Following a Financial Conduct Authority ("FCA") Supervisory Notice, stockbroking company Pritchard Stockbrokers Ltd ("PSL") was made subject to an investment bank special administration order in March 2012. The client money pool comprised approximately £23.5million. After agreeing 97% of the claims, a number of clients with potential claims could not be traced by the special administrators. The FCA agreed to modify the relevant client money rules and allow PSL to finally distribute the pooled fund, extinguishing the claims of any unresponsive clients. The special administrators sought directions from the court authorising them to distribute the client money on this basis.
The court held that whilst PSL did not need permission to distribute on this basis, for their own protection, the special administrators should seek the directions of the court given that the proposed method of distribution was unusual. Nevertheless, the court followed Re Alpari (unreported, 29 September 2016) and held that the claims of any unresponsive clients could be extinguished.
In providing guidance to administrators, the court noted that it would always be concerned to see, amongst other things, the precise steps which the administrators had caused the company in special administration to take in order to identify clients.
Even where the FCA formally authorises a modification of the relevant client money rules, for their own protection, special administrations should seek the directions of the court and provide the court with sufficient material explaining their reasoning.
Re Pritchard Stockbrokers Ltd  EWHC 137 (Ch)