Category: Reflections

The Office of Fair Trading report on pensions

Rajiv Jaitly was one of the experts appointed by the Office of Fair Trading on  its expert panel for its market study on defined contributions work place pensions in the UK.  

The report which was published in September 2013 contained a number of recommendations that government and industry are currently working on.

To read the full report please click here.

©Jaitly LLP

Banker’s bonuses

The latest missive to emerge from the European Union in its effort to control the risks that banks pose, has been to curb the amount of bonus that can be paid to the employee of a bank.  We have yet to see the detail of how this will operate in practice and what loopholes might be identified to maintain the earning power of executives,  but the creation of this restriction is a reflection of the impotence of shareholders in large businesses to exercise their rights as owners of these businesses.

To a large extent this impotence has arisen because those that exercise the shareholders’ powers whether through proxies or directly, tend to be financial institutions themselves, with similar interests and conflicts.  These financial institutions are not the ultimate owners of these interests because the chain of ownership extends even beyond pension vehicles – often identified as the largest owners of equity around the world – to the wider general public, who have little awareness of this.  This means that items such as remuneration get waived through without too much challenge – because market practice is accepted as the status quo.

But governments as investors have also been reluctant to challenge the status quo.  The reasons for this are less clear because as significant and controlling shareholders, they can very easily replace a board that was not acting in their interests.  But they have chosen not to flex their muscle in this manner.   This can in part be explained because governments as shareholders are also primarily interested in the value of their shareholdings upon exit, rather than income, because this is how an assessment will be made on the success of the government’s strategy and how much it will have ultimately cost the tax payer to bail out ‘too big to fail’ institutions.

In a capitalist economy, wealth creation needs to be rewarded.  Shareholders as owners of businesses should be free to choose how they remunerate and reward those who work for them.  The nature of shareholding has however, changed over the years.  Shareholders have gradually become a fragmented body of owners and this inability to act collectively in their own interests has resulted in them ceding their ability to influence outcomes, so that executives in a business have been able to reward themselves handsomely before passing on any income to shareholders.  These executives of course have an interest in the capital value of shares – to which they do pay keen attention – but true income generation for them as stakeholders, as opposed to capital wealth, has been through bonuses rather than the declaration of dividends.  

The nature of capital markets has therefore changed fundamentally in this respect with the balance of power shifting to the executives.  Shareholders have only themselves to blame in allowing this to have come to pass, but this is largely because the nature of share ownership has changed.   Shares increasingly function as instruments to measure capital value whether for secondary trading, price discovery and transparency or as exit strategies for investors and entrepreneurs rather than for  primary capital raising or as income generating assets.  Of course the shareholder base has also become disparate so that collective action against a board has become more difficult.  Regulations surrounding take-overs such as in relation to concert parties, complicate matters further.  

Activist investment managers recognise this and use their shareholdings in an effort to rectify the imbalance of power that they see – but they too are generally short term investors looking to extract value for their own investors in order to earn management and performance fees.

Difficulties around the regulation of public primary offerings have also resulted in capital being raised through means other than equity and there is increasing use of shadow banking structures and private equity type deals which make expensive charges for these facilities and take company assets as collateral to protect their interests.

Where shareholders are actively engaged in the remuneration process there should be no need for ceilings to be imposed on remuneration.   The chances are that such regulations are likely to drive these remuneration structures offshore to non EU locations and make transparency on these matters even more opaque than they currently are.   Rather than trying to regulate remuneration arrangements, it seems more appropriate to think about how investor engagement can be rekindled to become a more valuable process than the self serving interests of institutional investors who are only acting on behalf of the ultimate owners of these assets.

As ever the devil will be in the detail.

The basic intention of the rule is to curb excessive risk-taking.  The European bureaucrats have decided that this can be controlled by imposing a basic salary-to-bonus ratio of 1:1 but permitting this to be raised to a maximum of 1:2 with the approval of shareholders. This higher ratio would require the votes of at least 65% of shareholders owning half the shares represented, or of 75% of votes if there is no quorum.

In order to encourage a long-term view, if the bonus is increased above 1:1, then a quarter of the whole bonus will be deferred for at least five years.

In order to come into effect,  this proposal must be approved by member states and the European Parliament plenary.  The vote is expected to be taken in the April 2013 session.  If approved, member states would need to include these rules in their national laws by 1 January 2014.

If the vote results in approval for the proposal, then the second half of 2013 may provide some interesting restructuring opportunities for lawyers as they consider how these restrictions need to be addressed by their clients.   

©Jaitly LLP

‘On the beach’ directors

The private sector consultation by the Cayman Islands Monetary Authority (CIMA) in January and the concurrent corporate governance industry survey is an attempt by the Cayman Island’s authorities to address some of the criticisms directed at those who accept appointments as directors of Cayman domiciled funds.

Many other jurisdictions appear to have updated their governance codes, guidance and related laws following the financial crisis.  CIMA’s proposals which are long overdue are summarised below:

  1. To extend the Statement of Guidance on Corporate Governance to all registrants regulated by CIMA.   There are no surprises in the guidance.  They cover the responsibilities of the board, director’s duties, documentation, relations with CIMA, risk management and strategic objectives and the use of sub-committees
  2. The creation of a public database operated and controlled by CIMA which will provide the names of the directors of the regulated entity and its registered address
  3. Application of the Companies Management Law to extend to all who offer, provide or arrange others to act as directors, or to persons who themselves act as directors and do so for six or more entities and for profit or reward.
  4. All directors who are not already approved as directors of licensees or via the professional director route will be required to register with CIMA

The corporate governance survey that has been commissioned seeks views on limiting the number of directorships held, 

CIMA has also indicated that it intends to consult on corporate directorships in the future.

It will be interesting to see the responses from the various associations on the island that have been consulted.

Fund governance will always be difficult until investors get involved in the appointment decisions and make clear what they really want from fund governance.   There is a reluctance on the part of many investors to get involved in the governance processes for a variety of reasons.  To a large extent the Cayman industry has developed simply as a response to investor demand to ‘pile em high and sell em cheap.’  Despite that there are many experienced and reputable directors operating on the island.  Experienced directors will reasonably wish to be remunerated for the time they spend on a fund.  Limiting the number of directorships will inevitably push the price of a directorship up.  What the reasonable expectations of a professional director are, will influence the pricing based on supply and demand and whether they can invest in systems and processes that allow them to remain on top of the issues they need to consider on each appointment they accept.

The public database may just begin to start influencing the thought process by shedding light on the extent to which there is a real problem – it may even result in the market self regulating away from those with excessive appointments – but we are still a million miles away from any major sea change in governance processes.  Until then, there will still be some who will face the accusation of being ‘on the beach’ directors.  

The consultation runs to the 18th of March 2013.

©Jaitly LLP

Monitoring conflicts of Interest

Financial Services have lost a lot of credibility since 2007 some of which can be attributed to their failure to manage conflicts of interest.  That failure reflects unfairly on the many in financial services who strive to work decently and fairly and is something senior management in these businesses must take responsibility for.

Conflicts of interest are a fact of life and if recognised and managed properly can avoid many of the problems that have been the cause for criticism.   Recent regulatory action against some of the big names in financial services both in the UK and US highlight that just because entities are regulated does not mean that they necessarily behave appropriately.  Nor does ‘big’ give any indication of respectable behaviour – indeed the reverse might be a justifiable conclusion.

Yesterday the Financial Times reported on a study on mutual fund families conducted by researchers Goncalves-Pinto and Schmidt at the National University of Singapore and Emory University respectively, which reviews how cross trades occur in funds managed by the same investment manager.  Often the ability for such transactions to occur will be of benefit to investors in both the buying and selling funds, but this may not always be the case where the manager is forced to look for liquidity to meet redemption requests when the assets in the portfolio are illiquid (and difficult to value).  We have in earlier published Reflections looked at how this can happen in a fund of hedge funds  where inflows into one vehicle can be used to meet the liquidity requirements arising from outflows in another vehicle.  In such a scenario the cross trade may not necessarily be in the best interests of the subscribing investor but it helps the investment manager preserve its reputation with the redeeming shareholder at the expense of the incoming investor in an unrelated fund.

The evidence on the failures to manage these conflicts of interest continue to mount.

In November this year the UK Financial Services Authority (FSA) published a paper called “Conflicts of interest between asset managers and their customers:  Identifying and mitigating the risks.”  This looked at a few specific areas that are worthy of examination by any investor looking to invest money with an investment manager:

  • How firms identified and controlled conflicts of interest;
  • How firms managed the purchase of research and trade execution services on behalf of customers;
  • How firms managed gifts and entertainment;
  • How firms ensured customers have equal access to all suitable investment opportunities;
  • How firms managed personal dealing by employees; and
  • How firms allocated the cost of errors between themselves and their customers.

The work done by the FSA was in the form of a thematic review of a selection of asset management firms visited between June 2011 and February 2012.  The FSA concluded that “most of the firms visited could not demonstrate that customers avoid inappropriate costs and have fair access to all suitable investment opportunities.”  That is a worrying statement given that these firms are obliged to observe rules such as on treating customers fairly.   Yet it is not altogether surprising, given the attitudes of  some boards in financial services to regulatory fines being nothing more than a cost of remaining in business.  

Some of these firms had not even reviewed their conflict of interest arrangements since 2007 which also begs the question as to what their compliance departments had been doing following the credit crisis and the headline regulatory actions that had occurred since?  The suspicion that asset managers are reverting back to bad old habits is hard to overcome in the face of such evidence.

The FSA has asked the boards of asset management firms in the UK to discuss the findings of the FSA paper and to then complete and return to the FSA an attestation by 28 February 2013 which confirms that the firm’s arrangements are sufficient to ensure that the firm manages conflicts of interest effectively and in compliance with the FSA rules.  

Of course all firms are likely to comply with the FSA requirement.  But a regulator’s demands will not change attitudes on their own.  A firm’s culture – as the FSA points out – is central to the firm identifying and genuinely managing conflicts of interest.   But it also requires investors to actively demand evidence on these matters and to not accept asset managers assurances at face value.  That needs institutional investors with some determination to ensure that matters are set right and managed properly.

The standards of control over payments from customers assets are rarely the same as the standards of control asset managers exercise over payments made from the asset manager’s own resources.  Investors need to ensure that they understand what is being paid for with their assets.

Personal dealing policies and gifts and entertainment are generally better managed as conflicts of interest.

Investors should question how asset managers allocate trades between different clients and how cross trading is controlled between funds they manage.  The FSA has reported that it took enforcement action against a firm that had traded for one fund in order to ease the liquidity problems faced by another fund.  My own experience and the university research referred to above indicates that this issue is a lot more widespread than the regulatory action against one firm would suggest.

The FSA also noted the practice particularly amongst hedge fund managers of using contractual limitations for liability to customers from errors in the absence of gross negligence and for not reporting these and collecting information on them.  Of course under English law gross negligence is considered a “vituperative epithet”.  The FSA note that repeatedly making the same error or similar errors might itself amount to gross negligence.  The standard applied in English law to such a test may not be quite what the asset manager thinks they might be able to get away with.

So there is a lot that investors should be thinking about when it comes to their investment manager managing conflicts of interest.  Notwithstanding the regulated nature of investment management it is worth investors continuing to monitor how investment managers identify, report and manage these conflicts.

©Jaitly LLP

Reading regulatory signals

The regulators on both sides of the pond have been active.  Barclays, Knight Trading and now Standard Chartered have all found themselves squarely in the regulator’s sights.

The impact of all of these is serious to anyone running any sort of investment business.

One needs to overcome a lot of inertia to move an account or to move to another organisation – deposit guarantees not withstanding.   And lets not kid ourselves – customers ultimately pay for these fines because these organisations keep a tight eye on the bottom line and find ways of recovering these costs.  But fund boards do need to look at their service providers regularly to assess whether they remain appropriate and to spread risk if necessary.

Large businesses that can afford to do so will settle with the regulators quickly to try and limit reputational damage.  e.g. Standard Chartered are already reported to be in settlement discussions in the US and today there have been reports that settlement has been reached to the tune of £217m.  At least now we know how much a US banking licence costs as that is what has been preserved by reaching a settlement ahead of the hearings that were scheduled!  

But a settlement of a regulatory action should not be the end of the matter for a fund board.  It should consider whether the checks that will be carried out by a service provider remain appropriate and adequate and they should if necessary seek reassurances from them regarding exposure to any risks that arise as a consequence.

There are still a number of regulatory changes that have the potential to impact funds – the AIFMD rules have yet to be finalised and there have been changes to the CFTC exemptions which boards need to keep abreast of.  It is important that they check back with the fund lawyers to understand what the impact of all these changes will be on the fund.

It is clear that the regulators have been focussing on ‘know your client’ type procedures and the extent to which these have been carried out in addition to the robustness of operational procedures.

Operational issues too are important, particularly in how brokers and investment banks are segregating and handling client assets and executing trades.   IT change processes are often underestimated in terms of business impact as was demonstrated in the recent problems that the Royal Bank of Scotland had with its system upgrades. 

In the meantime the best that a fund board can do in interpreting the emerging regulatory signals is ensuring that the disclosures to investors remain accurate and relevant and that their service providers are responding to the changing environment and have adequate disaster recovery processes that are updated and tested regularly.

©Jaitly LLP

The City’s word

As news of the swingeing fines against Barclays Bank Plc have emerged, accompanied by press and political  comment, the City’s word needs ever increasing scrutiny.

LIBOR and EURIBOR rates are based on submissions from a number of banks that are then collated using a methodology that uses an average of those rates once the outlier rates that have been submitted have been eliminated.  These rates set international benchmarks for borrowing in the City, in international financial markets and for interest rate derivatives.  Reliance on these rates is fundamental to the operation of many financial contracts around the world.

To give some idea of the enormity of the transactions that rely on these rates the Financial Services Authority in its final notice to Barclays notes that “the notional amount outstanding of OTC interest rate derivatives contracts in the first half of 2011 has been estimated at 554 trillion US dollars. The total value of [the] volume of short term interest rate contracts traded on LIFFE in London in 2011 was 477 trillion euro including over 241 trillion euro relating to the three month EURIBOR futures contract (the fourth largest interest rate futures contract by volume in the world).”

The mechanisms for its calculation relied on institutions being transparent about the rates available to them.  The final notice describes how the team submitting the rates on behalf of Barclays took into account requests from their derivative trading teams and even outside traders to influence the submissions they made on behalf of Barclays.  The bank also took into account its own liquidity problems during the financial crisis to influence its submissions.  The full details (click here for a link)  in the final notice of the FSA highlight the level of complacence that existed in the process even when these matters were being raised with compliance teams and external agencies such as the FSA itself. 

What this regulatory action highlights yet again is the huge reluctance of large financial institutions to question the rights and wrongs of what has become market practice or customary modes of behaviour.  It takes a brave person to challenge it, even when they are in a compliance or risk role.  Attending courses on ethics is never sufficient to create a change in culture which challenges and examines right from wrong and takes pride in doing so.  Barclays is a profit making institution – an £85m fine reduced to £59.5m for cooperation is hardly going to break the bank even though its reputation is bound to take a severe knock.  The value of its shares and regulatory capital requirement will be affected (I am a small shareholder, so I see it first hand).   Even additional fines from across the Atlantic by the US regulators will not make a debilitating financial dent to its pocket. It will be regarded as a cost of doing business – even  a cost of surviving, in the face of the meltdown in the financial markets.   At the cost of a few heads that will roll, it will survive the publicity. So will the other banks, who as sure as night follows day will not be guiltless of breaches, as is evident from the other regulatory actions and Barclay’s complaints.  Complaints made whilst remaining silent about some of its own activities despite the extensive cooperation it subsequently gave to regulators.

In the meantime what should one make of the City’s word when it reports numbers such as those relating to LIBOR?  Increasing regulation is hardly the answer.  Large compliance departments have evidently not provided a solution either.    The regulatory action itself has taken years to investigate and crystallise and can hardly be regarded as timely intervention.  Another public enquiry perhaps?  More words and the rattling of cages?  If ghosts past are anything to go by, they seem to be loud and empty vessels.  Can there ever be a practical solution that neatly and transparently balances the competing interests?

A business culture where independent challenge is encouraged and accepted as healthy and not career limiting is much more likely to be productive in enhancing the City’s word as its bond.   That is more likely to result in an environment where it is safe to question right and wrong and to arrive at reasonable, transparent solutions, rather than be forced to be a whistleblower with all its consequences on a career.  To achieve such a culture is a real challenge and much, much easier said than done.  But it has to be the gauntlet that the City’s institutions should be prepared to take up because it is essential that they are trusted and survive.

©Jaitly LLP

Taking a punt on risk and regulation

I spent an interesting morning in Cambridge yesterday along with some other practitioners talking to a postgraduate class at the Judge Business School  about risk.  At the end of my session I was asked whether all the incoming regulations would improve the risk environment on funds.  The answer must be ‘no’ but I have been debating it ever since and indeed our discussions continued afterwards over a sandwich.  Why must the answer be ‘no’?  After all, the regulations are trying to address how risk might be mitigated and disclosed.  Culture however is fundamental to the mitigation of risk.  To the extent that there are ways around rules and regulations – people will find them if that is what the culture encourages.

Lets just look at presentations done by financial services practitioners.  The rules require authorised firms to have a series of disclosures and warnings on presentations that may be construed as financial promotion.  Compliance departments require these disclosures and warnings to appear on presentations.  I find it fascinating (sad though it may be) to see how these disclosures and warnings are dealt with by different people.

Should the warnings be at the start of the presentation or at the end?  How much time should be given on that warning slide – should you talk to the warnings highlighted or is it enough to just flick through that slide?  Does anyone really pay any attention to those disclosures or are they simply ignored and accepted as part of the landscape?  Would they really stop an investor from making a decision to invest in a product or strategy?

For example the warning we are all familiar with is that past performance on an investment is not a guide to future performance.  We all accept that and generally even understand it.  But does that statement really bear further scrutiny?  Of course we buy on past performance.  It is the whole point of reporting and analysing performance numbers.   I don’t know of anyone that has invested in a manager who has consistently reported losses, yet past performance is not a guide to future performance.  Such funds would be quietly closed down and buried as no one would invest in them.  Why do funds mushroom in size?  Because marketing departments trumpet the successes of the fund encouraging others to participate in that success.  

So despite the warning which we all accept as being correct, investors generally do invest on past performance as being a pretty good indicator of future performance – because although nobody really knows how a manager will perform in the future – it would take a brave investor to invest with a manager that was reporting consistent losses.  Indeed institutional investors will generally not invest with a manager with less than 3 years track record.  Perhaps I should rephrase that last sentence more accurately – institutional investors will generally not invest with a manager with less than three years track record of predominantly successful performance – otherwise that manager would not see the light of day – it would be a clever  salesman who could achieve sales on a fund with a poor three year track record.   Yet past performance we are told – and accept – is not a guide to future performance?

Does that mean the disclosure is wrong?  We all accept that it is a reasonable statement, yet investment behaviour does not support it.  Does that mean that investors are simply taking a punt on the risk despite the regulatory requirement that highlights that the premise of the decision may not be a safe one?  Is it because the measure may be one of the few that are readily understood in what is otherwise extremely uncertain decision making? 

Regulation is more often than not a reaction to problems that have occurred.   Regulators need evidence of a problem or market failure to justify the introduction of regulations.  That often means that risk management is backward looking rather than trying to look ahead at what might still go wrong.  The emphasis is to fix what has gone wrong in the past – as there is evidence to justify the stance.  That is regulation responding to risk.  It is understandable but it does mean that regulation therefore is often two steps behind and risk management a step behind the next real problem that is about to occur.  In the meantime all that market participants can take a punt on is that regulation is addressing the risks that have occurred even if none of us can forecast where the next problem lies.  Proper risk management requires the right culture to operate in.  No amount of regulation can ever change the culture of an organisation unless it is regulated out of existence.

©Jaitly LLP

Changing American requirements

Hedge funds in the United States have traditionally operated under two exemptions from registration prior to the implementation of the Dodd Frank Act registration requirements which came into force on 30 March 2012 .  These exemptions were found in the Investment Company Act 1940.

The first of these exemptions was found in section 3(c)(1) which exempted a fund from registering if its outstanding securities were owned by not more than 100 persons who were accredited persons (having a net worth of more than $1m).  This basic exemption was not as simple as it first sounded as there were a number of permutations that could be applied to it.

The second of the exemptions was found in section 3(c)(7) which exempted a fund from registering if its shareholders belonged to a category of investors referred to as Qualified Purchasers which was defined by reference to their wealth whether held individually or through entities.  There were also some exceptions to this rule such as knowledgeable employees of the manager.  Although section 3(c)(7) does not limit the number of investors the practical effect of SEC regulations and the Exchange Act has meant that the number of investors in such funds was limited to 500 investors in order to avoid more onerous reporting requirements i.e. having more than 500 shareholders would require the fund to register as a public company and provide quarterly reporting.  

There was also another relevant exemption in 203 (b) 3 which exempted a manager from making certain reports if they had less than 15 clients – a hedge fund being treated as a single client.

In 2001 the SEC tried to bring in a registration requirement for hedge funds by interpreting the requirements for the definition of what constituted a client.  This was overturned when the SEC was challenged in Court (Goldstein v SEC).

The Dodd Frank Act following the credit crisis of 2008 brought back registration for advisers to hedge funds exempting only three categories of advisers:   advisers that acted solely to venture capital funds, advisers to private funds with less than $150m in assets under management in the United States and certain foreign advisers without a place of business in the United States.  Advisers depending on the assets they manage will be subject to either state registration or registration with the SEC.  

Recently another Act the Jumpstart our Business Startups Act is expected to affect the way hedge funds are organised and operate in the United States.  This is because the threshold requirement to register as a public company has been increased from 500 to 2,000 shareholders (Title V)  which is likely to mean that hedge funds can become much larger than they have been historically.  Observers have also noted that Title II of the JOBS Act requires the SEC to adopt rules to eliminate the ban on general solicitation and general advertising when issuers are selling securities to “accredited investors”.  Note that this requirement to eliminate the ban does not however appear to extend to the CFTC.  It is expected therefore that there will be some more self generated publicity for hedge funds than has historically been the case in the United States.

©Jaitly LLP

Preserving assets

Yet again there is plenty to write about on regulatory developments but it is worth spending a bit of time on the Lehman client money judgement.

The Supreme Court judgement on Lehman Brothers has reached a sensible result for protecting client assets.

Lord Hope described the basic position in English law where “segregation of money into separate bank accounts is not sufficient to establish a proprietary interest in those funds in anyone other than the account holder.  A declaration of trust over the balances standing to the credit of the segregated accounts is needed to protect those funds in the event of the firm’s insolvency.  Segregation on its own is not enough to provide that protection.  Nor is a declaration of trust, in a case where the client’s money has been so mixed in with the firm’s money that it cannot be traced.  So segregation is a necessary part of the system.  When both elements are present they work together to give the complete protection against the risk of the firm’s insolvency that the client requires.”

These principles were adopted in CASS 7 of the FSA rules creating a statutory trust over client money and providing for segregation of the client money.  

The Lehman insolvency gave rise to three questions over the operation of the client money rules:

  1. When does the statutory trust arise
  2. Where a firm fails, is client money that is identifiable in the firm’s house account to be treated as client money or only money that is in the segregated client accounts
  3. Where a firm fails, who has a right to participate in the client money pool i.e. should it be only those clients whose money was held in the segregated client money accounts or should it be all clients who ought to have had their money held in segregated accounts but which may have been in house accounts at the time of failure.

The treatment of client money can potentially give rise to huge problems because there is a reliance on the financial services firm to recognise the funds as client money and then to treat it appropriately.  If it does not take the two steps to segregate and declare the funds as client money, then the client is exposed at a time when it needs most protecting in the event of a firm’s failure.

On the first question the Supreme Court found that the statutory trust arose upon receipt of the money.  They drew on the Scottish law principles of fiduciary duties owed by an agent rather than on the law of trusts in reaching their conclusion.    They determined on the second issue that all money received as client money was client money regardless of whether it was held in house accounts or in client money accounts.  On the third issue which was closely related to the second and which a number of the judges considered before reaching their conclusions on the second issue –  it was held that distribution of the client money pool should be on a claims basis and not a contributory basis.  i.e. all clients that were entitled to have their money segregated were entitled to participate in the client money pool rather than restricting it to those clients whose money had been placed in the segregated client money accounts.

Although there is complex legal reasoning in reaching these conclusions the practical effect of the judgements is a sensible one for clients.  Clients are not in a position to assess whether a financial services firm has properly segregated client money that is to be treated as such and a failure on the part of the financial services firm not to segregate the client money should not result in a misfortune for the client.

The judgement means that clients no longer need to take steps to verify that their funds have been properly segregated where a regulated firm is applying the CASS rules to funds held on their behalf as client money.   (Something that Jaitly LLP has advised clients in the past to do in order to protect their interests – even though the process of doing so practically was quite difficult.)  

The Supreme Court recognised that this was likely to mean a more complex process for the administrators of the Lehman Administration in distributing the client money pool but it means that clients are not faced with an additional burden of verifying that an authorised financial services firm has carried out its obligation to segregate and place money in a client account.  A process which was difficult even for sophisticated institutional clients.

A sensible result for protecting and preserving assets that belong to clients.

©Jaitly LLP