MF Global explanatory statement part I - KPMG | US

1 EUW_ACTIVE:\38301195\11 \ IN THE HIGH COURT OF JUSTICE No 9527 of 2011 CHANCERY DIVISION COMPANIES COURT IN THE MATTER OF MF Global UK LIMITED (IN SPECIAL ADMINISTRATION) AND IN THE MATTER OF THE INVESTMENT BANK SPECIAL ADMINISTRATION REGULATIONS 2011 _____ explanatory statement (AS MODIFIED ON 19 JULY 2012) part I _____ EUW_ACTIVE:\38301195\11 \ IMPORTANT NOTICE TO CLAIMANTS This document has been prepared by the Administrators and their advisors. It has been reviewed and approved by the Creditors Committee. In preparing this document the Administrators have relied upon their own investigations and information obtained from the Company s records.

2 Unless otherwise indicated, the statements, opinions and information contained in this document are made as at the date of this document and reflect the circumstances existing and the information of which the Administrators were aware at that time. Nothing in this document shall constitute any admission of fact or liability on the part of any of the Administrators or the Company or any other person with respect to any Client Asset. None of the Administrators or their firm, members, partners, directors, officers, employees, agents, advisors or representatives has authorised any person to make any representations concerning the Distribution Plan which are inconsistent with the statements contained herein and if any such representations are made they should not be relied upon.

3 The summary of the principal provisions of the Distribution Plan and related matters contained in part I of this document is qualified in its entirety by reference to the Distribution Plan in part II of this document. Claimants should read and consider carefully the full text of the Distribution Plan. If there is any conflict between part I and part II, the terms of part II shall prevail. Unless otherwise indicated, capitalised terms defined in the Distribution Plan have the same meaning throughout this document. None of the contents of this document is intended to constitute legal, tax, financial or other professional advice given to Claimants.

4 Claimants should take advice from their own professional advisers before taking any action in connection with the Distribution Plan. References in this document: (i) to a numbered Regulation, are to the relevant Regulation of the Regulations; and (ii) to a numbered Rule, are to the relevant Rule of the Rules. CONTACT INFORMATION If you require more information or have any queries, please either: 1. visit the Website at ; or 2. e-mail the Distribution Plan queries team at EUW_ACTIVE:\38301195\11 \ TABLE OF CONTENTS 1 WHAT IS A DISTRIBUTION PLAN? .. 2 2 CLIENT ASSETS.

5 2 3 BAR DATE .. 5 4 WHAT APPROVALS ARE REQUIRED? .. 6 5 REQUIREMENTS OF THE DISTRIBUTION PLAN .. 7 6 THE DISTRIBUTION PLAN HOW DOES IT WORK? .. 9 7 COSTS OF RETURN OF CLIENT ASSETS .. 13 8 PAYMENT OF COSTS AND METHOD OF DISTRIBUTION .. 19 9 TIMING OF DISTRIBUTION .. 20 10 CORPORATE ACTIONS AND MATURED CLIENT ASSETS .. 20 11 UNCLAIMED CLIENT ASSETS .. 21 12 ADJUDICATION .. 21 13 LATE CLAIMS .. 23 14 MODIFICATION .. 23 15 WHAT SHOULD YOU DO NOW? .. 24 16 HOW CAN YOU FIND OUT MORE ABOUT THE DISTRIBUTION PLAN AND ASK QUESTIONS? .. 24 2 EUW_ACTIVE:\38301195\11 \ part I explanatory statement Please note that the purpose of this explanatory statement is to summarise and explain the purpose and main provisions of the Distribution Plan in part II.

6 Claimants should read and consider carefully the full text of the Distribution Plan. If there is any conflict between part I and part II, the terms of part II shall prevail. Unless otherwise indicated, capitalised terms defined in the Distribution Plan have the same meaning throughout this part I. References to value or values shall be to the value at 31 October 2011 unless otherwise stated. 1 WHAT IS A DISTRIBUTION PLAN? Objective 1 (the return of client assets) of the Special Administration Regime requires the Administrators of the Company to ensure the return of client assets as soon as is reasonably practicable ( Objective 1 ).

7 The Regulations and the Rules set out that this may be done through a distribution plan. The Distribution Plan in part II of this document is the first distribution plan produced under the Special Administration Regime. The Distribution Plan sets out the Client Assets that are to be returned to Claimants, how this will be done and how the costs of this process are to be met. Claimants should read the Distribution Plan (set out at part II) under which they can identify their Client Asset Claims and understand the steps which need to be undertaken before Client Assets can be returned.

8 2 CLIENT ASSETS Client assets are defined in section 232(4) of the Banking Act 2009 (the Banking Act ) as assets which an institution has undertaken to hold for a client (whether or not on trust and whether or not the undertaking has been complied with) . This does not include assets transferred to the Company on ATT terms under the Company s Terms of Business (or otherwise), as assets transferred on ATT terms become the Company s property. In the course of dealing with the Company, Claimants and employees of the Company may have used different terms to describe Client Assets which may fall to be distributed under the Distribution Plan.

9 The following terms may have been used by the Company to describe assets which may fall within the definition of client assets under the Banking Act and which may be distributed under the Distribution Plan: retail collateral , being assets held for clients who had been categorised by the Company as retail 1 and which were used by such clients as collateral for derivatives trading or otherwise; and safe custody , being assets held in safe custody which could not be used as collateral for derivatives trading or otherwise. The term ATT collateral , denotes assets transferred to the Company on ATT terms.

10 Such assets do not fall within the definition of client assets under the Banking Act. Accordingly, 1 pursuant to the definition of Retail Client as set out in article 4(1)(12) of the Markets in Financial Instruments Directive (Directive 2004/39/EC of 21 April 2004) (MiFID) 3 EUW_ACTIVE:\38301195\11 \ assets that have been described as ATT-collateral assets do not fall to be distributed under the Distribution Plan. The terms described above do not have any legal effect and are only set out in this explanatory statement for guidance.