right to step into an actual creditor's shoes to avoid a fraudulent transfer under state law, that provision should be added to the statute by amendment. If the receiver is to have such a right, the amendment should make clear that section 21 O(a)(1 )(M) does not preclude the receiver from exercising the right.

Section 210(a)(lI)(F)(i) seems to afford an avoidance defendant the same defenses that it would have under Bankruptcy Code §§ 547, 548 and 549, but not under Bankruptcy Code § 550. Section 21 O(a)(l1 )(E) does give the defendant the right to certain defenses arising under Bankruptcy Code

§ 550(a). However, section to 21 O(a)(11) should be amended so that an avoidance defendant is entitled to assert the anti-Deprizio defense in Bankruptcy Code § 550(c), a single satisfaction defense under Bankruptcy Code § 550(d), a lien on improvements in Bankruptcy Code § 550(e), and a statute of limitation defense under Bankruptcy Code § 550(f).

The provisions of the statute dealing with the FDIC's avoidance powers should also be amended to:

• add a provision by which the claims of an avoidance defendant are disallowed, as in Bankruptcy Code § 502( d), until the transfer subject to avoidance is paid or returned;
• afford an avoidance defendant a reinstated claim for a transfer that is avoided and restored to the estate. See Bankruptcy Code § 502(h);
• afford the receiver the right to avoid a statutory lien. See Bankruptcy Code § 545; and
• afford the receiver a right to preserve an avoided lien for the benefit of the estate. See Bankruptcy Code § 551. (Without a right to preserve an avoided lien, if property is subject to a first and second lien, avoidance of the first lien may result only in elevation of the second lien.) Statute of limitation.

The statute should be amended to specify a statute of limitation on avoidance actions. See Bankruptcy Code § 546(a).

It is unclear what the statute of limitation is on a cause of action revived under section 21 O(a)(1O)(C). The statute should be amended to provide a statute of limitation, perhaps the three-year period referred to in section 210(a)(10)(A) as supplemented by (B).

Foreign investigation and cooperation. Section 210(k) should by amended to provide, as in § 1818(v)(1)(B) of the FDIA, that an office may be maintained outside ofthe United States to conduct an investigation, examination or enforcement. Errata.

The terms "security interest" and "security entitlement" should be defined in the statute. We suggest that the term "security interest" should have the same meaning as in Bankruptcy Code § 101(51) and that the term "security entitlement" should have the same meaning as in Article 8 of the Uniform Commercial Code.

Various provisions of Title II refer to a security interest differently. Sections 21 O(a)(1)(D) and

• (a)(3)(D)(iii) refer to "legally enforceable and perfected" security interests. Section 210(a)(5)(A)(i) refers to "legally valid and enforceable or perfected" security interests. Section 21O(c)(12)(A) refers to "legally enforceable or perfected" security interests. Section 210(c)(14)(B) refers merely to "security interest". The statute should be amended so that the references are to "legally enforceable and perfected security interest" throughout. ("Perfection" is the necessary step taken by the secured party for its security interest to prevail over ajudiciallien creditor under state law.)

Section 21 O(b)( 1)(0) should be amended to clarify that the phrase "less the aggregate amount paid to such employees under subparagraph (C), plus the aggregate amount paid by the receivership on behalf of such employees to any other employee benefit plan" means that the latter amount is deducted rather than added to the employees' priority claims.

Section 210(c)(8)(0)(vii) should be amended to change the word "contact" to "contract".

The Capital Markets Committee of the Conference has previously raised these issues, as well as other issues perhaps more suitable for rule-making, with the FDIC in response to the request by the FDIC made in the Federal Register, Volume 75, No. 201 (October 19,2010), for comments as to the key areas of Title II of the Act that may require additional rules or regulations in order to harmonize them with otherwise applicable insolvency laws. A copy of the Capital Markets Committee's submission to the FDIC is attached to this letter for your reference in the event that you believe that other issues identified by the Capital Markets Committee may also be appropriate for statutory amendment.

Although the FDIC has subsequently proposed to address through its rule-making process a few of the issues recommended above for statutory amendment, we believe that even those few issues would be more appropriately addressed by statutory amendment.

The Conference appreciates this opportunity to provide its suggestions. We remain available to address any questions relating to the suggestions or to explain them in further detail. We also are available to draft the text of any amendment that you believe to be worthy of further consideration.

Sincerely,
Sally S. Nee
Chair, Committee on Legis ation Attachment

January 18, 2011
VIA E-MAIL(comments@FDIC.gov)
Robert E. Feldman
Executive Secretary
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, D.C. 20429

Re:

Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Act', Title 11 (Orderly Liquidation Authority)

Dear Mr. Feldman,

The Capital Markets Committee (the "Committee") of the National Bankruptcy Conference (the "Conference") is responding to the request by the Federal Deposit Insurance Corporation (the "FDIC') made in the Federal Register, Volume 75, No. 201 (October 19,2010), for comments as to the key areas of Title n of the Act that may require additional rules or regulations in order to harmonize them with otherwise applicable insolvency laws.

The Conference is a voluntary, non-profit, non-partisan, self-supporting organization of approximately sixty lawyers, law professors and bankruptcy judges who are leading scholars and practitioners in the field of bankruptcy law. Its primery purpose is to. advise Congress on the operation of bankruptcy and related laws and any proposed changes to those laws.

The Committee is one of several committees of the Conference. The Committee focuses upon the operation of bankruptcy and related laws in relation to the capital markets and the Uniform Commercial Code. The Committee is comprised of the individuals listed on Exhibit A.

The Committee has reviewed various provisions of Title II and compared those provisions to the federal Bankruptcy Code. In undertaking its review, the Committee has been guided by the core principles of the Conference. As a non-profit, non-partisan and self-supporting organization, the Conference is able to take impartial, principled positions on issues implicating bankruptcy law and policy. The Conference does not act on behalf of any specific client, organization or interest group, but rather seeks to reach consensus among its members (who represent a broad spectrum of political and economic perspectives) based on their knowledge and experience as leading bankruptcy practitioners, judges and scholars. The Committee's comments are submitted by the members of the Committee and not by the Conference as a whole.

In formulating its comments, the Committee has recognized that a number of provisions of Title II were derived from parallel provisions in the Federal Deposit Insurance Act which have no analogous parallel provisions in the Bankruptcy Code. However, the Committee understands from the FDIC's request for comments that, even considering the provisions of Title II derived from the Federal Deposit Insurance Act, there is still a need to harmonize other provisions of Title II with otherwise applicable insolvency law, including the Bankruptcy Code.

The Committee has identified on Exhibit B certain provisions of Title Il where it believes that further clarification by rulemaking or technical statutory amendments to Title II may be desirable. In some cases, the provisions identified appear to be inconsistent withilie provisions of the Bankruptcy Code without an apparent policy justification. In other cases, we have identified provisions of the Bankruptcy Code that resolve issues for which no resolution is indicated in Title Il. Furthermore, we have noted various ambiguities, technical concerns and typographical errors for your consideration.

Robert E. Feldman
Executive Secretary
Federal Deposit Insurance Corporation January 18,201]

The Committee appreciates this opportunity to provide its comments. We remain available to address any questions relating to the comments or to explain them in further detail, Moreover, we are willing, as a general matter, to offer further assistance in this important process.

Respectively submitted,
Edwin E. Smith
Chair

Exhibit A

Exhihit B

ORDERLY LIQUIDATION AUTHORITY

UNDER THE DODD-FRANK ACT

The following issues may benefit from clarification:

Suspension of legal actions.

Should the section 210(a)(8) stay exclude the exercise of police powers like those excluded from the automatic stay under BankruptcyCode § 362(b)?

May the FDIC request an extension of the section 210(a)(8). stay or is 90 days the maximum period for the stay?

May the FDIC obtain the section 21O(a)(8) stay from a single court or must it obtain the stay from each court in which.a.judieial action is pending?

The section 210(a)(8) stay is to be granted "as teall parties". Are there circumstances in multiparty litigation in which the stay should not cover claims asserted neither by nor against the covered financial company?

Section 210(a)(9)(D) states generally that, except as elsewhere provided in the Act, no court shall have jurisdiction over any claim for payment from or determination of a right against assets of a covered financial company. Does section 210(a)(9)(D) require the dismissal of all existing actions, including those stayed under section 21O(a)(8) after the expiration of the stay under that section?

Section 21O(a)(13) allows any court of competent jurisdiction to issue injunctions, Section 205(a){2) refers to a "Federal district court of competent jurisdiction," Are the relevant courts federal courts generally, federal district courts, or any court, whether federal or state, that has competent jurisdiction? Beyond jurisdiction, should there be venue rules for the issuance of such injunctions?

Rights and duties of the receiver.

Under what circumstances will the receiver seek under section 21O(a)(I)(E) to commence a separate OLA receivership against a special purpose subsidiary of a covered financial company when the special purpose subsidiary is the vehicle for a securitization and has no indebtedness and obligations other than those relating to the securitization?

Section 210(a)(I)(G)(i) permits the FDIC to transfer "any asset" of the covered financial company to another company without.first obtaining approval or consent from any party, The.subsection makes clear that this authority extends to assets "held by the covered financial company for security entitlement holders." Does this authority extend to assets subject to security interests as well?

Section 21O(a)(I )(G)(ii) requires the FDIC to obtain prior approval from the relevant regulators to transfer assets, Will the stated deadlines (e.g., tor the Attorney General or the Federal Trade Commission to issue a report on competitive factors) cover all of the relevant agencies? How quickly must regulators make their decisions?

AI7J637029.6

If the FDIC "shall succeed" tothe rights of stockholders under section 21O(a){lXM}, why was it necessary to say separately that the FDIC "shall terminate" the rights ofstockholdersagalnst assets of the covered financial company? Perhaps it should be clarified that the intent was for the FDIC to be able to exercise the rights of stockholders in lieu of the stockholders being able to exercise those rights.

Sections 2JO(a)(3)(B), 2lO(aX3)(D}, 210(b)(l) and 210(b)(6) describe claims which must be "proven to the satisfaction of the receiver". Should there be clarification as to the applicable standard of proof?

Section 21O(h)(7) refers to documentation being "acceptable to the receiver". Should there be further details as to the standards that the receiver will apply to determine whether documentation is acceptable'? Is there a difference in the meaning between "acceptable to the receiver" in section 210(h)(7) and "proven to the satisfaction of the receiver" in sections 210(a)(3XB), 21O(a)(3XD), 21O(b)(I) and 2 J 0{b)(6)?

At common law a claim or defense of a contracting party arising out of the same transaction with the covered financial company would be considered to provide the contracting party with a right of recoupment while a claim or defense arising out of a separate transaction with the covered financial company would be considered to provide the contracting party with a right of setoff. Does the. receiver's right to sell assets free and clear of setoff rights under section 21O(a)(12)(F) exclude or include rights of recoupment? (Most courts have interpreted Bankruptcy Code § 553 not to address rights of'recoupment.)

Typically a lending agreement will contain, as a condition to the extension of credit. that no default has occurred under the lending agreement. Does the receiver's ability under section 21O(c)(13)(D) to enforce contracts to extendcredit require the lender to extend credit even if one or more defaults have occurred other than the appointment of the receiver?

Section 2\O(d)(2) limits the liability of the FDIC in its capacity as receiver but also "in any other capacity." What potential liabilities against the FDIC is the latter reference intended to limit?

Section 210(dX4)(A) authorizes additional payments or credits "if the [FDICJ determines that such payments or credits are necessary or appropriate to minimize losses to the [FDIC] as receiver from the orderly liquidation of the covered financial company under this section." Are these determinations to be made ad hoc by the FDIC on a case by case basis or does the FDIC intend to provide in advance regulatory guidance or rules in addition to the rule regarding short-term debt?

Claims estimation and guaranties; valuation.

How will pre-receivership obligations that are contingent, unmatured, or otherwise not yet "due and payable" be treated for distribution purposes in relation to those claims on which distributions are to be made under section 21O(a)(1)(H) as "due and payable at the time of the appointment"'?

Section 210(a){4) refers to "judicial determination of claims". Does judicial determination suggest that the disallowance of a claim by the receiver 'Will be subject to judicial review or de novo determination? If judicial review, what form ofjudicialreview is contemplated?

Section21O(c)(3)(E) permits the receiver to set forth by rule-making how a contingent claim will be estimated, Although a guaranty claim in a bankruptcy case would be allowed in the full amount. section 210(cX3)(E) suggests that the guaranty claim would be estimated in an aLA receivership. Was this variance from the Bankruptcy Code intended? Should claims otherwise be estimated under section 2 1O( c)(3)(E) only to the extent that they would be estimated in a bankruptcy case under Bankruptcy Code § 502(c)'?

N73637029.6

Section 21 0(d)(2)(B) limits claim liability to what would have been received if ... "the covered financial entity had been liquidated under chapter 7 of the Bankruptcy Code •.. or any similar provision of State insolvency law applicable to the covered financial company." Which of chapter 7 or a similar state insolvency law controls if both could apply?

In determining the value of the covered financial company's assets for purposes of section 210(d)(2)(B), should the effect of the collapse of the financial system itself due to the covered financial company's failure (in a hypothetical chapter 7 case absent OLA "rescue") be taken into consideration?

Unlike Bankruptcy Code § 1129(a)(7) (which ties the hypothetical liquidation date to the effective date of the plan) and section 210(d)(3) (which ties the hypothetical liquidation date in a SIPIC proceeding to the date on which the FDIC is appointed receiver), section 210(d)(2)(B) does not specify a date of the hypothetical liquidation. Should a date be specified?

Is the prohibition upon a claimant receiving more than the "face value amount of any claim" in section 21O(d)(4)(B)(i) intended to be different than the notion of impairment and non-impairment under Bankruptcy Code § 11247

Pre-commencement contracts subject to repudiation.

Under section 210(c)(2), what is a "reasonable time" in which the receiver must decide whether to repudiate or approve a contract?

What is the effect of the receiver failing to repudiate or approve a contract within a reasonable time, i.e., is the contract repudiated,or is it approved, if the receiver takes no action within a reasonable time? Does the receiver's inaction cause the contract to become an administrative liability of the receivership estate?

In order to avoid a negative implication that the acceptance of performance under a contract other than a services contract will preclude a subsequent repudiation of the non-services contract, should the provision in section 210(c)(7) that the receiver's acceptance of services in connection with a services contract will not affect the receiver's right to repudiate that contract after such performance be broadened to include the acceptance of performance under any contract?

Because of sections 210(a)(7)(B) and 21O(b)(4), would an oversecured creditor, whose secured obligations are repudiated, be entitled to recover post-repudiation interest and attorneys' fees to the extent of its "equity cushion" as under Bankruptcy Code § 506(b) notwithstanding section 21O(c)(3)(D)? Financial contracts.

Section 210(c)(8)(C) contains avoidance protection for certain transfers in connection with a qualified financial contract. However, under section 210(c)(8)(C)(ii) there is no protection "if the transferee had actual intent, to hinder, delay, or defraud" (emphasis added). The parallel provision in Bankruptcy Code § 548(a)(1 )A) and analogous state fraudulent transfer law is based on the intent of the transferor. The reference to the transferee instead of the transferor appears to be a drafting error, but in any event the provision should be clarified.

Under the Bankruptcy Code definitions of protected financial contracts (repurchase agreements, swap agreements, securities contracts, forward contracts and commodity contracts), a security agreement may be a protected financial contract "not to exceed the damages in connection with any such agreement N73637029.6 or transaction, measured in accordance with section 562". That phrase is omitted from the definitions of qualified financial contracts in section 21O(c)(8). Should it be clarified, as was the effect of the om itted phrase, that a security agreement is a protected contract itself only to the extent that it secures claims arising from a protected contract? Security interests.

Should the terms "security interest" and "security entitlement" be defined? Is the intent for the term "security interest"to have thesame.meaning as in the Bankruptcy Code § 101(51) and for the term "security entitlement" to have the same meaning as in Article 8 of the DCC.?

When and how is a secured creditor's collateral valued for purposes of determining its secured claim and what standard is used in the valuation? How does the timing and valuation standard relate to section 21O(b)(5)' s reference to the amount "realized" from the collateral?

Section 210(a)(1)(M) terminates all rights that a creditor may have against assets of the covered financial company. Does this mean tbat a secured creditor may not assert non-judicial remedies against collateral once a receiver is appointed, for example, even if the collateral is under the secured creditor's possession or control or may be collected or disposed of by non-judicial procedures? Avoidance powers.

Clause (II) of section 210(a)(11 )(A)(i) should have been inserted in (A)(il) in order to be consistent with Bankruptcy Code § 548 and any applicable state fraudulent transfer law. See, e.g., Bankruptcy Code § 548(aXl) and the Uniform Fraudulent Transfer Act § 4. Clause (II) of section 210(a)(II)(A)(i) should read "transfer or obligation" rather than "transferor obligation". These appear to be drafting errors. To what extent may they be corrected by rule-making?

The rule of construction in section 2 100a)(11)(H) for determining when a transfer is made applies a "good faith purchaser" test for all fraudulent transfers and preferences. However, Bankruptcy Code § 547(e)( I)(B) applies a 'Judicial lien creditor" test for preferences of personal property and fixtures. In addition, Bankruptcy Code § 547(e)(2)(A) provides a30 day post-attachment grace period for an alleged preferential transfer to be considered to have been made at the time of attachment ifperfection is achieved in the grace period. Section 21O(a)(II )(H) contains no such grace period. Presumably section 21O(a)(11) should conform to Bankruptcy Code §§ 547(e)(1)(B) and (2)(A) for preference purposes? Section 210(a)(11)(A), like Bankruptcy Code § 548(a)(I)(A), permits a receiver to avoid an intentional fraudulent transfer on an actual creditor of the covered financial company. However, Section 21O(a)(I)(M) would appear to terminate the creditor's right to look to an asset ofthe covered financial company. To what extent does section 21O(a)(1)(M) prevent the receiver from recovering an intentional fraudulent transfer under section 210(a)(11 )((A)?

Similarly, Title II does not appear to have a provision similar to Bankruptcy Code § 544(b). To what extent does the receiver have the right to step into an actual creditor's shoes to avoid a state law fraudulent transfer? Even assuming that the receiver has such a right, does section 21O(a)(1)(M) preclude the receiver from exercising it?

Section 210(a)(ll)(FXi) seems to afford an avoidance defendant the same defenses that it would have under Bankruptcy Code §§ 547, 548 and 549, but not under Bankruptcy Code § 550. Section 21O(a)(11)(E) does give the defendant the right to certain defenses arising under Bankruptcy Code §

550(a). To what extent is an avoidance defendant entitled to assert the anti-Deprizio defense in Bankruptcy Code § 550(c), a single satisfaction defense under Bankruptcy Code § 550(d), a lien on improvements in Bankruptcy Code § 550(e), or a statute of limitation defense under Bankruptcy Code § 550(f)?

Should there be a provision by which the claims of an avoidance defendant are disallowed, as in Bankruptcy Code § 502(d), until the transfer subject to avoidance is paid or returned?

Does an avoidance defendant have a reinstatement claim for a transfer that is avoided? Bankruptcy Code § 502(h).

See Does the receiver have the right to avoid a statutory lien? See Bankruptcy Code § 545.

Should there be there a fraudulent transfer exclusion in section 21O(a)(11)(A) for charitable donations as in Bankruptcy Code § 548(a)(2)?

Does the receiver have a right to preserve a. lien for the benefit of the estate? See Bankruptcy Code § 55 L (Without it, if property is subject toa first and second lien, avoidance of the first lien may result only in elevation of the second lien.) Statute of limitation.

Should there be a statute of limitation on avoidance actions? Sec Bankruptcy Code § 546(a).

What is the statute of limitation on a cause of action revived under section 21O(a)(IO)(C)? Is it the three-year period referred to in section 21O(a)(1O)(A) as supplemented by (B)?

Foreign investigation and cooperation.

Should it be clarified in section 21O(k)?as it is in § 1818(v)(l )(B) of the FDlA, that an office may be maintained outside of the United States to conduct an investigation, examination or enforcement? Insurance companies Section 203(e)(l) refers to the possibility that an insurance company that is a covered financial company may be rehabilitated even though a covered financial company that is not an insurance company would be liquidated in an OLA proceeding. Was the.rehabilitation possibility intended?

Section 203(e)(3) specifies the procedure for placing an insurance company into orderly liquidation. This section-specifies that if the appropriate state regulatory agency has not filed a petition for orderly liquidation of an insurance company at the end of60 days after the determination by the Secretary to invoke orderly liquidation under. section 202{a), the FDIC may "file the appropriate judicial action in the appropriate State court to place such company into orderly liquidation under the laws and requirements of the State." It is not clear, however, whether the FDIC or the recalcitrant regulator would be the receiver in such a proceeding. If'the receivership is to be done "underthe laws and requirements of the State" then the local regulator would be the receiver. See New York Ins. Law §§ 1403, 7405; Conn. Gen. Stat. §§ 38a-9J5, 38a-920; Cal. Ins. Code §§ 1011, 1016. However, since it is likely that the local regulator intentionally failed to act, Congress may have intended to have the FDIC serve as receiver. It would be very helpful if this point could be clarified as to whether the local regulator or the FDIC is intended to be the receiver.

N73637029.6

If the FDIC is to serve as receiver, would the FDIC be able to do so if only the local regulator is authorized under state law to act in that capacity?

Errata Section 21O(a)(1)(A) gives the FDIC the "rights, titles, powers, and privileges" of "any stockholder." Section 21O(a)(I)(B) states that the FDIC, as receiver, may operate the t'inancialcompany "with all the powers of the ... shareholders." Section 210(a)(1)(C) states the Corporation may "provide for the exercise of any function by any ... stockholder." Do the .terms "stockholder" and "shareholder" mean the same thing in all cases?

Various provisions of Title n refer to a security interest differently. Sections 210(a)(1)(D), (a)(3 )(D)(iU) refer to "legally enforceable and perfected" security interests. Sections 210(a)(S)(A)(i) refers to "legally valid and enforceable or perfected" security interests. Section 21O(c)( 12)(A) refers to "legally enforceable or perfected" security interests. Section 210(c)(14)(B) refers merely to "security interest", Is a different or the same meaning intended in these provisions?

Section 210{a)(7)(A) refers to the receiver acting "in its discretion" but section 210(a)(7)(C) refers to.the receiver acting "in its sole discretion". Is a different or the same meaning intended?

Section 21O(a)(7)(A) refers to the receiver paying "claims" that are "allowed"but section 210(a)(7)(C) refers to the receiver paying "dividends" on "proven" claims. Section 210(b) also refers to "proven" claims. Is a different or the same meaning intended?

In section 21O(b)(l )(D) it should be clarified that the phrase "less the aggregate amount paid to such employees under subparagraph (C), plus the aggregate amount paid by the receivership on behalf of such employees to any other employee benefit plan" means that the latter amount is deducted rather than added to theemployees' priority claims.

Section 21O(c) refers in some places to the receiver "disaffirming" a contract and in other places to the receiver "repudiating" a contact. Is a different or the same meaning intended?

In section 21O(c)(8)(D)(vii) the word "contact" should be "contract", Section 21O(m)(lXA) requires the FDIC to apply the distribution rules of Subchapter III of chapter 7 of the Bankruptcy Code when the covered financial company is a stockbroker. Section 21O(m)(1XB) requires the FDIC to apply the rules of Subchapter IV when the covered financial company is a commodity broker. Both of these subsections use the terms "customer" and "customer property and member property." Section 2] O(m)(2)(A) goes on to say that these terms should "have the same meaning as in sections 741 and 761" of the Bankruptcy Code, but these sections of the Bankruptcy Code give different definitions for the terms "customer" and "customer property." It is implicitly clear that § 741 's definitions apply to section 21O(m)(l)(A) (for stockbrokers) and § 761's apply to section 210(m){I)(B) (for commodity brokers) but perhaps this should be expressly stated.