October 10, 1989
TO: SEC RULES COMMITTEE NO. 60-89
RE: SEC PARTICIPATION IN REORGANIZATION PROCEEDINGS
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The SEC has issued a release seeking comments on the scope
of its participation in bankruptcy proceedings under Chapter 11
of the Federal Bankruptcy Code. Section 1109(a) of the
Bankruptcy Code authorizes the SEC to appear before federal
courts in reorganization proceedings. The SEC is seeking comment
on the impact of its participation on public investors and other
parties, and whether investor committees effectively protect the
interests of security holders. The SEC is also requesting
comment on the desirability of legislative changes in this area.
Some comment items may be of special interest to Institute
members. The SEC is requesting comment on whether it should
adopt a rule or issue a release that would approve the use of
Chinese walls to avoid liability for trading decisions made by an
institutional investor's trading department while that
institution is serving on an investor committee. (This was
proposed last year by the Council of Institutional Investors as a
means of encouraging participation by institutions on investor
committees.) The SEC is also seeking comments on the role of
"recovery funds", which invest in the securities of companies
undergoing reorganization, in the bankruptcy process.
Comments are due November 15, 1989. A copy of the release
is attached.
Craig S. Tyle
Associate General Counsel
Attachment