Client Money Update - Identifying Pre-Administration Client Money - Court Application 08/04/2011

This update provides further information to counterparties who believe that they have a claim against LBIE which includes amounts that may qualify for Client Money protection under the terms of the FSA's Client Money Rules ("Pre-Administration Client Money"). 

As noted in the Client Money General Update 14/02/2011, the Joint Administrators have been considering the steps required and the legal principles to be applied in order to identify and trace Pre-Administration Client Money (if any) held in LBIE's house accounts. The tracing rules are complex and the collapse of LBIE poses difficult questions concerning the application of the tracing rules in this context.

Accordingly, on 8 April 2011, the Joint Administrators made an application to the High Court seeking directions regarding (amongst other things) the legal principles to be applied to identify and trace Pre-Administration Client Money ("Application"). It is anticipated that the hearing will be scheduled for early 2012.

The full text of the Application and supporting witness evidence is available here.

The Application is important and integral to the progress of the LBIE Administration. A major factor affecting the Joint Administrators' ability to declare a dividend to all or a portion of LBIE's unsecured creditors is establishing whether or not certain funds currently credited to LBIE's house accounts constitute Pre-Administration Client Money. Due to the significance of this issue in the context of the LBIE Administration, the Joint Administrators have decided to issue the Application now, rather than waiting for the conclusion of the Client Money Application in the Supreme Court. If no steps are taken to advance the identification analysis until such time as the determination of the Supreme Court is available, there is a risk that a year or more may pass without the Joint Administrators having made progress towards returning Pre-Administration Client Money and making a meaningful distribution from the general estate.

Over the coming months, the Joint Administrators intend to supplement the evidence presented to the High Court in order to explain the factual background against which the issues raised in the Application need to be determined.

The Joint Administrators have been in discussions with various Pre-Administration Client Money claimants to determine if they would like to be joined as a respondent to the Application. Discussions with interested parties are ongoing and it is anticipated that the High Court will formally appoint respondents in due course. 

Further updates on the progress of this Application will follow. As always, the Joint Administrators will continue to communicate with you through this website on all matters relating to LBIE's Administration. Should you have any questions regarding this update, please contact the Communications and Counterparty Management team at clientpositionresponses@lbia-eu.com.