Opinion ID: 162082
Heading Depth: 2
Heading Rank: 3

Heading: The Enactment of Section 510(b)

Text: 15 In enacting the Bankruptcy Code of 1978, Congress found the Slain and Kripke position compelling. As the report accompanying the House version of the bill noted, Congress generally adopt[ed] the Slain/Kripke position tailoring section 510(b) in a manner that it considered administratively more workable. H.R.Rep. No. 95-595, at 196 (1977), reprinted in 1978 U.S.S.C.A.N. 5963, 6156. Its intent was to subordinate[] in priority of distribution rescission claims to all claims that are senior to the claim or interest on which the rescission claims are based. Id., reprinted in 1978 U.S.S.C.A.N. 5963, 6156-57. 16 Effective November 1978, the Bankruptcy Reform Act inserted the subordination principle first articulated by Slain and Kripke into bankruptcy law. The language of the statute, altered only slightly since its enactment, reads: 17 For the purpose of distribution under this title, a claim arising from rescission of a purchase or sale of a security of the debtor or of an affiliate of the debtor, for damages arising from the purchase or sale of such a security, or for reimbursement or contribution allowed under section 502 on account of such a claim, shall be subordinated to all claims or interests that are senior to or equal the claim or interest represented by such security, except that if such security is common stock, such claim has the same priority as common stock. 18 11 U.S.C. § 510(b).