This is good stuff Section 546(e)!
I will turn my head and walk away and keep my mouth closed and let my preferred equity shares work the NOLs as long as I get paid for my CTs now! LOL
This is going to be a very interesting ruling by Judge Peck on the remaining 27 counts of this law suit.
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THE SAFE HARBOR OF SECTION 546(e) OF THE BANKRUPTCY CODE
Section 546 of the Bankruptcy Code imposes several limitations on a trustee's avoidance powers. Several subsections of section 546, including section 546(e), provide safe-harbor protections against avoidance of transfers related to securities transactions that are complementary to the safe-harbor provisions found elsewhere in the Bankruptcy Code. Section 546(e) provides in part that:
the trustee may not avoid a transfer that is a . . . settlement payment as defined in section 101 or 741 of this title, made by or to (or for the benefit of) a . . . financial institution . . . or that is a transfer made by or to (or for the benefit of) a . . . financial institution . . . in connection with a securities contract, as defined in section 741(7), . . . that is made before the commencement of the case, except under section 548(a)(1)(A) of this title.
Thus, under section 546(e), the trustee may not avoid, among other things, transfers to or by financial institutions, if such transfers are settlement payments made in connection with a securities contract, unless the transfer was made with actual fraudulent intent to hinder, delay, or defraud creditors under section 548(a)(1)(A) of the Bankruptcy Code.
The term "settlement payment" is defined in both sections 101 and 741 of the Bankruptcy Code, with only minor variations between the definitions. A "settlement payment" is defined in section 741(8), somewhat circularly, as "a preliminary settlement payment, a partial settlement payment, an interim settlement payment, a settlement payment on account, a final settlement payment, or any other similar payment commonly used in the securities trade." The definition of the term in section 101(51A) varies slightly by adding the phrase "net settlement payment" and substituting "forward contract trade" for "securities trade." Section 741(7) of the Bankruptcy Code defines a "securities contract" as, among other things, "a contract for the purchase, sale, or loan of a security," and section 101(49) defines "security" to include "stock."
Although the plain language of section 546(e) and its defined terms do not clearly restrict application of the safe harbor to publicly traded securities, the legislative history of section 546(e) appears to tell a different story. Section 546(e) was enacted in 1982 (originally as subsection 546(d)) and altered by, among other amendments, the Financial Netting Improvements Act of 2006 ("FNIA"), to include within its protections transfers made in connection with securities contracts. The legislative history of section 546(e) indicates that it was enacted "to minimize the displacement caused in the commodities and securities markets in the event [of] a major bankruptcy affecting those industries" and "to prevent the 'ripple effect' created by the insolvency of one commodity or security firm from spreading to other firms and possibly threatening the collapse of the affected industry.' " Some tension therefore exists between the broad coverage of section 546(e), which appears to include within its safe harbor all forms of settlement payments in connection with securities contracts, and congressional intent underlying the enactment of the provision, which can be interpreted to limit the scope of the protections to transactions that could imperil the stability of financial markets.
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