Client Money Update - Update on Client Money held by Lehman Brothers Bankhaus AG - 23/10/09

This update concerns the status of client monies deposited with Lehman Brothers Bankhaus AG ("Bankhaus") prior to the date of Administration. 

As mentioned in our update of 18 December 2008, US$1 billion of client monies were deposited for LBIE with Bankhaus which was approximately 50% of the total Pre Administration Client Money held by LBIE.  Bankhaus is an affiliate of LBIE and had been used to deposit client monies over the preceding year.  On 12 November 2008 BaFin announced that insolvency proceedings had been commenced in relation to Bankhaus.  A claim on behalf of LBIE clients was filed with the Bankhaus Administrator on 3 February 2009 to recover this deposit.

The Joint Administrators have prepared a list of Frequently Asked Questions which include further information on this matter.

The first Bankhaus creditors' meeting was held on 17 March 2009.  One of the Joint Administrators was in attendance to represent LBIE, however, LBIE was unsuccessful in securing a position on Bankhaus' creditors' committee.  A decision on the status and ranking of LBIE's US$1 billion Client Money claim was expected on 7 July 2009.  However, the Bankhaus Administrator put forward a proposal to delay its decision on adjudicating LBIE's claim to allow Bankhaus to further consider the underlying facts relating to the US$1 billion of client monies.  The Administrators agreed to defer the claim adjudication until 20 October 2009. 

In the intervening period, the Joint Administrators continued to meet with the Bankhaus Administrator to agree facts and contractual agreements between LBIE and Bankhaus including:

• Chronological analysis of the movement in the account into which the US$1 billion was deposited; and
• Posting of the US$1 billion of client monies in Bankhaus' general ledger.

In addition, the Joint Administrators have presented the facts supporting LBIE's Client Money claim to the FSA, the Bank of England and HM Treasury to ensure that the Client Money claim receives the appropriate attention.

At the second Bankhaus' creditors' committee meeting on 20 October 2009, the Bankhaus Administrator stated that the claim on behalf of LBIE clients for recovery of the client monies was rejected.

The Joint Administrators do not agree with the decision of the Bankhaus Administrator. The Joint Administrators will now look to challenge this in the German Courts. The ultimate determination of this challenge may take some time.

Please direct any questions you may have with respect to the above to clientpositionresponses@lbia-eu.com.