SVS Securities Plc, Re The Investment Bank Special Administration Regulations 2011

When approving a distribution plan under the investment bank special administration regime, the court must exercise its own discretion and decide whether the plan provides a fair and reasonable means of returning client assets as soon as reasonably practicable.

Particular weight should be given to the administrators’ professional judgment, the creditors’ committee’s position, client representations and the FCA’s response. Where those with an interest have had a proper opportunity to make representations and have not objected, the court should be slow to substitute its own assessment.

Client assets may be transferred to another regulated firm where the statutory conditions are met. A transfer of pooled client money may also be authorised where regulatory requirements are waived or satisfied. The court has an inherent jurisdiction in relation to the administration of trusts to establish a procedure for resolving client money claims.

SVS Securities plc was in special administration. Its administrators sought approval of a distribution plan under the Investment Bank Special Administration Regulations 2011 and the related Rules. The plan provided for the bulk transfer of client assets and contracts to an FCA-regulated nominated broker.

SVS, as trustee of pooled client money, separately sought directions permitting the transfer of approximately £23.7 million to the nominated broker and an order establishing a procedure for determining and distributing client money claims.

The central issues were whether the distribution plan should be approved, whether the client money could lawfully be transferred, and whether the court could direct a claims and distribution procedure under its inherent trust jurisdiction.

1. Distribution plan. The statutory preconditions for approval were satisfied. The court’s task under Rule 146 was discretionary. The plan had to provide a fair and reasonable means of returning client assets in pursuit of Objective 1: returning them as soon as reasonably practicable.
2. The court gave particular weight to the administrators’ professional judgment, the creditors’ committee’s approval, the absence of client objections, and the FCA’s position. Those factors were not conclusive, but where interested persons had received a proper opportunity to make representations, the court should be slow to withhold approval or substitute its own assessment. The plan was approved.
3. The transfer of client assets to the nominated broker was a permitted method of returning assets. The statutory definition of return was broad enough to include the transfer of assets to a third party. The same approach applied to post-administration fruits of client assets, which could sensibly be transferred with the underlying assets.
4. Client money. SVS had power to transfer the pooled client money under CASS 7A. The FCA waiver removed the requirement for specific client consent, and the nominated broker had provided the required contractual undertakings. The court directed that SVS was at liberty to make the transfer.
5. Claims procedure. CASS 7 and CASS 7A contained no equivalent proving process for resolving disputed client money claims in an administration. Following the approach in MF Global UK Ltd (in special administration) (No 3), the court exercised its inherent jurisdiction in relation to the administration of trusts. It approved a procedure under which claims would be notified by a bar date and would be accepted only if agreed by the administrators or admitted by the court, with appropriate reserves for unresolved claims.