Treasury has published the interim report resulting from the first phase of the independent review of the Investment Bank Special Administration Regulations (SAR) 2011. The report finds that:

  • the SAR has benefitted the three firms using it so far, and should therefore be retained;
  • the statutory objective of returning client assets should extend to their transfer, so that it could be fulfilled by transferring clients’ relationships and positions;
  • the bar date mechanism should also be available for setting a deadline to the filing of client money claims;
  • administrators should have limited immunity;
  • firms need to improve the quality of record-keeping, reconciliation and clarity as to entitlement to assets; and
  • there could be quicker payment by the Financial Service Compensation Scheme, or its funds could be used to facilitate transfers of business to another firm.

The final report will be published in July 2013. It will analyse the interaction between the SAR review and FCA’s review of the Client Assets Sourcebook (CASS) and the segregation and porting provisions under the European Market Infrastructure Regulation (EMIR). Other areas for further exploration in the final report include whether client claims should have preference over unsecured creditors and what lessons can be learnt from Lehman and MF Global administrations and related case law. (Source: Review of Investment Bank Special Administration Regulations 2011: by Peter Bloxham)