FAQs For Trust Assets 19/3/09

Trust Assets - General Questions

1. What is Trust Assets?

"Trust Assets" is defined within the Lehman Brothers International (Europe) ("LBIE") administration as all assets held by, or held in the name of, or otherwise to the order of, LBIE which is subject to trust or proprietary claims, whether comprising monies under the FSA Client Money Rules ("Client Money") or other monies or assets ("Client Assets")  The Trust Assets Team's administration objectives include the identifying, reconciling and returning of trust assets to clients who have a valid claim.

2. How do I contact the Trust Assets Team with a query (regarding Trust Assets)  that is not covered in these FAQs?

The Joint Administrators have established a bespoke Client Management Team to address client queries with regard to Trust Assets issues.  Please email your questions to clientpositionresponses@lbia-eu.com

As the team is receiving a significant number of emails, we ask for your patience in receiving a response.

3. What process have the Joint Administrators adopted to administer the return Trust Assets?

In summary, the Trust Assets Team has undertaken inter alia the following steps, in parallel:

i. identifying and taking appropriate steps to gain control of all Trust Assets;
ii. seeking to identify the entire population of clients that purport to have claims, rights or interests in Trust Assets ("Trust Claims");
iii. identifying, from LBIE's records, the accounts held with affiliates of LBIE and with third party custodians, agents, counterparties, exchanges and clearing houses ("Depots") where Trust Assets may be located and contacting the relevant affiliates to obtain confirmation of the securities and/or monies that are being held;
iv designing and installing an IT system on which all data available from the internal LBIE systems relating to Trust Assets is managed;
v seeking to revise LBIE records for failed or broken trades as a consequence of the Administration, so as to enable the Trust Assets to be fully identified;
vi developing a protocol in relation to the implementation of corporate actions that may need to be undertaken in relation to Trust Assets;
vii making claims in other insolvent estates which may hold Trust Assets (e.g., in relation to Client Money held by Lehman Brothers Bankhaus AG (" Bankhaus"));
viii identifying the impact of termination notices that have been served since the commencement of the Administration;
ix writing to all of the clients who may have claims, or asserted rights or other interests in the Trust Assets to obtain from them full details in relation to all alleged Trust Claims;
x reconciling LBIE's books and records with those of the Depots and affiliates, by security and by client against information obtained from clients;
xi considering potential cases for the early return of Trust Assets in accordance with the prioritisation principles referred to in question 7 below;
xii determining the extent to which clients purporting to have Trust Claims have any indebtedness to LBIE and any other entity in the Lehman Brothers group and whether there are any other reasons for the exercise of any lien LBIE may have over the relevant Trust Assets.

Further to the data collection process, the Joint Administrators and their advisors are analysing a wide range of legal issues which have arisen and are seeking court direction where required. 

Operationally, the Trust Assets Team has created two sub teams: one which is directed at resolving issues with respect to Trust Assets and the other which is resolving issues with respect to Client Money.  In addition, a Trust Assets Committee has been set up to oversee the operation and the overall management of the Trust Assets Team. 

The Joint Administrators have also engaged in extensive communications, including web presentations, maintaining frequently asked questions, operating a query management system for all Trust Assets clients (see Trust Assets question 2) as well as updating the Creditors Committee on the issues arising.

4. What progress has been made in returning Trust Assets to clients?

The Joint Administrators have returned a number of Trust assets since October 2008. These holdings of Trust Assets have been returned on terms that seek to ensure that the LBIE estate is adequately protected in the event that competing Trust Claims arise.

The Joint Administrators continue to address the return of Trust Assets as a matter of priority.  They continue to review, and seek to adopt, the most appropriate mechanisms available to them to assist in returning Trust Assets to those to whom it belongs. In this context the Joint Administrators have filed an application with the Court in relation to Trust Assets.

The initial Court application, which was heard on 16 March 2009, gave an opportunity for the Joint Administrators to provide an update as regards the progress that has been made in relation to Trust Assets and to explain some of the difficulties which they continue to face as regards returning Trust Assets to clients. The Joint Administrators also explained their intention to explore the possibility of proposing a scheme of arrangement in respect of Trust Assets.

For further information please refer to Client money and assets update - 26/02/09

5. If I believe I have assets and/or money held by LBIE, how do I make a claim to have these returned?

If you believe you have assets or money held by LBIE and have not received a letter or email from the Joint Administrators, please submit your positions and balances by email only on a standardised MS Excel form (see below for link). In doing so, please ensure that you complete all sections fully, including account name and account number.  Use a separate form for each account you hold with LBIE.  Failure to complete the form or provide full information may result in a need to resubmit again and further delay our review of your positions and balances.  In addition to the standardised form for positions and balances, please also provide electronic copies of any written contracts you have with LBIE as well as any other relevant documentation.

The standardised MS Excel forms (one for Institutional Clients and one for Private Investment Management clients) can be found using the following link:

//business-recovery/administrations/lehman/lehman-client-money-assets-151008.jhtml

6. How can I find out about the progress of my claim if I have not heard anything about a claim or query I have raised?

We have been working to respond to all queries as efficiently as possible, however since the appointment of the Joint Administrators, we have received a substantial number of enquiries and documentation.

The Trust Assets Team is currently reviewing the information submitted by clients in their client position responses. Initially, this entails identifying and responding to queries, and reviewing documents received to check for completeness of the information provided.

To assist us in processing your claim as quickly as possible, please ensure your submission has followed the instructions provided in the Client money and assets update - 15/10/08 with all fields completed on the forms provided and your contracts attached.

We realise that many clients have put substantial efforts into providing us with information on their claims, please be patient as we conduct a thorough review of information you have provided and reconcile this against the data available. This is a critical part of the process to return client assets and monies to clients who have a valid claim.  We will contact you when your claim is being reviewed and advise if further information is required. 

7. On what basis are claims being prioritised?

In their press release dated 10 October 2008 the Joint Administrators set out principles to be applied in prioritising claims.

In addition the Joint Administrators have established a Hardship and Prioritisation Committee ("HPC") which meets regularly to consider the return of Trust Assets.  The HPC considers the following factors when assessing a claim for prioritisation:

i. the quality and timing of data being made available to the Joint Administrators;
ii. the speed of response of counterparties in dealing with the Joint Administrators' questions, coupled with the quality and accuracy of the data supplied, the complexity of the data and the legal issues relevant to the determination of a particular claim;
iii. the number of claims that may be made to a particular class or category of Trust Assets and the risk of a shortfall in that particular class of category of Assets;
iv. the cost efficiency and expediency of the relevant process; and
v. market stability and confidence.

The review also involves an analysis of other claims being made over the particular asset class and whether a situation could arise where there is a risk of shortfall of the asset relative to amounts claimed by clients. In all cases the Joint Administrators need to examine LBIE's wider relationship with relevant counterparties and ensure there are no offsetting claims against the estate.

8. What can I do if I am experiencing hardship as a result of my assets and/ or money being held by LBIE?

The Joint Administrators recognise that many parties affected by the LBIE Administration are in a difficult position and that there may be exceptional cases in which it is desirable and possible to accelerate the release of certain clients' assets.

In accordance with the order of the High Court on 7 October 2008, the Joint Administrators set up the Hardship and Prioritisation Committee ("HPC") which identified a set of principles to be applied when considering the prioritisation of claims, and makes recommendations to the Joint Administrators as to the identification of counterparties or classes of counterparties to be considered as priority claimants.

In situations where the Joint Administrators are prioritising the return of client assets due to hardship, they need to mitigate the risk of competing future claims being made against the asset in question. Therefore guidelines have been developed which include:

i. a contribution paid towards the cost of prioritising its claim;
ii. credit support where required;
iii. a contribution towards the costs of the administration of Trust Assets claims;
iv. Indemnification for losses and costs should a competing claim subsequently arise.

Due to the complexity of the analysis required under the FSA Rules it is currently not possible to return any pre administration client money. Cash balances are being treated separately and efforts are underway to reconcile and calculate client entitlement to the different cash pools. For further information, please refer to the questions regarding Client Money.

If you believe you are experiencing hardship and would like to submit a request for prioritisation to the Hardship and Prioritisation Committee, please submit a request by email to: clientpositionresponses@lbia-eu.com

As part of your request, please provide further details of the specific hardship you are suffering. In all correspondence please state the full name of the legal entity concerned, the account number(s), and provide a contact name, postal address and e-mail address.

Before submitting your request, please ensure you have submitted your positions and balances by email only on a standardised MS Excel form. In doing so, please ensure that you complete all sections fully, including account name and account number.  Please use a separate form for each account you hold with LBIE. Failure to complete the form or provide full information may result in a need to resubmit again and further delay our review of your positions and balances.  In addition to the standardised form for positions and balances, please also provide electronic copies of any written contracts you have with LBIE as well as any other relevant documentation.

The standardised MS Excel forms (one for Institutional Clients and one for Private Investment Management clients) can be found using the following link:

//business-recovery/administrations/lehman/lehman-client-money-assets-151008.jhtml

9. I have submitted my client position response. When can I expect my assets and/ or money to be returned?

Due to the complexity and the various stages in the process, it will take substantial time to return client assets and money held by LBIE.

The Joint Administrators are actively working to reconcile positions on a client by client basis. In parallel, the aggregate position for all clients needs to be determined and reconciled to the assets held in custody and in the money bank accounts. There are also a number of legal and practical issues that have arisen which need to be addressed before assets or money can be released.

Additionally, the Joint Administrators need to reconcile actions taken by counterparties (e.g. actions following default notices) and update these in LBIE books and records before an up to date picture can be produced. This process will necessarily take time to complete.

To assist us in reviewing your claim as quickly as possible, please ensure that you have submitted your client positions and balances by email only on a standardised MS Excel form. (See Trust Assets question 5.)

10. Can I obtain a statement showing my positions and balances with LBIE as at a specified date?

As LBIE's books and records were not fully updated at the point of Administration, you cannot rely on any information obtained after 07:56 on 15 September 2008 from LehmanLive or any other Lehman Brothers source. 

We are working to ensure that LBIE books and records are up to date and accurately reflect all events post 15 September 2008. Until this work is complete there is a risk that any statement may contain inaccuracies and as a result we are not currently in a position to provide statements.