The court-appointed trustee overseeing the liquidation of Lehman Brothers Holdings Inc.'s broker-dealer business said the adoption of a "living will" could have prevented much of the chaos surrounding the company's historic collapse.

James W. Giddens, the trustee who is overseeing the liquidation of Lehman Brothers Inc., said in a report filed Wednesday in U.S. Bankruptcy Court in Manhattan that the company's lack of a disaster plan "contributed to the chaos" of its bankruptcy and the liquidation of its brokerage.

"One possible step forward would be a regulatory requirement that each broker-dealer and, where owned by a holding company, its parent, have in place an up-to-date liquidation plan that could be monitored by regulatory authorities, Giddens wrote.

The recommendation for more preliquidation "disaster planning" was one of several made by Giddens, who is winding down the brokerage business under the authority of Securities Investor Protection Corp., which governs the liquidations of failed brokerage firms. The report listed eight possible ways to avoid a "second Lehman."

Among his other recommendations were more robust provisions governing asset transfers, reconsideration of the practice of pooling all customer property into "one pot" and rules governing the rights of clearing banks with respect to repo agreements and other derivatives.

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