Wealthtek LLP, Re
[2024] EWHC 2520 (Ch)
Blankstone Sington Limited (In Special Administration), Re
7 May 2024
[2024] EWHC 1111 (Ch)
High Court
A failed investment bank had to return client money. The judge approved a plan to do this fairly and quickly, using existing legal rules to deal with any arguments about who gets what. The plan was backed by other involved parties, and the judge made sure it was all done properly within the law.
Key Facts
- •Blankstone Sington Limited (BSL), an investment bank, entered special administration.
- •Administrators applied for court approval of a distribution plan for client assets (£271,644,156) and client monies (£11,590,925 sterling, US$415,207 and 1,310,751 Euros).
- •BSL was a trustee of a statutory trust of client monies under CASS 7.
- •The IBSA Regulations govern the administration, prioritizing the return of client assets.
- •A soft bar date was set for claims, and a distribution plan was created for returning assets.
- •The court's approach considered fairness, reasonableness, creditor/client committee approval, FCA input, and administrators' judgment.
- •The inherent jurisdiction was used to address disputed client money entitlements (CMEs).
- •An FCA waiver allowed the transfer of client money pool (CMP) without client consent.
- •The distribution plan included provisions for disputed claims, late claims, and specific asset types.
- •A Nominated Broker was selected to acquire BSL's nominee company holding most client assets.
- •No parties opposed the distribution plan.
Legal Principles
IBSA Regulations modify the usual administration regime to address specific issues in investment bank insolvencies, prioritizing client asset return.
IBSA Regulations, MF Global UK Limited [2012] EWHC 3789 (Ch), Re SVS Securities PLC [2020] EWHC 1501 (Ch)
Court approval of a distribution plan requires fairness, reasonableness, consideration of creditor/client committee and FCA input, and weight given to administrators' judgment.
Re SVS Securities PLC [2020] EWHC 1501 (Ch)
Inherent jurisdiction allows courts to give directions to trustees to distribute trust property on particular bases when just and expedient, including using In re Benjamin orders to distribute based on practical probabilities.
Re MF Global UK Limited, Re Beaufort Asset Clearing Services [2018] EWHC 2287 (Ch), Re SVS Securities PLC, In re Benjamin [1902] 1 Ch 723, In re Green’s Will Trust [1985] 3 All ER 455
CASS 7A.2.2R(1) requires client monies held upon entry into special administration to be treated as pooled and distributed rateably.
CASS 7A.2.2R(1)
FCA waivers can modify statutory trusts, allowing transfers of CMP without client consent.
Re SVS Securities PLC, CASS 7AS.2.4R(4)
Outcomes
Court approved the Distribution Plan for client assets.
The plan was fair, reasonable, unopposed, and supported by the Creditors Committee, FCA, and FSCS. It prioritized efficient asset return and maximized FSCS compensation.
Court approved the Administrators' proposals for client monies, subject to amendment.
The proposals largely followed the client asset distribution plan but needed amendment to avoid exceeding the court's inherent jurisdiction in dispute resolution.
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