The American Bankruptcy Institute has published an article by Christopher J. Weema. In a January 8, 2016, opinion, the U.S. Court of Appeals for the Seventh Circuit reminded secured lenders of their due diligence obligations when choosing to extend credit. In Grede v. Bank of New York Mellon Corp. and Bank of New York (Grede), a panel of the Seventh Circuit held that Bank of New York and its successor, Bank of New York Mellon Corporation, (collectively, the bank) were on inquiry notice of their obligation to investigate the provenance of the collateral used by Sentinel Management Group, Inc. to secure several hundred million dollars in loans made to Sentinel. The bank’s failure to act on that inquiry notice, the court held, was sufficient to deny the bank its secured status. That failure, though, was insufficient in itself to justify any equitable subordination of the bank’s claim. Read the full article here (subscription required).