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Seventh Circuit Takes the Road Less Traveled, and Looks to the Substance of ' 546(e)

By Sheryl P. Giugliano
September 01, 2016

In a surprise decision, the U.S. Court of Appeals for the Seventh Circuit declined to follow the “plain meaning” approach adopted by the Second, Third, Sixth, Eight and Tenth Circuits, and rejected an opportunity to expand the safe-harbor protections afforded by Bankruptcy Code section 546(e) to protect “securities transactions” in the private market where the extent of a financial institution's involvement is to serve as an intermediary or conduit. FTI Consulting, Inc. v. Merit Management Group, LP, No. 15-3388, 2016 WL 4036408 *6 (7th Cir. July 28, 2016) (“We will not interpret the safe harbor so expansively that it covers any transaction involving securities that uses a financial institution or other named entity as a conduit for funds.”).

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