## Facts

- The SEC brought a civil enforcement action against Robert E. Brennan and First Jersey Securities, Inc., alleging a long-running scheme to sell securities to customers at excessive prices, generating over $27 million in unlawful profits.
- After a lengthy bench trial, the district court entered a July 1995 judgment finding securities-law violations and ordering Brennan and First Jersey, jointly and severally, to disgorge about $75 million (including prejudgment interest).
- While facing mounting liabilities, Brennan created and funded an offshore “asset protection” trust in Nevis with securities valued at about $5 million.
- Brennan filed for Chapter 11 bankruptcy protection, triggering the automatic stay under 11 U.S.C. § 362(a).
- The bankruptcy trustee attempted to recover the offshore trust assets, including through litigation in Nevis, but those efforts failed.
- The SEC then obtained an ex parte order in the enforcement case requiring Brennan to repatriate the offshore trust assets and deposit them into the district court registry.
- Brennan appealed, arguing the repatriation order violated the bankruptcy automatic stay and did not fall within the governmental “police and regulatory power” exception.

## Issues

1. Whether the SEC’s post-petition repatriation order directing a Chapter 11 debtor to bring offshore assets into the United States and deposit them with the court is barred by the automatic stay under 11 U.S.C. § 362(a).
2. Whether the order is permitted under the governmental-unit exception in 11 U.S.C. § 362(b)(4) as an exercise of “police and regulatory power.”
3. Whether, even if the SEC’s enforcement action fits § 362(b)(4), the repatriation order is nevertheless prohibited as “enforcement of a money judgment.”

## Decision

- The Second Circuit vacated the district court’s repatriation order.
- The court held that § 362(b)(4) permits governmental units to continue certain regulatory enforcement actions notwithstanding bankruptcy.
- However, the repatriation order was an impermissible effort to enforce a money judgment and therefore remained subject to the automatic stay under § 362(a).
- The matter was remanded for proceedings consistent with the ruling.

## Legal Principles

- The automatic stay under 11 U.S.C. § 362(a) broadly halts actions against the debtor and efforts to collect or recover claims after a bankruptcy filing.
- Under 11 U.S.C. § 362(b)(4), governmental units may commence or continue actions to enforce police or regulatory power, including obtaining and enforcing judgments other than money judgments.
- The police-power exception does not allow governmental units to take post-judgment steps whose practical effect is to secure, marshal, or collect assets to satisfy a prepetition money judgment.
- In distinguishing permissible regulatory enforcement from stayed collection activity, courts look to the function and effect of the relief sought, not merely its label or asserted public purpose.

## Conclusion

The Second Circuit held that the SEC could not use a repatriation-and-deposit order in the enforcement action to secure offshore assets after the debtor entered Chapter 11, because the order functioned as enforcement of a money judgment and was barred by the automatic stay.


Sec. & Exch. Comm’n v. Brennan, 230 F.3d 65 (2d Cir. 2000)