Part II United Kingdom, 7 Extended Liens

Subject(s):

Lien — Securities clearing system — Securities lending — Securities settlement system — Security interest

During the course of the Lehman insolvencies it was discovered that the Lehman companies had used a number of different standard documents to record their terms of business which included provision for a security interest over the counterparty’s property. The important distinguishing feature of some of those security interests was that the relevant Lehman entity purported to take security not only for sums due to it but also for sums due to any other Lehman entity. Such security interests came to be known as ‘extended liens’—a label which is potentially misleading for an English lawyer because the security interests in question were more likely to be correctly characterized as floating charges. ‘Lien’ in this context is merely a generic term for different types of security interest. The chapter looks at the efficacy of extended liens.