Amicus Brief on the Scope of the Bankruptcy Safe Harbor for Securities Settlement Payments

46 Pages Posted: 5 Oct 2017

See all articles by Ralph Brubaker

Ralph Brubaker

University of Illinois College of Law

Bruce Alan Markell

Northwestern University School of Law

Charles W. Mooney

University of Pennsylvania Law School

Mark J. Roe

Harvard Law School

Date Written: September 18, 2017

Abstract

Bankruptcy Code § 546(e) contains a safe harbor that prevents avoidance of a securities settlement payment, e.g., as a preferential or constructively fraudulent transfer. This amicus brief was filed in Merit Mgmt. Grp. v. FTI Consulting, Inc., No. 16-784 (U.S.). The brief explains how § 546(e) rationally constrains its scope via the statutory specification that the safe harbor only applies (because it need only apply) if the “transfer” sought to be avoided was allegedly “made by or to (or for the benefit of)” a protected securities market intermediary, such as a stockbroker or a financial institution.

Ascertaining the meaning and function of that determinative scope language requires an understanding of (1) the concept of a “transfer” as the fundamental analytical transaction unit throughout the Code’s avoidance provisions, and (2) the relationship between that avoidable “transfer” concept and the inextricably interrelated concepts of who that “transfer” is “made by or to (or for the benefit of).” By its express terms, § 546(e) only shields a challenged “transfer” from avoidance if (1) that transfer was “made by” a debtor-transferor who was a qualifying intermediary, “or” (2) a party with potential liability — because the challenged transfer allegedly was made “to or for the benefit of” that party — was a protected intermediary.

Keywords: Bankruptcy, Avoidable Transfers, Safe Harbor, Securities Settlement Payment

Suggested Citation

Brubaker, Ralph and Markell, Bruce Alan and Mooney, Charles W. and Roe, Mark J., Amicus Brief on the Scope of the Bankruptcy Safe Harbor for Securities Settlement Payments (September 18, 2017). University of Illinois College of Law Legal Studies Research Paper No. 18-1. Available at SSRN: https://ssrn.com/abstract=3047832

Ralph Brubaker (Contact Author)

University of Illinois College of Law ( email )

504 E. Pennsylvania Avenue
Champaign, IL 61820
United States

Bruce Alan Markell

Northwestern University School of Law ( email )

375 East Chicago Ave
Chicago, IL 60611
United States
312.503.4060 (Phone)

HOME PAGE: http://www.law.northwestern.edu/faculty/profiles/BruceMarkell/

Charles W. Mooney

University of Pennsylvania Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States

Mark J. Roe

Harvard Law School ( email )

Griswold 502
Cambridge, MA 02138
United States
617-495-8099 (Phone)
617-495-4299 (Fax)

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