Ch. 11 Pros Forsee Refurbishing Of Securities Safe Harbor

By Andrew Scurria (December 1, 2014, 7:00 PM EST) -- Safe harbor laws designed to prevent bankruptcy trustees from disrupting the securities markets deserve a fresh look in Congress in response to complaints that they invite moral hazard by safeguarding fraudulent transactions, experts said at a Monday panel in New York.

At a Beard Group conference in Manhattan, a panel of bankers and lawyers grappled with the tension between market stability and creditor protection in section 546(e) of the U.S. Bankruptcy Code, which protects payments made in the course of settled securities transactions from being clawed back.

Trustees and bankruptcy administrators are otherwise empowered to unwind pre-petition deals that thwart creditor...

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