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ARTICLE · 12 APRIL 2012

Client Money Is Held On Trust On Receipt, Not On Segregation

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A recent appeal in the Supreme Court was concerned with the meaning and application of the "client money rules" and "client money distribution rules" contained in Ch 7 of the Client Assets Sourcebook ("CASS 7") issued by the Financial Services Authority for the safeguarding and distribution of client money in implementation of the Markets in Financial Instruments Directive 2004/39/EC ("MiFID").

United KingdomFinance and Banking
Emma Day
Emma Day

A recent appeal in the Supreme Court was concerned with the meaning and application of the "client money rules" and "client money distribution rules" contained in Ch 7 of the Client Assets Sourcebook ("CASS 7") issued by the Financial Services Authority for the safeguarding and distribution of client money in implementation of the Markets in Financial Instruments Directive 2004/39/EC ("MiFID"). Re Lehman Brothers International (Europe) (In Administration) [2012] UKSC.

The central feature of the client money rules is the requirement that CASS 7 imposes on MiFID firms to segregate money that they receive from or hold for or on behalf of their clients in the course of MiFID business by placing it into a client money account so that it is kept apart from the firm's own money.

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