We use cookies to improve your website experience. To learn about our use of cookies and how you can manage your cookie settings, please see our Cookie Policy. By continuing to use the website, you consent to our use of cookies. Close

CLIENT MONEY RULES AND LEHMAN BROTHERS

Lloyd's Maritime and Commercial Law Quarterly

CLIENT MONEY RULES AND LEHMAN BROTHERS

Harry McVea*

This article analyses the Court of Appeal’s recent decision in Lehman Brothers International (Europe) (in Administration) v. CRC Credit Fund Ltd. The case helps to illustrate some of the difficulties associated with the collapse of a financial behemoth such as Lehman, and sheds light on the interpretation and effect of the FSA’s client money rules, and various deficiencies in how some of those rules operate in practice.

1. Introduction

The collapse of Lehman Brothers in September 2008—until then one of the world’s most famous and successful investment banks—is widely seen as the event which sparked the wave of financial panic that, in turn, brought global financial markets to the brink of disaster. The full legal fallout from the Lehman’s episode is still to be felt, but the Court of Appeal’s recent decision in Lehman Brothers International (Europe) (in Administration) v. CRC Credit Fund Ltd 1 (hereinafter “LBIE”) helps to illustrate some of the difficulties associated with the collapse of a financial behemoth such as Lehman, and helps shed light on some of the more arcane, yet important, aspects of the UK’s regulatory scheme, in particular the interpretation and effect of the FSA’s client money rules, and various deficiencies in how some of those rules operate in practice.2

2. The client money rules

The Financial Services Authority (FSA), as the UK’s unified regulatory responsible for regulating the financial services industry,3 has a wide discretion to make legally binding
LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

412

The rest of this document is only available to i-law.com online subscribers.

If you are already a subscriber, please enter your details below to log in.

Enter your email address to log in as a user on your corporate account.
Remember me on this computer

Not yet an i-law subscriber?

Devices

Request a trial Find out more