The recent UK Supreme Court decision in Lehman Brothers International (Europe) (“LBIE”) has ramifications for all creditors of UK financial institutions, including MF Global UK Limited.
Lord Walker referred to the decision as making "investment banking more of a lottery than even its fiercest critics have supposed."
Creditors with segregated client money claims may no longer receive a full return and now must share their segregated funds with the unsegregated client money pool, resulting in a shortfall to be shared across all client money claims. The decision potentially increases the number of creditors who can claim against the client money pool as the court found that a trust arose “upon receipt” by LBIE of client money, not upon segregation. It also potentially increases the pool of funds available for distribution to client money claimants as all identifiable client money, including funds held in LBIE’s own accounts, is pooled for distribution.
Richards Kibbe & Orbe LLP attorney Matthew Hughes describes the recent Lehman decision and reflects on the issues it raises for creditors of LBIE and issues it may raise in the future for creditors of MF Global UK Limited (in Special Administration).