On 29 February 2012 the Supreme Court of England and Wales dismissed the appeal by GLG Investments and ruled that clients whose money had not been properly ring-fenced when Lehman Brothers International (Europe) (“LBIE”) went into administration could now have access to the segregated pool of money alongside those clients whose money had been actually segregated by LBIE. This ruling, by a majority in the Supreme Court, directly impacts not only LBIE clients but also MF Global UK (“MFG UK”) clients and has more general implications both for financial institutions providing client money protection and for their clients.
The ruling in brief
The court dismissed an appeal by hedge fund GLG Investments that the pool of segregated funds should only be distributed to clients whose money had been segregated by LBIE. The appeal centred around how client money should be defined and subsequently distributed in the event of the insolvency of the regulated firm providing client money protection (a “primary pooling event”).
The court ruled on three key points...
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