In May 2009, the Treasury published a discussion paper entitled Developing effective resolution arrangements for investment banks. In this discussion paper the Treasury set out its initial thinking on the steps necessary to improve the regime around the failure of investment firms.
On 16 December 2009, the Treasury published a consultation document which was entitled Establishing resolution arrangements for investment banks. In this consultation document the Government provided further detail on its thinking and outlined more than 30 policy initiatives that are designed to mitigate the impact of the failure of an investment firm.
Chapter 4 of the consultation document set out proposals to improve the protections for investment firm clients at a pre-insolvency stage. The measures considered include:
- Increasing clarity over the allocation of shortfalls in an omnibus account.
- Making client asset officers directly accountable.
- Placing limitations on the ability of investment firms to transfer client money to affiliate entities and jurisdictions where this would be incompatible with the protections in the FSA's Client Assets sourcebook.
- Requiring firms to have the capacity to divide client money into different pools.
- Creating a statutory scheme with fixed terms under which client claims have to be received.
Chapter 5 of the consultation document set out proposals for the possible creation of a client assets trustee. The trustee would have a role separate to the administrator of a firm in insolvency and would be tasked with prioritising the return of client assets and money. The deadline for comments on the consultation document is 16 March 2010.
View Establishing resolution arrangements for investment banks, 16 December 2009