Creditors Continue to Mistake Regulatory Receivership Cases for Bankruptcy Cases

Recent article by Southern California law firm, McNamara Benjamin LLP, discusses how failing to understand the difference in how regulatory receivership cases and bankruptcy cases are handled can be costly.

McNamara Benjamin LLP is one of the few firms in Southern California that handles federal receivership cases. In a recent article they discuss how creditors often confuse the way regulatory receivership cases are handled in comparison to bankruptcy cases. With an increased frequency in regulatory receivership cases in the last few decades, and a lack of familiarity on behalf of creditors, the firm states that creditors often make costly presumptions. 

Regulatory receiverships are imposed by courts at the request of enforcement agencies such as the Securities and Exchange Commission, the Federal Trade Commission, the Consumer Financial Protection Bureau, the Commodity Futures Trading Commission, and their state counterparts.

In our experience working on regulatory receiverships, the most common mistake creditors make is to assume that a regulatory receivership will be handled the same way as a bankruptcy. While there are significant parallels between a bankruptcy and a regulatory receivership, failure to understand the differences can be costly.

McNamara Benjamin LLP

The firm discusses that while many parallels can be drawn between bankruptcy and regulatory receivership cases, failure to understand the differences can lead to costly complications. In order to create clarity and understanding, they outline a few of the following significant differences: ​

  • Receiverships are still largely governed by equity, with few statutes and rules.  
  • The receivership order is critical – and it’s rarely the same twice.  
  • There may not be a formal notice or claims process. 
  • Fraudulent transfer law is narrower than in bankruptcy, but there are also exceptions. 
  • A Regulatory Receiver may have the ability to avoid certain defenses that would prevent recovery by a bankruptcy trustee.  

The lawyers of McNamara Benjamin LLP have served as receivers and counsel for receivers in well over twenty regulatory receiverships involving hundred of millions of dollars in claims and assets.  Their lawyers have also represented secured and unsecured creditors in numerous other receiverships.   Each receivership is unique, and their experience allows them to navigate the complex and uncertain circumstances that arise.   

The complete article can be found here. To learn more about regulatory receiverships or to schedule an interview with a McNamara Benjamin LLP attorney, contact us here.