Client Money Update - Client Money Proposal Frequently Asked Questions - 08/04/2010

This update set outs frequently asked questions and answers ("Q&As;") concerning the proposal made on 8 April 2010 that Lehman Brothers International (Europe) (in administration) ("LBIE") pay certain clients with claims to client money held by LBIE prior to the time of administration ("Pre-Administration Client Money") the amount of their client money entitlement as calculated by the Joint Administrators, up to a maximum of USD 10,000 (ten thousand US dollars) per client, in return for such clients assigning their claim for Pre-Administration Client Money (the "Client Money Proposal").  Further information on the Client Money Proposal can be found in our update of 8 April 2010.

1. What is the Client Money Proposal? 

Answer: The Joint Administrators of LBIE are considering paying certain clients with Pre-Administration Client Money claims the full value of their client money entitlements as calculated by the Joint Administrators, up to a maximum of USD 10,000 per client, to reduce the number of clients with claims to Pre-Administration Client Money and so reduce the costs of administering the return of Pre-Administration Client Money.

2. Who is eligible to be considered for a payment under the Client Money Proposal? 

Answer: To be eligible to be considered for a payment, you must satisfy certain conditions, the most important of which is that you are entitled to a distribution from the pool of Pre-Administration Client Money in accordance with the High Court judgments handed down on 15 December 2009 and 20 January 2010 in the court application issued by the Joint Administrators concerning Pre-Administration Client Money (the "Client Money Application"). In addition, you must be able to provide details of a US dollar bank account into which any payment could be made. Further details of these conditions and others that you must satisfy are outlined on the Client Money Proposal page available on the Client Information Portal (the "Portal").

If you are unable to access the Portal or if, after accessing it and reviewing this page, you are still unsure as to whether you are eligible or not, please contact the clientpositionresponses@lbia-eu.com mailbox referencing your full client name and GAC code.

3. I have an unsecured claim against LBIE. Am I eligible to be considered for a payment under the Client Money Proposal?

Answer: Only certain clients with claims to Pre-Administration Client Money are eligible to be considered for a payment under the Client Money Proposal (please see the answer to question 2 above for further details).  Clients with other claims, including unsecured claims against LBIE's general estate, are not eligible.

4. How do I register my interest in being considered for a payment under the Client Money Proposal?

Answer: Clients who believe they are eligible to be considered for a payment and who wish the Joint Administrators to consider making such a payment to them should register their interest by ticking the box shown in section 5 on the Client Money Proposal page on the Portal on or before 28 May 2010. 

Please note that you will only be able to tick this box if you have already consented to the Joint Administrators disclosing details of your name, address and client money entitlement for certain specified purposes. If you have not already provided this consent, please review the page on the Portal called "Consent to Disclosure" and follow the instructions accordingly.

5. Once I indicate that I wish the Joint Administrators to consider making a payment to me under the Client Money Proposal, am I guaranteed to receive a payment from LBIE?

Answer: No. Until an agreement has been executed by you and by LBIE in line with the Form of Agreement (as described in the update of 8 April) available to be viewed in the Portal, LBIE is not under any obligation to make any payment to you. Therefore even if you are eligible to be considered for a payment under the Client Money Proposal and register your interest in time, the Joint Administrators may still decide that LBIE should not make a payment to you. If such a decision is made, this will be communicated to you.

6. Why is the Client Money Proposal being made? 

Answer: The Joint Administrators have performed a detailed cost benefit analysis of the Client Money Proposal.  As a result of this analysis, they have concluded that the costs which would otherwise be incurred in managing the return of Pre-Administration Client Money to lower value claimants would exceed the costs of paying these lower value claims in full.

7. I have a Pre-Administration Client Money claim of USD 50,000; is it possible that the Client Money Proposal threshold of USD 10,000 per claimant may be extended such that my claim would be paid out in full?

Answer: In performing the detailed cost benefit analysis of the Client Money Proposal, the Joint Administrators have concluded that a maximum threshold of USD 10,000 per claimant best meets the objective of reducing the costs of administering the return of Pre-Administration Client Money. No amounts in excess of USD 10,000 will be paid to any claimant under the Client Money Proposal.

8. To assist me in deciding whether or not I should register interest in the Client Money Proposal, are the Joint Administrators able to provide any view on the likelihood that the judgments in the Client Money Application may be wholly or partially overturned as a result of the appeals in those proceedings? 

Answer: The Joint Administrators are unable to comment on the likelihood that the judgments in the Client Money Application may be wholly or partially overturned as a result of the appeals which are currently pending in those proceedings.

9. When will payments be made under the Client Money Proposal?

Answer: If you are eligible to be considered for a payment under the Client Money Proposal, have indicated that you wish the Joint Administrators to consider making a payment to you in the manner and by the prescribed deadline and an agreement is executed between you and LBIE on or before 30 June 2010, payment will be made to your nominated US dollar bank account (in USD) on or before 30 July 2010.

10. To assist me in deciding whether or not I should register interest in the Client Money Proposal, what factors should I consider? 

Answer: All clients who have a claim to Pre-Administration Client Money should consider the information on the Portal with respect to the Client Money Proposal and the Form of Agreement included there carefully, and consider whether to seek legal advice in relation to them.

None of the information contained within the Portal, the Form of Agreement or the Q&As; produced here is intended to advise you on or to advocate any particular course of action. However, in determining whether or not you should register interest in the Client Money Proposal, you may wish to consider:

1. How the value of your Client Money Entitlement based on Court Directions (as shown in your Client Money Statement-Post Court Directions, available on the Portal) compares to the USD 10,000 (ten thousand US dollars) maximum payment limit under the Client Money Proposal.
2. Your view of the size of any potential shortfall in the pool of Pre-Administration Client Money available for distribution, considering the information made available to you on the Portal.
3. The timing of a payment under the Client Money Proposal compared to the possible timing of distributions from the pool of Pre-Administration Client Money. In relation to this, you should note that whilst the Joint Administrators wish to distribute Pre-Administration Client Money to those clients who are entitled to it as quickly as possible, they cannot make any distribution of Pre-Administration Client Money until the appeals in the Client Money Application have concluded. Depending on the outcome of these appeals, it is possible that there could be further appeals, or that further proceedings could be necessary before any distribution could be made. The Joint Administrators are not therefore currently able to provide any estimate of when a distribution of pooled Pre-Administration Client Money may be made.

Should you have any questions regarding the content of this update, please do not hesitate to contact the Counterparty Communications and Management team at clientpositionresponses@lbia-eu.com.