EC3 Brokers administration: court approves client money distribution scheme under CASS 5

In a judgement handed down on 14 April 2026, Chief ICC Judge Briggs approved a scheme of distribution for client monies held by EC3 Brokers Limited (in administration), providing helpful guidance on the interaction between paragraph 63 of Schedule B1 to the Insolvency Act 1986 and the FCA's Client Asset Sourcebook (CASS 5) in the context of a failed insurance intermediary.

EC3 Brokers was a regulated insurance broker, registered with Lloyd's of London and regulated by the FCA, which entered administration on 25 November 2022 following a winding-up petition from HMRC and subsequent appointment of administrators by Santander UK plc as qualifying floating charge holder. At the date of administration, the company held approximately £13m of client money across multiple currencies, with accrued interest of some £300,000 by the date of hearing.

The administration has proceeded under objective (c) of paragraph 3(1) of Schedule B1 — realisation of property for distribution to secured or preferential creditors — with no anticipated return for unsecured creditors.

Record-keeping and reconciliation difficulties

The joint administrators encountered substantial difficulties in reconciling client money entitlements. The company had operated three separate record-keeping systems: an early Excel spreadsheet covering transactions from 2013 to around 2021; a second spreadsheet introduced alongside the Global XB Insurance System from 2016; and a third spreadsheet for a property wholesale division from August 2020. The Global XB system was found to be unreliable, and material discrepancies existed between the spreadsheet data and system records, making client-by-client reconciliation impossible in many instances.

Further complications arose from payments made by third parties on behalf of clients, the company's predominantly overseas client base (spanning North and South America, Australia and New Zealand), unallocated monies, foreign currency reconciliation issues, and the difficulty of determining, in a number of cases, whether risk transfer arrangements under CASS 5.1.5AR were in place.

The scheme and FCA rule modification

The FCA exercised its rule-making powers to modify CASS 5.6.7R to facilitate the proposed scheme, subject to ten conditions — the first of which required a sealed court order approving the scheme before any distribution could proceed.

The scheme adopts a two-stage proving process, with insurer clients submitting claims before non-insurer clients, on the basis that insurer records are more likely to be accurate and cross-referenceable. Where risk transfer arrangements could not be determined, the scheme proceeds on the presumption that no risk transfer applies — a rebuttable presumption — treating the relevant funds as held for non-insurer clients. The court confirmed this approach as consistent with the protective policy of CASS 5, which prioritises non-insurer clients.

Judge Briggs reaffirmed the principles governing paragraph 63 applications, noting that directions must be consistent with an administrator's statutory functions, must not place the officeholder in a position of conflict, and cannot be used to validate ordinary commercial judgements or as a substitute for available statutory remedies. Applying Re Nortel Networks (UK) Ltd [2016], the court confirmed it is satisfied that the proposed exercise is within the administrators' powers, that the administrators hold a genuine and rational view that the scheme benefits the company and its creditors, and that no conflict of interest arises.

An "Alpari order" was made setting a bar date for a proprietary claim asserted by a Mr Salamh in respect of USD 564,000 allegedly paid as a deposit in connection with a nickel wire investment transaction. In the absence of supporting evidence, he was given 28 days to substantiate his claim before losing any entitlement against the client money pool.

Costs and remuneration

Costs incurred to 27 February 2026 of £1,084,949 plus VAT were approved in full, with projected further costs of £702,068 plus VAT authorised to cover completion of the distribution. The court applied the Re Berkeley Applegate principle, endorsing the analysis in Allanfield Property Insurance Services Ltd [2016] that costs properly attributable to the distribution of a statutory trust pool are recoverable from that pool under CASS 5.3.2R(4).