Client Money, Lehman Brothers International (Europe) Ltd, and the Global Trader Case

Upon the collapse of Lehman Brothers International (Europe) Limited, clients who had believed that their money had been held in segregated client money accounts discovered that, in many cases, the requirements of the Financial Services Authority Rules may not have been followed. Former Lehman clients have been awaiting the first judgment on the treatment on client money that had not been segregated.

This week, in a case arising from the collapse of a spread betting broker, the English High Court determined that clients whose money had not been segregated had no proprietary claim against the general assets of the broker, nor a right to share in the “pool” of client assets. Accordingly, their claims ranked as unsecured creditors of the firm, only.

This client alert summarizes the judgment, and considers the implications for Lehman clients.