Client Money & Asset Protection

Client Money

The MF Global bankruptcy filing again highlighted the danger of investment banks/brokers not properly segregating client money.

Irrespective of regulatory measures taken after the Lehmans collapse, some risks still exist under FSA Client Money Rules.

During the implementation of MIFID in 2007, without realising, many clients were taken out of Client Money protection.

The right to Client Money protection in some agreements is overridden by provisions in other agreements with the same broker, many times in a prime brokerage agreement.

Whether money is in fact held in a client money trust account or sometimes held in jurisdictions with no client money protections.

We assist our clients with:

re-negotiating back contractual rights to Client Money protection in agreements with investment banks/brokers.

assessing if MIFID amendments introduced by investment banks/brokers affect Client Money segregation.

other Client Money protection measures in view of latest Lehmans case law.

See also our widely read series on Client Money (parts 1, 2, 3, & 4) published in Reuters Thomson, interviews held with us and where we were quoted on this subject.

Asset Protection

Clients who keep excess securities collateral and margin with investment banks/brokers sometimes unknowingly have given title transfer or rights of use to such excess collateral or margin.

In the event of a bankruptcy of the investment bank/broker, clients will be in the same position as an unsecured creditor.

We assist our clients with:

negotiating the acceptable level of title transfer/rights of use to be given on excess securities and margin.

the best structures under which excess securities collateral and margin can be held in custody or with independent third party custodians.