An agreement reached in the Lehman Brothers liquidation proceedings could pave the way for customers of the failed brokerage to see 100% recovery without using any fund advances from the U.S. Securities Investor Protection Corp.
Under the agreement in principle—which still has to be approved by the U.S. Bankruptcy Court for the Southern District of New York and an English High Court—approximately $38 billion in claims are resolved. The agreement was hammered out between James Giddens, Trustee for the liquidation of LBI, and Tony Lomas, the Joint Administrator of Lehman Brothers International (Europe).
If approved, the agreement will allow both sides to proceed with plans to allocate and distribute the assets to customers and creditors. The two sides hope to finalize the agreement by mid-December and are seeking Court approval in the first quarter of 2013.
SIPC president Stephen Harbeck praised the work of Giddens in reaching this agreement without seeking funds from the SIPC. “SIPC’s goal is always to achieve the maximum recovery for customers and Trustee Giddens’s efforts have yielded the best possible results” Harbeck said.
In April 2011, Harbeck objected to a report from the U.S. Securities and Exchange Commission’s Inspector General that claimed the cost of liquidating Bernard Madoff's firm and Lehman Brothers could deplete the SIPC's $2.5 billion reserve fund.
At that time, Harbeck said the fund contained $1.3 billion and was generating $450 million a year through broker-dealer assessments. (In 2009, the SIPC greatly raised the cost of broker-dealer assessments, which are paid by the broker-dealers. SIPC began to charge a percentage of net operating revenue, instead of the flat $150 fee it had charged before that.)