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bankruptcies SEC role business bankruptcy
What is the role of the SEC in Chapter 11 bankruptcies?
Generally, the SEC’s role is limited. The SEC will:
(1) review the disclosure document to determine if the company is telling investors and creditors the important information they need to know; and
(2) ensure that stockholders are represented by an official committee, if appropriate.
Although the SEC does not negotiate the economic terms of reorganization plans, the agency may take a position on important legal issues that will affect the rights of public investors in other bankruptcy cases as well. For example, the SEC may step in if they believe that the company’s officers and directors are using the bankruptcy laws to shield themselves from lawsuits for securities fraud.
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