On February 17, the Federal Deposit Insurance Corporation (FDIC) approved a proposal for recordkeeping requirements for FDIC-insured institutions with a large number of deposit accounts to facilitate rapid payment of insured deposits to customers if those institutions were to fail. The proposed rule would apply to insured depository institutions with more than 2 million deposit accounts. Under the proposal, these institutions would generally be required to maintain complete and accurate data on each depositor.

“A creditor does not become an insider simply by receiving a claim from a statutory insider,” held a split panel of the U.S. Court of Appeals for the Ninth Circuit on Feb. 8, 2016. In re The Village at Lakeridge, LLC, 2016 WL 494592, at *1 (9th Cir. Feb. 8, 2016) (2-1). According to the court, “Insiders are either statutory [per se] [e.g., officers, directors] or non-statutory [de facto].” Id.

A Chapter 11 debtor’s impairment in its reorganization plan of two unsecured claims filed by its former lawyer and accountant “was transparently an artifice to circumvent the purposes of” the Bankruptcy Code (“Code”), held the U.S. Court of Appeals for the Sixth Circuit on Jan. 27, 2016. In re Village Green I G.P., 2016 WL 325163, at *2 (6th Cir. Jan. 27, 2016).

On January 21, the Federal Deposit Insurance Corporation (FDIC) announced that it was seeking comment on a revised proposed rule that would amend the way small banks are assessed for deposit insurance. The proposed rule would affect banks with less than $10 billion in assets that have been insured by the FDIC for at least five years.

A federal “secured tax claim takes priority over [a professional’s] claim to fees” in an aborted Chapter 11 case, held the U.S. Court of Appeals for the Fourth Circuit on Jan. 26, 2016. In re Anderson, 2016 WL 308590, at *1 (4th Cir. Jan. 26, 2016).

A “bank [making a secured rescue loan] had information that should have created the requisite suspicion … to conduct a diligent search for possible dirt” — i.e., whether the debtor had the right to pledge $312 million of customer securities, held the U.S. Court of Appeals for the Seventh Circuit on Jan. 8, 2016.In re Sentinel Management Group, Inc., 2016 WL 98601, at *2 (7th Cir. Jan. 8, 2016) [“Sentinel V”]. The Seventh Circuit reversed the district court, voided the defendant bank’s lien as a fraudulent transfer, and rejected the bank’s good faith defense.

A federal appeals court in Illinois held that Bank of New York Mellon Corporation and Bank of New York (collectively, “BNYM”) were on “inquiry notice” that Sentinel Management Group, Inc. improperly used customer funds as collateral for a loan prior to the firm’s collapse in August 2007. (Sentinel was an investment management firm registered with the Commodity Futures Trading Commission as a futures commission merchant that claimed it specialized in short-term cash management for hedge funds, individuals, financial institutions and other FCMs.

A secured lender had to “pay the [encumbered] Property’s maintenance expenses incurred while the [bankruptcy] trustee was trying to sell the Property,” held the U.S. Court of Appeals for the Fifth Circuit on Dec. 29, 2015. In re Domistyle, Inc., 2015 WL 9487732, at *1 (5th Cir. Dec. 29, 2015).

“Claims arising from securities of a debtor’s affiliate should be subordinated” to all other “senior or equal” claims in the debtor’s bankruptcy case, held the U.S. Court of Appeals for the Second Circuit on Dec. 14, 2015. In re Lehman Brothers Inc., 2015 WL 8593604, at *3 (2d Cir. Dec. 14, 2015).

The U.S. Bankruptcy Court for the Northern District of Illinois ordered the “equitable subordination” of insider secured claims against a Chapter 11 debtor on Nov.