Deals
Bankruptcy ‘Safe Harbor’ Protection to Get Supreme Court Review
- Creditors seek to narrow scope of shield for securities sales
- Case involves stock transaction two years before a bankruptcy
Guards stand in front of the Supreme Court on Sept. 7, 2016, in Washington.
Photographer: Mark Wilson/Getty ImagesThis article is for subscribers only.
The U.S. Supreme Court agreed to hear a case that could make it easier for creditors to claw back cash that was paid out by a company before it went bankrupt.
Bankruptcy law offers a “safe harbor” to financial institutions that perform securities transactions. The provision was intended to protect trades from creditor claims, to promote stability in financial markets in the face of complicated corporate reorganizations. The justices are being asked to consider whether the shield should apply when a financial institution merely acted as a conduit for a transaction.