Law360, New York (May 04, 2011, 4:06 PM ET) -- Section 546(e) of the Bankruptcy Code provides a “safe-harbor” for certain transfers involving the purchase or sale of securities and protects those transfers from avoidance as constructive fraudulent transfers or preferences. The safe-harbor protects, among other things, transfers that are “settlement payments,”[1] as used in the securities trade, as well as other transfers made to or from certain protected parties, including financial institutions, financial participants and stockbrokers, in connection with a securities contract.[2]

On April 21, 2011, Judge Robert Drain of the United States Bankruptcy Court...