Bankruptcy ‘Safe Harbor’ Protection to Get Supreme Court Review

By Dawn McCarty, Bloomberg News

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.

FTI Consulting Inc., the trustee of ...