Barclays Fined £38m for Failing to Safeguard Client Assets

25 09 2014

In the highest fine ever imposed for client assets breaches, pursuant to the Financial Services and Markets Act 2000, the Financial Conduct Authority (FCA) has fined Barclays £37,745,000 because of the bank’s failure to properly protect clients’ custody assets worth £16.5 billion. The majority of these belonged to the bank’s Affiliates (£13.5 billion) and its Affiliates’ clients (£2.7 billion) – read Final Notice here. Had Barclays come to be plagued by the onset of insolvency, its clients ran the risk of incurring extra costs, lengthy delays or losing their assets. The bank’s breaches arose from significant weaknesses in its systems and controls and a historical focus on business lines and products traded, rather than giving adequate consideration to which legal entity was conducting the relevant business.

For David Lawton, FCA director of markets, “Barclays lack of focus on the rules was unacceptable” because the FCA’s “on-going scrutiny of firms’ compliance reflects the importance of the regime, which protects custody assets worth £10 trillion held in the UK.”

Tracey McDermott, the FCA’s director of enforcement and financial crime, considered that:

Barclays … exposed its clients to unnecessary risk.

And she remarked further that:

All firms should be clear after Lehman that there is no excuse for failing to safeguard client assets.

Read the rest of this entry »





UK Supreme Court: Case Preview: Securitisation and the Balance Sheet Test

23 02 2013

BNY Corporate Trustee Services Limited and others (Respondents) v Neuberger Berman Europe Ltd (on behalf of Sealink Funding Ltd) and others (Appellants) UKSC 2011/0086 and BNY Corporate Trustee Services Limited and others (Respondents) v Eurosail-UK 2007-3BL PLC (Appellant) UKSC 2011/0199 shall be heard by the UK Supreme Court on 25 and 26 February 2013. Lord Hope of Craighead DPSC and Lord Walker of Gestingthorpe, Lord Mance of Frognal, Lord Sumption and Lord Carnwath of Notting Hill JJSC will hear these appeals. This hearing can be viewed online during Court hours here.

Facts

Interest-bearing Notes were issued by a special purpose vehicle, Eurosail-UK 2007-3BL PLC (“the Issuer”), formed to hold income-producing assets, namely mortgage loans. Due to the insolvency of Lehman Brothers (see the earlier case decided by the UK Supreme Court involving Lehman Brothers here), with whom the Issuer had entered into swap agreements, the Issuer suffered a significant deficiency in its net asset position. The terms governing the issue of the notes provided that on specified Events of Default an enforcement notice could be served, the effects of which included altering the respective priorities of the Noteholders for repayment of capital and interest. One such Event of Default involved the issuer being unable to pay its debts within the meaning of section 123(2) – definition of inability to pay debts; “a company is also deemed unable to pay its debts if it is proved to the satisfaction of the court that the value of the company’s assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities” – of the Insolvency Act 1986. The trustee of the Noteholders’ rights, BNY Corporate Trustee Services Ltd, commenced the current proceedings seeking a determination of whether that event of default had occurred. Read the rest of this entry »





Rubin and New Cap: Massive UK Supreme Court Ruling on International Insolvency, Enforcement and Jurisdiction

26 10 2012

Rubin & Anor (Joint Receivers and Managers of the Consumers Trust) v Eurofinance SA & Ors [2010] EWCA Civ 895 and New Cap Reinsurance Corporation Ltd & Anor v Grant & Ors [2011] EWCA Civ 971 were interesting cases and threw up important issues in international insolvency law. The UK Supreme Court has decided these cases as Rubin & Anor v Eurofinance SA & Ors [2012] UKSC 46. Broadly, the court’s judgment shed much needed light whether a foreign court’s order or judgment to set aside anterior transactions such as preferences or transactions at an undervalue (or avoidance proceedings) were (1) recognisable and enforceable in England and Wales and (2) enforceable through the international assistance provision of the UN Convention on International Trade Law (“UNCITRAL”) Model Law – which is implemented through the generally applicable Cross-Border Insolvency Regulations 2006 (“CBIR”) – or the assistance provisions of section 426 of the Insolvency Act 1986 (“IA86”) which applied to a limited number of countries including Australia. The Supreme Court held that the Dicey Rule, set out below at the end of this post, which arises from the operation of common law and  Foreign Judgments (Reciprocal Enforcement) Act 1933  (“the 1933 Act”), applied to foreign judgments in avoidance proceedings in insolvency.

Background in the Court of Appeal

I. Rubin & Anor (Joint Receivers and Managers of the Consumers Trust) v Eurofinance SA & Ors [2010] EWCA Civ 895

Rubin and others, the appellants (A), were receivers who appealed against Nicholas Strauss QC’s [2009] EWHC 2129 (Ch) decision to dismiss their application for enforcement of a New York judgment against Eurofinance and others, the respondents (R) who cross-appealed against the recognition of the New York proceedings as foreign main proceedings and the recognition of the appointment therein of A as foreign representatives. R had created a trust, operating under English law, and conducted a sales promotion scheme in Canada and the US. Money from the scheme received by the trust was distributed to R and others. Read the rest of this entry »





Re Globespan Airways: Administration, Liquidation and Registration

3 09 2012

Re Globespan Airways Ltd (In Liquidation) also called Cartwright & Anor v The Registrar of Companies [2012] EWCA Civ 1159 (24 August 2012), read judgment.

The Court of Appeal (Lord Neuberger MR, Arden and Moses LJJ) has unanimously held that it was not possible for an administrator of a company to convert administration into a creditors’ voluntary liquidation (CVL) by simply giving a conversion notice to the Registrar of Companies  (“the registrar”) because conversion only occurred once the registrar had registered a notice on the company’s file at Companies House.

In taking the above approach, the Court of Appeal has reversed Briggs J’s earlier decision that where a notice of movement from administration to CVL under Schedule B1 (“administration”) paragraph 83 of the Insolvency Act 1986 (“the IA 86”) was received by the registrar before the termination of the administration, paragraph 83(4) was to be interpreted as meaning that the date of receipt of the notice was the effective date of registration, regardless of whether the administrative steps necessary for registration had been completed. Read the rest of this entry »