The United States Bankruptcy Court for the Southern District of New York recently entered a memorandum opinion in the Lehman Brothers Inc. proceeding under the Securities Investor Protection Act (SIPA). The Bankruptcy Court’s opinion concerned the issue of whether claims asserted by counterparties in relation to bilateral repurchase agreements qualified for treatment as customer claims under SIPA. Judge James M. Peck concluded that such claims were not entitled to customer status because a necessary predicate to a customer claim is the entrustment of property with the broker-dealer, which the counterparties were unable to establish. The decision is significant because the Bankruptcy Court reached a different conclusion than the United States District Court for the District of New Jersey, the only other court to address the issue, albeit in the context of hold-in-custody repurchase agreements.View full memo, "S.D.N.Y. Bankruptcy Court Finds That Claims Against Lehman Brothers Inc. Related to Bilateral Repurchase Transactions Do Not Qualify for Customer Status"
