Guidance on client money claims resolution and distribution process

Guidance on client money claims resolution and distribution process

How should client money claims be dealt with and when can administrators distribute funds? Kathy Stones looks at the case of Re MF Global UK [2013] All ER (D)139 (Jun), [2013] EWHC 1655 (Ch), which approved a process to establish a bar date and deal with rejected claims.

The Chancery Division, Companies Court, made an order governing the distribution of funds as client money by the administrators. In order to proceed with a distribution of the balance of the available funds, and to ensure the timely return of client money, a process was needed to deal with rejected claims and unknown claims which could provide a degree of certainty and protection.

Why did the problem arise?

MF Global UK's client money (estimated at between $945m and $951m) was held in trust under the Clients Assets Sourcebook (FSA CASS) rules. However, the FSA CASS rules don't contain any provisions setting out a claims, adjudication or distribution procedure for client money. Successful client money claims are effectively proprietary claims, meaning the assets don't fall within the estate of the debtor. It's surprising that there is nothing equivalent to the bar date provisions for assets of the debtor arising under:

  • the Insolvency Rules 1986, SI 1986/1925, relating to proofs of debt, with late-comers being prevented from disturbing prior distributions, or
  • the Investment Bank Special Administration Regulations 2011, SI 2011/245, relating to the distribution of assets of investment banks

Subscription Form

Related Articles:
Latest Articles:

Already a subscriber? Login
RELX (UK) Limited, trading as LexisNexis, and our LexisNexis Legal & Professional group companies will contact you to confirm your email address. You can manage your communication preferences via our Preference Centre. You can learn more about how we handle your personal data and your rights by reviewing our  Privacy Policy.

Access this article and thousands of others like it free by subscribing to our blog.

Read full article

Already a subscriber? Login

About the author:
Kathy specialises in restructuring and cross-border insolvency. She qualified as a solicitor in 1995 and has since worked for Weil Gotshal & Manges and Freshfields. Kathy has worked on some of the largest restructuring cases in the last decade, including Worldcom, Parmalat, Enron and Eurotunnel.