On Feb. 27, 2018, the U.S. Supreme Court issued its decision in Merit Management Group LP v. FTI Consulting Inc., resolving a circuit court split regarding the scope of the Bankruptcy Code’s Section 546(e) “safe harbor,” which protects certain securities-related transfers from avoidance. Much of the discussion surrounding the decision has characterized the ruling as a narrowing of the safe harbor, given the court’s holding that a transfer is not protected from avoidance merely because the funds passed through a “financial institution” or other protected entity. However, footnote 2 of the decision — which states that the court’s holding does not address whether a “customer” of a financial institution is encompassed within the statute, because the argument was not presented by the parties — could mean that the safe harbor remains applicable to additional participants in securities transactions, beyond those obviously covered under the statute. This article examines the strength of that argument.

Copy link to share post