The Wealth Finance Brief - March 2015
Welcome to another issue of the Wealth Finance Brief, in which we cover a broad spectrum of topics which we hope you will find relevant to the private banking world.
We have updated our briefing paper "Lending to Individuals" in light of the changes to the UK consumer credit regime which came into force last April. Also on the theme of dealing with individuals, we consider a recent case which involved a guarantee held to be validly granted by the chef Gordon Ramsay, despite not having been actually executed by him. We also provide a general overview on the doctrine of sovereign immunity and what impact this may have on a private banking transaction.
On another interesting and thorny subject, we take a look at the potential for fraudulent activity on private banking transactions and the extent of a lender's (and its customers') duty not to facilitate such fraud. We have taken the opportunity to provide a summary of the objectives and key themes coming out of the second Markets in Financial Instruments Directive (“MiFID II”) and the potential impact on your business.
Finally, we often receive enquiries about how to take effective security over intellectual property and so we have drafted a detailed briefing on this topic.
Hannah Rowbotham, Editor
Lending to Individuals
When lending to an individual borrower, or seeking to obtain a personal guarantee or security from an individual, a lender will need to consider a number of matters, and should ideally take advice from suitably experienced counsel to ensure that the transaction is enforceable and to avoid the risk of liability in the regulatory context.
This briefing paper seeks to outline and explain some of the relevant legislation, regulatory issues and other factors that lenders operating in the private wealth sphere should consider in financing transactions involving individuals.
Execution of Guarantees
Seeking to enforce and make demand under a personal guarantee can be a minefield and we have previously written on the execution requirements of a guarantee and the importance of the guarantor obtaining independent legal advice: please see our briefing paper entitled "Enforcing Against a Personal Guarantor". However, the recent case of Gordon James Ramsay v James Love* held that an individual was bound by the terms of a personal guarantee even though he had not executed the document himself: it had been executed by a signature machine used by a business colleague on his behalf.
* Gordon James Ramsay v Gary Love  EWHC 65 (Ch), 20 January 2015
Sovereign immunity: considerations for lenders
Sovereign immunity is a legal doctrine by which the sovereign or state cannot commit a legal wrong and is immune from civil proceedings or criminal prosecution. The doctrine stems from the ancient English principle that the monarch can do no wrong. In this article, we look at the key considerations for lenders when dealing with a sovereign or state in a transaction.
Duties not to facilitate fraud
Fraud and forgery have always been an issue for banks and customers alike in the transfer of money and these days, with the electronic transfer of money, the risks are even greater. This briefing paper explores what duties banks and their customers owe not to facilitate fraud.
MiFID II: A Summary
You would have had to be living in a very remote, dark cave to have missed the spectre of MiFID II (to give it its full name: the second Markets in Financial Instruments Directive (“MiFID II”)) over the past 12 months. However, notwithstanding the numerous column inches penned on the subject, many people are still left asking what MiFID II is really all about and, more importantly, whether it will have an impact on their business. The answer to the latter question, if your business involves the distribution and trading of financial instruments in the EU, is highly likely to be answered in the affirmative and this note aims to provide a concise explanation in respect of the former.
Taking Security over IP
Intellectual property rights are increasingly valuable in today's high tech work and accordingly, taking security over intellectual property rights is becoming increasingly popular with lenders. However, taking security over intellectual property is not a straightforward exercise. In fact, when taking this security, there are a wide range of factors that a prudent lender needs to consider. This briefing paper seeks to explore the different types of intellectual property rights over which security can be granted and the ways in which a lender can take, perfect and enforce its security over such rights.