Securities in UK Law

Although a repo is structured legally as a sale and repurchase of the securities, it behaves economically like a secured loan, with the securities acting as collateral (see e.g. DCC Holdings (UK) Ltd v Revenue and Customs Commissioners [2011] 1 W.L.R. 44, SC; In the Matter of Lehman Brothers International (Europe) (in Administration) [2010] EWHC 2914 (Ch) at [79], Briggs J; and the definition in Directive 2002/47/EC of 6 June 2002 on financial collateral arrangements, Art 2).

It is common ground that a trust may exist not merely between legal owner and ultimate beneficial owner, but at each stage of a chain between them, so that, for example, A may hold on trust for X, X on trust for Y and Y on trust for B. That is how the holding of intermediated securities works under English law, wherever a proprietary interest is to be conferred on the ultimate investor.

By the time that any of the securities the subject matter of this application were acquired from the street, LBIE and LBF had for many years been engaging in a Rascals process of daily repos in relation to eligible securities of the same type. The mutual book entries resulting from those repos uniformly describe their effect as making LBIE a secured creditor of LBF in respect of the off-leg purchase prices under every repo.

The requirement that the conventional understanding was sufficiently shared between LBIE and LBF, and that LBIE assumed an element of responsibility for it seem to me fully satisfied by their adoption of a mutual system of book-keeping which recorded LBIE as a secured creditor, and by LBF's acquiescence in circumstances where, but for the effective transfer of beneficial title, LBIE would have been unable to satisfy itself that it could continue to act as LBF's agent or broker in the acquisition of securities from the street, consistent with its capital adequacy and regulatory obligations.

That he would sell at a gross under-value, were it not that he had in mind some benefit out of making a loss? It is Just on a par with a case where a company gives its money away. Such a transaction is so outside the ordinary course of business of any trader that the Commissioners were entitled to find that it was not done in the course of trade.