Limiting the SEC's Role in Bankruptcy
16 Pages Posted: 23 Jul 2011 Last revised: 18 Sep 2011
Date Written: July 22, 2011
SEC involvement in corporate bankruptcy cases reveals weaknesses in the bankruptcy system and also raises concerns about the use of SEC resources. If the bankruptcy system is functioning properly as designed, and if the SEC is devoting its resources to the most pressing problems confronting the securities markets, then SEC involvement in corporate bankruptcies should be negligible. Instead, we see the SEC participating in many aspects of major corporate bankruptcy filings and assuming an oversight role over not just the corporate debtor, but also the bankruptcy courts and the independent United States Trustee, a branch of the Department of Justice. This officious participation in a fully functioning federal system designed to resolve financial failures in a manner consistent with important public policies is an inefficient use of federal resources and may undermine bankruptcy policies and priorities.
Keywords: SEC, bankruptcy, trustees, securities, fraud
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