UK: England and Wales: protecting client money

The Court of Appeal gave judgment in CRC Credit Fund Ltd & Ors v GLG Investments Plc (Sub-Fund: European Equity Fund) & Ors [2010] EWCA Civ 917 earlier this month. This is an important decision concerning one aspect of investor protection under the Financial Services and Markets Act (2000). A summary of the decision has been published here by the ICLR as part of its WLR Daily service, the headnote for which reads:

Chapter 7 of the Clients Assets Sourcebook (“CASS 7”), issued by the Financial Services Authority (“FSA”) under s 139 of the Financial Services and Markets Act 2000, created a statutory trust in respect of client money (obtained by an investment firm for the purposes of its investment business on behalf of those clients) which arose immediately on receipt of that client money and not when it was paid into a segregated account".

It is also worth noting this summary of CASS7 provided by Arden LJ in her judgment (at para. [77]):

CASS7 is a code for dealing with client money but is not a substitute for, or a codification of, the general law. The default rules of the general law of trust may fill in gaps and provide additional remedies in the protection for investors provided by CASS7. The principle of pari passu distribution also forms part of the legal background which the court must keep well in mind".