One Lehman International client money appeal headed for Supreme Court

By Caroline Salls

Pittsburgh, Dec. 21 - Lehman Brothers International Europe's joint administrators said the Supreme Court granted GLG Investments plc Sub-Fund: European Equity Fund's application to appeal an order regarding the joint administrators' application for directions concerning Lehman Brothers International Europe's obligations for handling client money.

A request by Lehman Brothers Inc. to appeal the order to the Supreme Court was denied. The appeal panel ruled that it "does not raise an arguable point of law of general public importance."

The joint administrators' application to appeal the client money issue to the Supreme Court has been held over.

The appeal panel has requested a directional hearing to be held in 2011 to determine the likely timetable and duration of the substantive hearing before the Supreme Court.

As previously reported, the joint administrators sought direction in May 2009 concerning the handling of client money received before Lehman Brothers International Europe's administration.

In January 2010, CRC Credit Fund Ltd., Lehman Brothers Inc., Lehman Brothers Finance AG and Lehman Brothers Holdings Inc. appealed judgments related to the client money issue.

The administrators said the Court of Appeals overturned the previous judgments on two issues.

Specifically, the appeals court said the Financial Services Authority's client money rules require identifiable client money held by Lehman Brothers International Europe at the time of administration outside of its segregated accounts to be pooled with the client money held in its segregated accounts.

The pool will be distributed to all of the clients entitled to claim against the pool.

The appeals court also ruled that all clients who ought to have had money segregated for them by Lehman Brothers International Europe as client money before administration are now entitled to share in the client money pool, regardless of whether or not the company segregated the money for them.

In addition, the administrators said the appeals court upheld the previous ruling on two issues.

Specifically, the courts agreed that the statutory trust attached to client money attaches at the point of receipt of client money by Lehman Brothers International Europe, not at the point of segregation.

In addition, both courts ruled that money that was payable by Lehman Brothers International Europe to a client but had not been appropriated to that client before the administration is not client money and does not form part of the client money pool.

According to the release, the joint administrators and Lehman Brothers International Europe's client money team continue to make progress in identifying client money in unsegregated bank and transaction accounts and in indentifying entitlements to client money based on Lehman Brothers International Europe's client contracts.

New York-based Lehman Brothers Holdings Inc. was the fourth-largest investment bank in the United States. The company filed for bankruptcy on Sept. 15, 2008 in the U.S. Bankruptcy Court for the Southern District of New York. Its Chapter 11 case number is 08-13555.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.