Client money protection after the Lehman case: Testing the limits and limitations of the FSA's rules

  • Mar 2010
  • Client publication/article

This briefing paper considers the key legal principles relevant to the FSA’s client money rules and their application to the Lehman Brothers administration in the UK.

Without attempting to predict the outcome of the ongoing litigation, this paper considers the:

  • requirements of applicable EU legislation (in this case, the Markets in Financial Instruments Directive or MiFID)
  • scope of the equitable remedy of 'tracing', where a person acting as trustee (such as Lehman Brothers was acting in respect of its clients’ money) has wrongly mixed trust monies with its own
  • principle of pari passu distribution in an insolvency
  • extent of the FSA’s existing powers under FSMA to make rules modifying the application of English law in those two critical areas
  • statutory powers that the FSA does presently possess which could enable it to improve the future operation of CASS 7
 
 

Contacts

 

Ruth Fox (partner), Jan Putnis (partner), Ben Kingsley (partner)

 
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