The Banking Act 2009 required the Treasury to review the ‘Investment Bank Special Administration Regulations 2011’ by February 2013. The Act states that the review had to be carried out by a person with expertise in the law of insolvency or financial services and that he or she must report to the Treasury on how far the regulations achieve their objectives and whether they should continue to have effect. The Treasury will lay the report before Parliament.
The initial review was expected to recommend further work, as allowed for in the Act. This second phase has already begun and will be completed in the summer 2013. The review will be co-ordinated with the FCA’s own review of its Client Assets Rulebook, which is expected to go out for further consultation over the summer.
The SAR was developed in response to the Lehman administration. Four firms have been placed in special administration since the regulations came into force in February 2011: MF Global UK Limited, Worldspreads Limited, Pritchard Stockbrokers Limited and Fyshe Horton Finney Ltd.
The SAR was developed to increase the confidence of market participants in the effectiveness of the UK’s insolvency regime as it applies to investment firms. The statutory objectives of the SAR are: a) identifying, protecting, and facilitating the return of, client assets; b) protecting creditors’ rights; ensuring certainty for investment banks, creditors, clients, liquidators and administrators; c) minimising the disruption of business and markets; and d) maximising the efficiency and effectiveness of the financial services industry in the UK.
Peter Bloxham was a partner at Freshfields (1983-2006), practising in restructuring and insolvency, with a focus on financial services. He was instrumental in setting up Freshfields’ “Restructuring and Insolvency” group and led it up to shortly before his retirement from the firm in 2006. He has since continued to practise on one off assignments, principally in the financial services sector.
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