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
maximize efficiency across both cases," KPMG said in a
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
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
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
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
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.
(Reporting by Luke Jeffs)
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