Reuters: Bankruptcy News: MF Global's KPMG and Lehman's PWC seek legal clarity

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MF Global's KPMG and Lehman's PWC seek legal clarity May 8th 2012, 15:07 By Luke Jeffs LONDON | Tue May 8, 2012 11:07am EDT LONDON May 8 (Reuters) - MF Global's European administrator KPMG is teaming up with PricewaterhouseCoopers, Lehman Brothers's administrator, to try to speed up the return of assets and cash to former clients of both failed brokers. KPMG said on Tuesday it will work with PWC to establish whether unsecured funds can be "traced" and treated as if they were secured, following a ruling by Britain's Supreme Court. "As this issue affects both Lehman and MF Global UK, the special administrators will liaise with Lehman administrators with the aim of mitigating the costs of this exercise and maximise efficiency across both cases," KPMG said in a statement. Britain's highest Court said in February Lehman clients whose cash the U.S. investment bank had mixed with its own have the same rights as clients whose cash was kept separately or "segregated", a ruling with implications for MF Global clients. KPMG said at the time the ruling left "lots of grey areas" that would need to be resolved by the court, effectively slowing down the process of returning MF Global UK clients' stock and cash. The administrators hope that by teaming up they can elicit more quickly from the court the guarantees both need to forge ahead with their plans to return monies and assets to MF Global and Lehman clients. Financial firms are legally required to keep money they trade on clients' behalf separately from their own in segregated accounts. The British court said Lehman Brothers had failed to do this "on a spectacular scale". Furthermore, it ruled that client assets and monies held in unsegregated accounts that could be traced should be treated as if they were segregated, a ruling the administrators have argued needs clarification. KPMG is working to retrieve $2.7 billion (1.8 billion pounds) of MF Global client and creditor cash outstanding when the broker collapsed in October last year. But the firm said on Tuesday uncertainty over the court ruling and outstanding claims between MF Global's European and United States-based units meant it could not at this stage improve on the 26 cents on the dollar it has already guaranteed clients. MF Global UK last week filed litigation in a British court over a $700 million dispute with MF Global's U.S. broker-dealer, the broker-dealer's trustee said in a statement. Trustee James Giddens has argued that roughly $700 million at the UK affiliate's estate belongs to the broker-dealer's customers who traded on foreign exchanges. KPMG is separately claiming $300 million from the U.S. administrator on behalf of MF Global UK clients and creditors. MF Global, a U.S.-based futures broker, collapsed on October 31 last year after making bed bets on European sovereign debt. Link this Share this Digg this Email Reprints

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