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Amid the 1,000-plus page avalanche of post-trial briefs submitted last week in the Lehman Brothers estate’s $13 billion fraud suit against Barclays, a 17-page filing by the Securities and Exchange Commission barely registered. But as Bloomberg reported at the time, the SEC’s post-trial brief contained allegations that were sure to catch Barclays’s attention: The agency claimed that Barclays and Lehman may have violated securities laws when Barclays acquired Lehman’s broker-dealer business in Sept. 2008. The SEC brief asserts that Barclays’ receipt of $1.3 billion in Lehman assets–$769 million in securities held in Lehman’s reserve bank account and $507 million in a debit item in the brokerage’s customer reserve calculation–may have violated the agency’s broker-dealer customer protection rule. The transfers “would cause a violation of the rule, if [they] would increase the deficiency in the account, and [the Lehman brokerage] would not have sufficient funds to satisfy all claims of the remaining customers,” SEC lawyer Patricia Schrage asserted in the agency’s filing. On Tuesday, Barclays fired back in an 18-page motion for leave to file a memorandum of law in response to the SEC and to an earlier brief filed by the Securities Investor Protection Commission. The bank’s message? Hands off, in so many words. Barclays’ lawyers at Boies, Schiller & Flexner claim the SEC is promoting a bogus and inequitable interpretation of its own rules that, even if bankruptcy judge James Peck were to adopt it, wouldn’t affect Barclays’ entitlement to the $1.3 billion in assets. “The timing of the [SEC's] submission appears to have sandbagged the court as well as Barclays,” Boies Schiller partner Jonathan Schiller told us Tuesday. “The submission relied on allegations that are not supported by evidence in the record, and that directly contradict a stipulation signed by the trustee that no factual finding would be made concerning any putative deficiencies.” Barclays’ brief makes a similar point. “The SEC and SIPC have asked this court to adopt positions that are contrary to law, contrary to the factual record in this case, and contrary to the unqualified support they gave to the sale transaction in September 2008 and for many months (if not years) thereafter,” the brief says. “In particular, this is the first time that the SEC has seen fit to articulate any views at all in this case since its express and vigorous support for the sale.” Barclays contends that both the SEC and SIPC supported its Sept. 2008 acquisition of the very assets the agencies are now questioning, and that the agencies did so knowing the sale would create a lot of uncertainty about the Lehman broker-dealership’s customers and assets. In addition, the bank claims it would have a right to the funds regardless of the SEC’s interpretation of the law, because its contract entitled it to securities from the Lehman brokerage reserve account “or securities of substantially the same nature and value.” Judge Peck is expected to issue a ruling in the megabillions case in January or February.

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