Bankruptcy Code protects certain Ponzi scheme payments. The trustee for debtor Bernard L. Madoff Investment Securities (BLMIS) sued to avoid fictitious profits paid by BLMIS to hundreds of customers over the life of the Madoff Ponzi scheme. The defendant customers moved to dismiss certain of these avoidance claims pursuant to 11 USC Sec. 546(e), which shields from recovery securities-related payments made by a stockbroker. The trial court agreed that Sec. 546(e) barred the claims, dismissing them, and the Second Circuit affirmed. (12/8/2014) In re: Bernard L. Madoff Investment Securities.
SEC lifetime bar upheld. The US Circuit Court of Appeals for the DC Circuit affirmed the SEC’s lifetime industry bar against petitioner Peter Siris. The Court concluded that Siris did not show that the Commission’s imposition of a lifetime bar was unwarranted as a matter of law or unjustified in fact. (12/2/2014) Siris v. SEC.
FOIA exemption crafted for the SEC applies broadly. The US Court of Appeals for the DC Circuit held that documents the SEC collects while examining financial institutions, including the Financial Industry Regulatory Authority, are exempt from disclosure under Exemption 8 of the Freedom of Information Act. This is true no matter the records’ substance so long as they relate to a resulting report, and the report need not involve a “financial” examination. The Exemption applies to the SEC’s examination of FINRA’s arbitration program as well. The Court notes that Exemption 8, adopted in 2010 as part of the Dodd-Frank Act, only applies to the SEC; it does not apply, for example, to the Consumer Financial Protection Bureau. (11/14/2014) Public Investors Arbitration Bar Association v. SEC.