Welcome back to the Fides Weekly Update – a round-up of the week’s key news and developments in legal and compliance.

Feel free to tweet us @Fides_Search, we would love to hear from you!

This week:

1) A tipping point for Talent Strategy?

Law firms must prepare effectively now to ensure that they are not left behind at the end of the decade, or so argued a report published this week from Deloitte Developing legal talent: Stepping into the future law firm.

According to the report, increasing client expectations combined with external factors such as rapid technological advancement and the shifting of workforce demographics and expectations, will lead to a ‘tipping point’ for individual firms in 2020 which will impact the competitive landscape within the sector and the role of talent within law firms.

Although the employment of solicitors into top corporate firms has increased by a fifth over the past decade, the report identified a bigger shift in skills and expectations by law firms, who have already identified a mismatch in the skills being developed through education and those required in the workplace. “We believe that the most successful law firms will be those agile enough to flex resources to meet client’s needs at an efficient price” the report stated. “They will need access to lawyers who have a broader skill set and are not just technically competent lawyers.”

Further technological advances and continued client demand for a better value of service mean that future skill requirements at law firms will change over the next decade. With the growth of automation opportunities through robotics, algorithms and Artificial Intelligence, lower skilled jobs will be replaced with the highly skilled roles created to develop and manage this new technology. To an extent this change has already started with increasing demand for legal knowledge engineers, legal technologists and legal process analysts. As clients drive to keep costs low, law firms have turned to the hiring ‘non-traditional and transient employees’ – such as project managers, sales executives and dealmakers – to ensure efficiency, value for money and the availability of low cost options for clients. This led The American Lawyer to herald the move of the four-person Legal Project Management team from Berwin Leighton Paisner to Herbert Smith Freehills to be its most prized lateral hire of 2015.

Beyond considering individual business needs, and what sort for leaders law firms need to develop to strive in the future (Through the consideration of diversity initiatives, succession planning and alternative skillsets), law firms also need to meet the individual expectations of their employees regarding opportunities and responsibilities within their role, as well as personal development and the firm’s alignment to social values. With 71% of UK millennials surveyed expected to leave their current employer in the next five years, this becomes especially pertinent within the legal sector given the large demographic of partners expected to retire by 2020, as well as alternative career options in-house and increasing competition from ABS and ‘new law’ firms.

As such, talent strategies will be will be key to dealing with future challenges as concludes the report. By considering the number and type of people needed in the future, and how to attract, retain and change skills within individual organisations, there is a clear opportunity for UK law firms who evaluate how they cultivate talent now to make competitive business gains in the future.

2) Fried Frank conquer the City

Fried Frank’s record-breaking 2015 financials were released this week, highlighting the successful execution of their 2014 ‘realignment’ strategy, which involved the firm focusing on its core practice areas and locations.

The firm’s total revenue increased by 9.7 per cent in 2015 to $504m, whilst profit per equity partner reached a new high of $2.2m, 21 per cent higher than 2014. Net profit also rose by 18 per cent to $228.5m.

 It can be assumed this growth is attributed to the rigorous assessment carried out by the firm in 2014 when former Goldman Sachs deputy general counsel David Greenwald was appointed new chairman. The new strategy placed greater emphasis on costs and efficiency, cutting loose any areas operating at a loss. Their assessment concluded that the firm’s most profitable operations existed in US and Europe, leading to their decision to close offices in Hong Kong and Shanghai.

Greenwald took a risk in making such bold decisions and eliminating any resources that didn’t justify the costs. He has managed to change firm culture and his experience working in-house enabled him to create initiatives that would maximise efficiency and productivity at all levels of firm structure. New initiatives included a partner self-assessment process and a timekeeping policy that fines partners $100 per day if they are late to record their weekly billable hours.

In particular, London has been a remarkable area of growth and is also where the firm have made their most high-profile lateral hires in the last 12 months. This is a result of the impressive restructuring Fried Frank’s London office has been carrying out since 2014. To enable greater efficiency, the firm cut headcount significantly, dropping their London team to below 20. They have subsequently expanded to a 45 lawyer office, exceeding the previous headcount and are likely to continue to grow. Their lateral hires have been particularly strategic, only taking on high-class talent in their core practice areas.

Private equity and restructuring & insolvency have been the most active hiring spaces for the firm as Kirkland & Ellis’ Graham White joined the firm in October 2014 to head up their European private equity practice and London office, followed by a team of three funds partners also from Kirkland. Additionally, Ashley Katz joined the firm more recently from Mayer Brown, where he co-led their restructuring, banking and insolvency practice.

Fried Frank have given themselves a strong footing in the market and built a solid foundation for further growth. After the announcement of their upcoming office move to 41 Lothbury, which is double the size of their current City office, alongside their claim to be “understaffed” in a number of practice areas, including real estate, private equity, M&A and asset management, it is likely to see a continuation of significant lateral hiring from the New York-based firm.

Movers & Shakers of the week

Merger talks

BLP and Greenberg end merger talks

The transatlantic merger plans between Berwin Leighton Paisner and Greenberg Traurig have been called off due to differences in individual pay models, firm culture and other factors. Creating a mammoth real estate and infrastructure practice, with a revenue in excess of $1bn, was an exciting prospect; however, the lack of ‘common ground’ was too considerable a factor to progress any further.

Appointments

Addleshaw Goddard elect new senior partner

Corporate finance head Charles Penney has been appointed new senior partner at Addleshaw Goddard

Lloyds assigns a head of legal for ring-fencing

Frances McLehman was appointed head of legal for ring-fencing at Lloyds Banking Group, after having been previously seconded to the bank as interim head of corporate and M&A legal in 2014 from Berwin Leighton Paisner.

Ashurst appoint new Italian managing partner

Capital markets partner Stephen Edelmann will replace Domenico Gullo as managing partner of Ashurst in Italy.

Moves

Freshfields elects competition head in Hong Kong

Alastair Mordaunt has joined Freshfields Bruckhaus Deringer as a partner in their Hong Kong office, moving from Clifford Chance in London. He will become the firm’s new head of competition in Hong Kong.

Spotify gains Microsoft GC

Microsoft general counsel and corporate vice president Horacio Gutierrez is to become general counsel at Spotify

Eversheds gain 3-strong pensions team in London

Partner and former head of pensions at Squire Patton Boggs Charmian Johnson will join Eversheds along with two associates in their Manchester office

W&C strengthen Belgian finance practice

Former Shearman & Sterling partner Hadrien Servais joins White & Case’s Global Banking Practice, based in Brussels

EU Law partner joins Heuking Kühn Lüer Wojtek

Ursula O’Dwyer has been hired into the Brussels office of Heuking Kühn Lüer Wojtek. She previously worked at Philip Lee and founded their Brussels office.

HSF make international arbitration hire in Frankfurt

International arbitration specialist Patricia Nacimiento will become a partner at Herbert Smith Freehills in Frankfurt, joining from Norton Rose Fulbright

Dentons bolsters Dubai disputes practice

King & Wood Mallesons partner Matthew Showler has joined Dentons partnership, based in their Dubai dispute resolution practice

Jones Day hires new lead for non-patents IP litigation practice

Jones Day have appointed Rebecca Swindells as head of the non-patents IP litigation practice. She joins from Fieldfisher

Mischon further boost their commercial disputes team

Addleshaw Goddard partner Sonia Campbell has exited the firm to join Mischon de Reya, specialising in insurance litigation

Ince & Co hires Dubai corporate heavyweight

Corporate partner Tom Briggs has joined Ince & Co’s Dubai office after having spent three as head of corporate/commercial team in Bahrain at Charles Russell Speechlys.

Office Openings and Closings

Fasken Martineau relocate to smaller London office

Fasken Martineau close office in Hanover Square and relocate their reduced 10-lawyer team to Old Broad St

Partner Promotions

Slaughter and May promote 10, all in London

Burges Salmon promotes five

Until next week,

Team Fides

Welcome back to the Fides Weekly Update. Scroll down to take a look at what news stories our researchers have been talking about and don’t forget to check out this week’s movers and shakers!

This week:

1) ABS takes on a new form

As we witness an influx of Alternative Business Structures (ABS) appearing amongst traditional law firms in the market, the SRA has granted an ABS license to an all the more unusual business model, in which fee earners and employees alike could earn the same amount of remuneration.

South west law firm Stephens Scown has become Stephens Scown Limited after employing a shared ownership model, making it the largest law firm to introduce such a scheme. The business model, most commonly used by department store John Lewis, will come into play at the start of May and will work by depositing all profits exceeding the minimum threshold into a pool. This will then be split 50/50, half being distributed between staff members and the other half retained by the firm.

Average bonuses will rise considerably under this model, with an average bonus of £1,300 for staff last year expected to increase to over £2,000 this year. The levelling out of remuneration across all ranks is a risky strategy for the firm and unchartered territory within private practice. However, there is no doubt this model will encourage all members of staff to perform well and take responsibility for the firm’s profitability as they will be direct beneficiaries. Robert Camp, managing partner at Stephens Scown, said: “I believe it will have a tremendously positive impact on the firm. Back-office support staff in particular will feel much more involved as we will all be working towards the same goal.”

It was revealed last month that Mischon de Reya may also be considering undertaking a shared ownership scheme. The firm’s proactive attitude to market-leading initiatives, such as agile working and “unlimited holidays”, shows their sincerity in implementing such a daring scheme, as well as the value they place on their employees in fostering a healthy firm culture.

The SRA’s decision to grant such a license is another ground-breaking movement in the sector and points to further diversification of the legal market. This adds another layer of competition for traditional law firms, who due to their fixed pricing structure and less flexible working models need to continue to pursue more competitive strategies to remain attractive to their workforce.

2) Firm’s strategy focuses on diversity

In celebrating the principles of International Women’s Day that took place on the 8^th March, Osborne Clarke announced this week that they have hired their first diversity and wellbeing manager Su Akgun.

The appointment comes as Osborne Clarke update their firm-wide strategy to include a strong focus on diversity, with Akgun’s role specifically covering family balance, female retention and social mobility. Currently 20% of the firm’s UK partnership are women, compared to 62% in non-partner legal roles. This sits on average with female partnership rates across the UK top 25 firms at 20.61 percent.

The legal sector has seen an increase in the number of strategies being developed around diversity as it becomes an important factor regarding both client relationships and firm culture. As such, many firms have invested in hiring top talent from a variety of sectors to help lead their Diversity & Inclusion initiatives. Diversity managers including Daniel Danso, who joined Linklaters from LGBT rights charity Stonewall, and DLA Piper’s Mitra Janes, who previously worked at Ford Motor Company are some examples of the leading professionals transforming the legal landscape.

Gender equality in the UK legal sector is a topic recently explored in an article by Fides Search “The Path to Parity: Reassessing Gender Balance within UK Law Firms”. To request your copy of the article, please contact research@fidessearch.com.

Movers and Shakers of the week

Appointments

Nabarro appoints new senior partner

Real estate head Ciaran Carvalho has been elected as Nabarro’s new senior partner, commencing his role on 1 May

Bird & Bird elect next chief executive and chairman

Chief executive David Kerr has been re-elected into his role for the next three years, whilst Italian managing partner Massimiliano Mostardini has been newly appointed chairman

Resignations

CC banking and finance partner exits after 16 years

Leveraged and acquisition finance specialist James Johnson will leave Clifford Chance and the legal sector after 16 years at the firm

Moves

London-based architecture and design firm hires first GC

Zaha Hadid Architects has hired Tamsyn McLean as general counsel. She joins from Balfour Beatty Investments where she served as senior commercial manager

DLA lose UK competition head

UK head of competition at DLA Piper Kate Vernon has joined Quinn Emanuel Urquhart & Sullivan as the second partner in their London competition practice

Freshfields hires CC competition partner

Alastair Mordaunt will depart from Clifford Chance’s London office to relocate to Hong Kong and lead Freshfields Bruckhaus Deringer’s Asia competition practice

K&L Gates expands Berlin office

Greenberg Traurig’s chair of employment, incentives and pensions group Manteo Heikki Eisenlohr has joined K&L Gates in the firm’s labour, employment and workplace safety practice

Latham lose further partner in Frankfurt

Latham & Watkins partner Rudolf Haas will join King & Wood Mallesons in the Frankfurt Corporate team

Dechert strengthen white collar practice in the city

Former Skadden partner Matthew Cowie has joined Dechert’s white collar team in London

CMS build out Dubai Middle East offering

Islamic finance partner Shakeel Adli departs Norton Rose Fulbright to become a partner in CMS’s banking and finance practice.

Partner promotions

Freshfields Bruckhaus Deringer promotes 16 globally and 5 in London

Squire Patton Boggs promotes 30 globally and 7 the City

Berwin Leighton Paisner promotes 17 globally, 14 based in London

Slater & Gordon announces Restructuring Plan following £493m six month loss

Slater & Gordon (S&G) is going to conduct a major restructuring of its UK operation after announcing an A$958m (£493m) loss for the six months ending 31 December 2015. Facing debt of A$741m, lenders have given the firm until the end of April to present a new plan for reorganising the business, with the likelihood that a number of offices in the UK will close. The first listed law firm in the world, Slater & Gordon has now lost more than 95% of its value since April 2015, with shares dropping a further 30% after the announcement was made on Monday.

So what happened?

The staggering loss, amounting to three times the sum of the firm’s profits, was primarily attributed to an A$876.5m impairment of intangible assets caused by a write-down of goodwill. This was a result of S&G’s acquisition of the insurance outsourcer Quindell’s professional services arm for £700m in May 2015.

Controversy surrounding the deal concerning Quindell’s valuation and accountancy practices was quickly justified with the launch of an initial FCA and then SFO investigation following the admission that pervious management had overstated the division’s profits by more than £300m in 2014. Due diligence for the acquisition, which was based on a ‘bottom up’ review of case files, did not consider Quindell’s accounting policies as fundamental to decision making compared to the profits it was expected to generate, although S&C assured investors that it was aware of the mistakes in the accounts ahead of the deal.

The announcement also revealed a sharp decline in UK business performance, responsible for 45% of the firm’s revenue. Having already entered into consultations in January to close two of its UK offices, personal injury (PI) law revenue was ‘materially weaker than expected’ following shock government proposals to ban claims for general damages in ‘low value’ whiplash cases made in the Autumn statement. This has the potential to severely affect profits from fast-track road accident claims, upon which S&G now account for most of their UK earnings.

So what next?

The future of the firm now depends on S&G’s lenders, and whether or not they are willing to renegotiate the terms of its debts. With the firm submitting a restructure proposal to its banking syndicate at the end of the month, any amendments to its debt facility must be made by the end of April or the firm faces the nearly impossible task to repay $800 million in loan facilities by next year.

Until recently a highly successful firm, expanding significantly in Australia before coming to Britain, the £493m half yearly loss demonstrates how quickly a law firm’s fortune can turn in the face of a poor business decision and unfavourable market conditions. In acquiring Quindell, S&G bought a business valued (at the time) more than its Australian and UK operations combined, that doubled staff numbers overnight and caused a vast amount of reputational damage to the firm. To add flame to the fire, planned changes by the government to limit personal injury claims continues to undermine the business S&G so heavily relies upon in the UK.

Hopefully the firm can reach an agreement with investors by the end of March to rescue the firm and its 4,000 UK employees.

Barclays face displeased shareholders

Barclays share prices dropped by more than 10 per cent earlier this week after the bank reported a drop in full-year profits and a subsequent 54 per cent dividend cut.

The bank’s annual profits fell by two per cent to £5.4bn for 2015 as well as disclosing a further £1.45bn provision for mis-selling. This year’s results indicates that Barclays have now failed to generate cumulative profit over the past four years, which has brought about chief executive Jes Staley’s decision to accelerate their major restructuring plans.

The plan involves selling off a large amount of their 62.3% stake in Barclays Africa Group, something Staley had intended to do when he stepped into the role, as well as splitting the company into two divisions Barclays UK and Barclays Corporate International, which will be in line with the industry’s new ring fencing regulations. It is apparent that the main aim of Barclays’ restructuring is to eliminate any under-performing areas, i.e. many of its non-core assets, and focus on running their most healthy operations concentrated in the UK and US, which will transform it from a global bank into a transatlantic bank, according to Staley.

In order to carry out such plans, however, the bank have needed to strengthen capital reserves through dividend cuts. The bank announced the final dividend for 2015 of 3.5p, stating that this would fall to 3p for 2016 and 2017. This came as a shock after chairman John McFarlane made a pledge last June that the bank’s share price would double in three years. Cutting dividends to offset drastic restructuring costs is becoming commonplace for Barclays and is creating a high level of uncertainty amongst the shareholders.

McFarlane alleged that “a high and progressive dividend will in future need to make up a significant portion of our annual total shareholder return”, but there have been no signs yet as to whether the bank will be making consistent and stable returns anytime soon. Despite strong efforts to recapitalise the business, investors remain wary of the banks strategic targets.

With the continued regulatory pressures and evolving strategy at Barclays it will be interesting to see how the coming 12 months progresses for the bank. As Fides have noted in recent blogs and our regulatory article, all financial institutions are having to face up to this new world environment and deal with significant profit challenges through more robust legal and compliance regimes. As such how the bank utilises its legal and compliance function along with external counsel in this continued period of change and uncertainty will be interesting to observe and analyse.

Movers and Shakers

Appointments

Slaughters appoints new M&A head
Corporate finance partner Roland Turnhill will replace Steve Cooke as the firm’s head of M&A when he becomes senior partner

DLA choose new global co-chair
Juan Picon will become the firm’s global co-chair as Sir Nigel Knowles steps down Moves

Moves

Mayer Brown strengthens London Finance Practice
Mayer Brown has appointed Kieron Dwyer, ex-head of international energy and natural resources at Wragge Lawrence Graham, as a new Finance partner in London

Eversheds grows corporate finance team
Eversheds has enhanced its corporate team with the appointment of partner Sebastian Orton who joins the firm from Jones Day.

Linklaters appoints UK trusts lawyer
Peter Golden has been hired from Forsters to lead Linklaters’ trusts practice

Clifford Chance adds to its growing white collar and regulatory defence team in the U.S.
Clifford Chance have hired Daniel Silver, Deputy Chief of the Criminal Division in the United States Attorney’s Office for the Eastern District of New York, into the firm’s Americas Litigation and Dispute Resolution practice

Mayer Brown expands regulatory practice
Former head of the FCA’s enforcement and market oversight division Guy Wilkes will join Mayer Brown as a partner in their financial and regulatory enforcement practice DLA Piper bolsters investment funds team

DLA Piper bolsters investment funds team
DLA Piper appoint new London head of investment funds Andrew Wylie, joining from Nabarro, where he served as head of alternative investment fundsTaylor Wessing hires venture capital expert

Taylor Wessing hires venture capital expert
Angus Miln has joined Taylor Wessing in their corporate technology team. He previously worked at Bird & Bird and led their Venture Capital practice

Eversheds expands in Munich
Competition partner Martin Bechtold joins Eversheds’ Munich office as their Head of Competition for Germany. He has held previous positions at Clifford Chance, Allen & Overy and King & Wood Mallesons

Jones Day lose London energy head
Energy and corporate partner Paul Exley is to join Baker Botts in their UK energy practiceMorgan Lewis bolster antitrust and competition practice

Morgan Lewis bolster antitrust and competition practice
London partner Omar Shah has joined Morgan Lewis & Bockius from Latham & Watkins to their antitrust and competition practice

BLP strengthen German real estate offering
Dentons counsel Boris Strauch has been hired by Berwin Leighton Paisner as a real estate and infrastructure partner in their Frankfurt office

Jones Day gain energy duo in Beijing
Partners Dirk Walker and Dina Yin have exited King & Wood Mallesons to join Jones Day’s Beijing office

Kirkland loses further partner in London
Capital markets partner Andrew Hagan will join Freshfields Bruckhaus Deringer, alongside former Kirkland partner Ward McKimmTravers Smith add to Restructuring & Insolvency practice

Travers Smith add to Restructuring & Insolvency practice
Former K&L Gates partner Edward Smith will join Travers Smith as a Restructuring & Insolvency partner

Sidley sets up PE team in the City
Sidley Austin has taken six private equity partners from Kirkland & Ellis’ London office to set up a private equity team. The partners are Christian Iwasko, Erik Dahl, Fatema Orjela, Bryan Robson, Sava Savov and Oliver Currall

Office closings

Vinson & Elkins consolidate in the Middle East
Vinson & Elkins will close down their Abu Dhabi office and transfer their offering to their Dubai and Riyadh offices.

After ten months of deliberation, HSBC’s board are expected to meet on Sunday to decide whether to shift the bank’s headquarters from London.  Moving the bank’s domicile will determine its tax base, lead regulator and lender of last resort – issues all considered critical by the board and outlined in the eleven factors said to be influential in their decision making. With Canada, the U.S., China, Australia, Singapore, France and Germany touted as possible destinations, commentators consider HSBC to most likely to return to its roots in Hong Kong if it decided to relocate its headquarters.

Despite this, in recent weeks the rhetoric has shifted to the likeliness of the bank remaining in the UK. To an extent, this is not surprising as the political conditions today are far more favourable than when the review was launched. Things have calmed with the with the election of a Conservative majority in May, and Chancellor George Osborne’s decision to reduce the bank levy which wiped 10% off HSBC’s profits last year. The further axing of ex-FCA Chief Martin Wheatley, and other decisions to drop the reverse burden of proof to be implemented within the Senior Managers Regime have also served to create a more favourable domestic regulatory environment.

On the other hand, the Brexit debate continues to loom on the UK’s political landscape, with any decision to leave the European Union likely to damage the country’s financial industry. Further regulatory change through the implementation of ring-fencing rules is expected to cost the bank an additional $2 billion as it relocates the headquarters of it’s from London to Birmingham. Both the bank levy, albeit reduced, and incoming ring-fencing requirements duplicate other domestic measures aimed at the same problem—silos, capital surcharges, “bail-in” bonds and liquidity buffers.

Furthermore, current volatility in the Chinese stock market is considered by those close to the situation to be of little consequence to decision making, with the board considering the future of the bank in the next 20 to 30 years. Asia currently accounts for 60% of the bank’s profits, and there is little contention that over time this region will grow at a faster rate than Britain. The bank must also consider the possible acquisition of rival Standard Chartered by a Chinese institution – a move many consider to be inevitable. If this were to take place, Standard Chartered would become the only foreign notes-issuing bank in Hong Kong if HSBC decided to stay in London, with HSBC losing out on this valuable franchise.

Although analysis has shown that moving to Hong Kong would not ease HSBC’s tax bill or capital level by much, or insulate it totally from Britain leaving the European Union, the bank would avoid the UK bank levy, intrusion by Western regulators and be physically closer to its biggest markets. But the biggest worry remains a geo-political one, in that Hong Kong is a territory and not a country in its own right. Whist being a favourable regulator, the Hong Kong Monetary Authority (HKMA) both lacks the crisis toolkit of a central bank and does not possess a credit line from America’s Federal Reserve to supply it with dollars, HSBC’s operating currency. In instances of crisis, with a balance-sheet nine times bigger than Hong Kong’s GDP, HSBC’s ultimate backstop would be mainland China’s government – an option far less favourable to that in the UK.

Therefore, despite a persuading argument to pull it overseas, it appears that on this occasion the grass is not greener on the other side for HSBC.

Welcome back to the Fides Weekly Update. Read on to see what news stories our researchers have been talking about this week.

Tweet us @Fides_Search with your thoughts and comments.

This week:

Another Trans-Atlantic tie-up?

Wednesday saw the announcement of another proposed trans-Atlantic tie up, with Berwin Leighton Paisner (BLP) confirming that it has entered into preliminary merger talks with US firm Greenberg Traurig. Both recognised for their global real estate practices, a merger between the two firms would create a practice with 2,500 lawyers – 750 of which would be based in New York and London.
The proposed merger could offer a good potential match for both firms. With 75% of its lawyers based in London, it would not only give BLP a major presence in the US but access to offices in Europe, Israel and Latin America to complement the firm’s existing offering in Asia. For Greenberg Traurig, who recently hit the headlines with the hire of former New York mayor Rudy Giuliani, the merger would bolster the firm’s practice in London which last year reported a 6% loss in profit. As well as reinforcing both of the firms’ real estate practices, which currently accounts for 30% of BLP’s revenue and a 300-lawyer practice at Greenberg, the merger would also provide both firms with the opportunity to strengthen other global practice areas.

However, a proposed merger is not without challenge as a substantial gap in size and profitability exists between the two firms. Already with 1,950 lawyers and 38 offices globally, Greenberg is the third largest firm in the US and ranks as the world’s 20th largest firm by revenues with PEP standing at $1.424m against £661,000 ($1.090m) for the UK firm’s 2014-15 year. Despite a 15% profit rise for BLP over the same period, with turnover at £259.2m and PEP at £465,000, the 850-lawyer firm remains a substantially smaller offering.

BLP has been searching for a suitable merger since last spring, signalled by the election of Lisa Mayhew as managing partner. Having rejected a UK merger with Olswang in late 2015, US firms Morrison & Foerster, Holland & Knight and Covington & Burling have also been mentioned as potential suitors. Greenberg Traurig on the other hand have never merged with another law firm, achieving such phenomenal levels of growth organically. Any merger would be subject to a partner vote from both firms.

Credit Suisse face gloomy outlook

Credit Suisse featured heavily in the news this week, most significantly for the sharp falls in profit they experienced in the fourth quarter of 2015. Their global markets division lost $3.5bn in Q4 and the bank reported their first full year loss since 2008 to be CHF2.44bn, a loss that was 16.7 per cent greater than anticipated.

These bleak results have caused Credit Suisse’s shares to fall by a whopping 13 per cent on Thursday, which saw them at their lowest value since 1991. It has sparked their decision to accelerate plans for a costs savings programme, which will involve cutting 4,000 jobs as well as seeing bonuses in the investment banking division slashed by as much as 36 per cent. The bank will stick to their strategy of shifting the focus onto wealth management and emerging markets, whilst continuing to cut costs in investment banking in an attempt to save CHF3.5bn by 2018.

The figures reported are a consequence of the torrid market conditions global banks have been facing. Swiss rivals UBS have also published their discouraging Q4 earnings and revealed its wealth management business experienced net outflows of CHF3.4bn, whilst Deutsche Bank’s securities unit also slipped into a loss in the fourth quarter. It has been a hard hit for the banking sector and Credit Suisse CEO Tidjane Thiam stated market liquidity, the sharp decline in oil prices and widening credit spreads as some of the destructive qualities to have shaped the market in Q4 and expects these challenging conditions will persist.

The news of Credit Suisse’s hefty loss comes only three days after the SEC and NY attorney general announced the bank is to pay a total of $80.3m for misconduct within their dark pools. The bank’s dark pool CrossFinder, one of the largest dark pools in the industry, has been censured for misleading customers who used them and allege that they welcomed high-frequency traders into their pools at the expense of the bank’s traditional customers. Barclays have also admitted to wrongdoing and will pay a penalty of $70m.

Eric Schneiderman, the New York attorney general, said the fines were a “major victory in the fight to combat fraud in dark pool trading”, an activity regulators have been targeting for a number of years. Dark pools are a closed trading platform and are inaccessible to the public. This form of trading highlights the lack of visibility in the banking system and is an aspect of the obscure shadow banking sector that has gained real influence in recent times. Click here to read director Tom Spence’s blog on shadow banking in European markets.

Movers and Shakers of the week 

Appointments

McDermott Will & Emery appoints new London head
Hugh Nineham will retire as the firm’s head of the London office and will be replaced by private client partner Andrew Vergunst

CMS elect new managing partner
Stephan Millar will replace Duncan Weston to take the role of managing partner at CMS Cameron McKenna

Moves

Fieldfisher add to Financial Services Regulatory team
Azad Ali has moved to Fieldfisher as a partner, joining from Shearman & Sterling where he served as counsel in their Financial Institutions Advisory & Financial Regulatory Group

VW hire CC German parter as US legal chief
VW has hired Clifford Chance German partner David Detweiler as their general counsel in the US

Fieldfisher take three from IP boutique
Partners Diana Sternfeld, Nicole Jadeja and Rebecca Baines will join Fieldfisher’s IP and life sciences practices from IP boutique Rouse.

Norton Rose lose regulatory team in Sydney
Clyde & Co have gained 10 lawyers in Sydney, including regulatory partners Michael Tooma and Alena Titterton, as well as four lawyers from Norton Rose Fulbright

Stephenson Harwood gain 7-strong team in Hong Kong
Stephen Harwood have hired a seven lawyer trade finance from Eversheds in Hong Kong, which includes partners King Tak Fung and Ivan Ng

Quinn Emmanuel expand Israel practice
Litigation partner Paul Friedman exits Clyde & Co to join Quinn Emmanuel Urquhart & Sullivan in both their London and Israel offices

White & Case hire Linklaters heavyweight in Hong Kong
Linklaters partner Christopher Kelly will be joining White & Case in Hong Kong as their Asia head of corporate.

Hill Dickinson boost corporate practice
Mark Weston will be joining the firm’ London office from Matthew Arnold & Baldwin

Clyde & Co hire IP partner
IP lawyer Ralph Cox departs from Fasken Martineau as head of the contentious IP group in London to join Clyde & Co in their London office

Eversheds lose corporate partner to DWF
Alasdair Outhwaite will be joining DWF’s national corporate practice from Eversheds

Dechert strengthen competition offering in Paris
Dechert have hired former Norton Rose Fulbright partner Mélanie Thill-Tayara into their antitrust and competition practice Paris.

Mergers

DLA boost Nordic offering after merging with Finnish firm
DLA piper have merged with Peltonen LMR to give them over 200 lawyers in the region

BLP reveal possible tie-up with US firm
BLP have released a statement confirming merger talks with Greenberg Traurig

Office openings and closings

Jones Day expand in Australia
Jones Day have opened a third Australian office in Brisbane, alongside their Sydney and Perth offices

Orrick announce office opening in Houston
Orrick, Herrington & Sutcliffe are launching a new office in Houston, joined by 13 new partners

Welcome back to the Fides Weekly Update. Read on for this week’s key moves, trends and developments in legal and compliance.

Feel free to tweet us @Fides_Search with your thoughts and comments – we always love to hear them!

This week:

1) Partner departs from Slaughter and May

Slaughter and May lost their first partner in Hong Kong since 2006 this week, as news emerged that corporate partner Laurence Rudge is to join global supply chain managers Li & Fung. Corporate partner Paul Chow, now of Davis Polk & Wardwell, was the last departure from Slaughter’s Hong Kong office when he jumped ship to Linklaters in 2006 to head their Beijing office.

RPC also made a move into the Asian market this week, after its alliance with Singapore’s Premier Law was announced on Thursday. This joint venture will double the size of RPC’s Singapore practice as well as giving them access to Premier Law’s corporate and commercial capability in Hong Kong, complementing the firm’s existing presence in this space.

International firms have been increasingly looking at boosting their offering in Hong Kong, as Olswang tied with local firm Haldanes in December and White & Case hired corporate partner Catherine Tsang from Paul Hastings earlier this month. However, firms are also considering the slowdown of the Chinese economy and the adverse effect it could have on the Hong Kong legal services sector, with many firms like Milbank Tweed Hadley & McCloy re-jigging their practices to reflect this new market reality and Fried Frank Harris Shiver & Jacobson leaving the jurisdiction altogether. For a full analysis into the Hong Kong legal market, click here to see The Lawyer’s Special Report.

2) New FCA chief announced

After a global search to find the replacement for Martin Wheatley, the FCA this week announced its new CEO to be Andrew Bailey, current chief executive of the PRA and deputy governor of prudential regulation at the Bank of England. Bailey will be taking on the position as permanent leader of the FCA as soon as a replacement is found for his current role, replacing interim chief Tracey McDermott who withdrew herself from the running for the top job earlier this month.

Overall, the reaction within the financial services industry has been fairly positive to his placement, with many describing Bailey as a safe and sensible appointment. Bailey is a well-respected character at the bank and HSBC chief executive Stuart Gulliver says the new FCA boss is “very bright, technically superb…He is tough and fair – a real coup for the FCA.” Bailey’s current standing in heading up the PRA provides him with sufficient knowledge and experience to run the FCA, although some argue that he may struggle with the publicity associated with the role as well as performing the enforcement aspects of the FCA, something which he hasn’t executed in his previous roles.

It will be interesting to see how this appointment affects the culture of the regulator, and whether or not Andrew Bailey’s leadership creates a more “bank-friendly” environment. However, the FCA and PRA have shown they plan to continue to clampdown on the sector as this week they also launched investigations into the senior managers at HBOS, after a report was released in November criticising the lenient decisions made by the Financial Services Authority.

The future direction of the FCA has been subject to much scrutiny recently, with the last-minute ditching of their review into banking culture as well as recent changes made to the Senior Managers Regime (SMR), which included removing the reverse burden of proof principle. (For our January blog on the issue, click here.) Some consider this to be the start of a new era of financial regulation, where others consider it proof that regulatory standards on banks are falling. Indeed, it will be interesting to see the outcome of the Treasury Select Committee’s inquiry into the shelved banking culture review, and how Bailey responds to this and sets the tone for his first few months in charge.

Further confusion surrounding the SMR also emerged this week, as a further consultation was launched into the regime’s coverage of in-house lawyers, and whether those in charge of legal functions will need to gain approval under the regime. The FCA acknowledged that “significant uncertainty” existed regarding the overall responsibility of decision-making, and have made interim arrangements whilst they consult fully on the issue.

 
Movers and Shakers of the week 

Moves

BNY Mellon hire BofE counsel
Former head of legal for markets, banking and notes directorates at the Bank of England Jacqueline Joyston-Bechal to join BNY Mellon as EMEA head of their advisory compliance team for investment services

Insurance firm RSA gains new chief legal officer
RSA’s GC and company secretary Derek Walsh is stepping down and being replaced by Charlotte Heiss, who will take the new role of chief legal officer and company secretary

BLP carry out double partner hire in UAE
King & Spalding’s Dubai disputes head Raza Mithani and DLA Piper’s energy and infrastructure partner Alexander Sarac join Berwin Leighton Paisner’s disputes practice and project finance practice respectively.

KWM boost Brussels corporate practice
King & Wood Mallesons have hired Squire Patton Boggs’ head of Belgium practice Anthony van de Hauwaert into their European corporate practice

A&O expand German disputes practice
Allen & Overy have appointed Orrick’s disputes partner Benedikt Burger to their Frankfurt office

Slaughters lose Hong Kong partner
Corporate partner Laurence Rudge has left Slaughter and May’s Hong Kong office to join global supply chain managers Li & Fung as deputy general counsel

A&O lose nine-strong team to Italian firm
Bonelli Erede Pappalardo have hired nine lawyers from Allen & Overy, which includes their Italian senior partner Massimiliano Danusso, to headquarter their London office.

Office openings and closings
Pinsents lauch second German office
Pinsent Masons have hired KPMG partners Thorsten Volz, Torsten Wielsch and Sönke Gödeke to lead their German energy practice and will be based in Düsseldorf

Simmons exit Abu Dhabi
Simmons & Simmons are closing their Abu Dhabi office, leaving the firm with four offices remaining in the Middle East

Recognition
The Lawyer releases 2016’s Hot 100

On Monday, Wragge Lawrence Graham & Co (WLG) became the latest UK law firm to introduce targets for female partnership. Keeping in line with others in the industry, the firm has committed to increase its proportion of female partners from 20% to 30% by 2026. This mirrors targets set by Linklaters, Berwin Leighton Paisner and Baker & McKenzie set to expire in 2018, and commitments made by Norton Rose Fulbright, Herbert Smith Freehills and Pinsent Masons to improve female partnership numbers over the long term.

The move has been prompted by Wragge’s impending merger with Canadian firm Gowlings, who have a current female partnership rate of 27%. This greatly exceeds progress made in the UK and Canadian market more generally, where average female partnership numbers currently stand at 22% and 20% respectively. However, the boost in female partnership numbers at Gowlings have been achieved without the introduction of female partnership targets, with the targets introduced by Wragge applying exclusively to their partnership when the firm’s merge under an umbrella structure to create Gowling WLG at the end of the month.

Diversity Targets – To implement or not to implement?

The inclusion of female partnership targets as part of a wider Diversity & Inclusion (D&I) strategy is subject to much contention within law firms. A firm’s announcement of female partnership targets demonstrates a clear commitment to the issue from senior management, which creates accountability to enforce change that filters down to practice heads and partners. Unlike other initiatives, the introduction of female partnership targets provide a concrete benchmark against which the impact of other policies to improve gender diversity can be measured. More broadly, the introduction of female partnership targets, and discussion of what needs to be improved to achieve them, increases visibility of the issue amongst firms and prompts dialogue about how best to enforce change.

Despite this, the introduction of female partnership targets also risk alienating other (majority and minority) segments of the workforce, or at worse enforce positive discrimination. Women themselves often dislike the idea of female partnership (or boardroom) targets, and the associated tokenism this brings as opposed to promotion based on individual hard work and merit. Other strands of diversity, such as BAME, disability and social mobility are also not ordinarily measured by targets. More fundamentally, some commentators question whether female partnership targets are realistic, and if such numbers are even achievable by UK law firms. For example, findings from The Lawyer’s Diversity Audit revealed that female partnership numbers across the UK100 have remained at the same level as they did in 2010.

The Canadian example

This brings us back to Gowlings, and a select number of other Canadian firms, who have increased their proportion of female partners without the introduction of targets. As well as women making up close to a third of Gowling’s partnership (119 of 433 partners), women also lead over half the firm’s offices and one of the co-managing partners is a women. Furthermore, Gowlings only committed to a firm-wide D&I initiative in 2014 – four to five years behind the majority of the UK legal market. So what accounts for the firm’s progress, and what, if anything, could be transferable to UK law firms?

Closer inspection of the Canadian legal market reveals that, although a gender gap in partnership definitely still persists, more consistent gains are being made across the province-based law societies. For example, in Ontario of the 41% of the legal profession that are women – 23% of them are partners. A reason for this is the number of larger scale province wide initiatives that do not comparatively exist in the UK. The best example of this is the Justicia project, which after initially being established to survey gender diversity in private practice, now provides resources and toolkits on issues such as pathways to partnership, flexible working and business development. The project also developed a template to help the 57 participating firms to accurately track their gender demographics for the long term. For firms participating in Justicia, the proportion of female equity partners rose by 67% in 2012, 80% in 2013 and 44% in 2014.

Gender diversity initiatives in Canadian firms themselves also differ in approach to those often implemented in the UK, such as women’s networks and mentoring schemes. As well as greater participation in province-wide initiatives, law firms place greater emphasis on training – especially increasing skills of business development. The ability to generate business and spot opportunities for growth underpins the success of any lawyer to make it to partnership, but can be overlooked in favour of networking or mentoring for example. Blake Cassels & Graydon, a Canadian firm with 25% female partnership, introduced a ‘Make it Rain’ training programme where successful partners ran business development training sessions with mid-level associates.

Finally, another insight into the success of Canadian law firms to advance female lawyers comes from the demand from their clients. Similar to the US, general counsel have become much more explicit in their desire to see diversity in the teams of lawyers that service them, asking directly for a firm’s demographics, the gender balance of the team they are working with, and the initiatives in place to increase gender diversity in the future. Beyond this, GC’s from a number of Canadian corporates established Legal Leaders for Diversity and Inclusion (LLD), a public interest group to lobby for a more inclusive legal profession across all strands of diversity. As part of this, corporate clients agree to consider diversity in their purchasing and hiring practices, and to encourage their external legal counsel to do the same. In 2013, in a commitment to promote diversity in their firms and work with LLD and other general counsel, sixteen leading Canadian law firms came together to create The Law Firm Diversity and Inclusion Network (LFDIN) to share ideas about how best to increase diversity and inclusion in the sector.

Conclusion

By looking at the Canadian example, it is clear to see that increased female partnership numbers have come from the greater push of external factors on law firms, rather than internal firm initiatives alone. This does not deny the individual effort of Canadian law firms, which has undoubtedly been great, but states that such effort has grown out of a wider culture of accountably bred by clients and diversity organisations. This has been successful in the absence of firms setting female partnership targets – as in this context, they were simply not needed.

This provides important transferable lessons to the UK legal market about ways to increase gender diversity, upon which progress has started to stagnate. The implementation of intra-firm and regional based projects could easily be replicated in the UK, and to an extent has already been achieved in increasing access to the legal sector by PRIME. Building upon the success of the 30% Club, a more pointed legal-based public interest group comprising large clients and their general counsels could also serve to provide the greater push needed to ensure gender, and other diversity stands continue to be addressed by law firms.

The implications of this will become more important in the future, as by 2020 women are expected to account for more than half of the solicitors in the UK, for the first time becoming the majority gender in the profession. As such, law firms cannot afford to ignore the financial, resourcing and moral implications of not getting their gender diversity initiatives right.

Female partnership targets or not, ultimately gender diversity initiatives need to be tailored to a firms’ organisational culture, existing D&I initiatives and current level of gender balance. Whilst it is positive that Wragge Lawrence Graham & Co have joined the host of other UK law firms in publicly announcing their commitment to increasing gender diversity, we stand to learn a lot from the Canadians about how best to see these targets through.

Fides Search strives to push the boundaries of recruitment and consultancy work, thought leadership is central to this. We focus on our client’s objectives and challenges and aim to help them achieve their goals through our approach and insight. Diversity remains a challenging topic for our private practice and in-house clients. This blog forms part of a Diversity series that we will be reporting on throughout the year, with a more in-depth article on Gender Diversity in the legal sector to be released to celebrate International Women’s Day on the 8th March. Please contact research@fidessearch for further details

Over the last few years, due to the globalisation of the legal market, top-class UK firms have been altering their partner remuneration models and, in some cases, breaking lockstep for big ticket hires. Many argue, however, that it is now time for a more drastic overhaul of firm lockstep structures where more competitive and lucrative systems are implemented that will bring UK firms in line with their fellow global elites.

The London legal market is becoming more competitive year on year, due to the continued influx and expansion of US firms as well as a host of non-legal firms who have been granted Alternative Business Structure licenses. These entrants offer attractive alternative options to many partners looking for new opportunities in an alternative, and arguably more commercial environment. Therefore, UK firms are coming under threat, particularly due to the evident gap in profitability compared to their US counterparts.

The last of the UK’s law firms to adapt to this new reality was the Magic Circle. Whilst they have begun to take on some aspects of performance-based remuneration, such as Freshfields’ second-tier lockstep ladder and Clifford Chance’s addition of ‘superpoints’, it may be necessary for Magic Circle firms to radicalise their models to continue to attract and retain star performers. There has been some evidence of this, as Freshfields broke their lockstep last June to take on Kirkland & Ellis high yield partner Ward McKimm.

Freshfields are leading the magic circle in the move away from the lockstep model and it will be interesting to see how the other firms react. Due to obvious challenges the magic circle face in considering a complete overhaul of their partnership structures, it is not surprising that they have stopped short of this. They are instead restructuring the bottom of the equity and adding gates rather than adopting the US compensation mentality in its broadest sense.

Although the Magic Circle have a very secure market position in London, entering the US market and addressing the nature of how they compensate their partners will be a challenge. Freshfields have certainly paved the way with their strategy to enter the US market. They have shown they are not afraid of making high-profile hires in establishing a reputable footprint by hiring a three partner team in 2014 from Fried Frank in New York, which included their the firm’s global capital markets practice head, Valerie Ford Jacob. As law firms tend to follow market trends set by others, we predict that 2016 could see other Magic Circle firms possibly following suit in this space. Clifford Chance in particular have also amended their lockstep to become more flexible and as such, are capable of making the same headway across the Atlantic.

The Silver Circle have been more ambitious with regards to the flexibility of their models, introducing modifications to their lockstep models much earlier. However, given their market position, this strategy forms part of a more protectionist perspective, as they struggle to retain many of the best performers and a modified lockstep allows them to compensate top earners more effectively. Nevertheless, even with significant changes to their remuneration structures, second tier firms will continue to struggle in attracting big ticket hires as they do not have the profitability to compete with Magic Circle or US firms.

Whether we are discussing Magic or Silver Circle firms, it remains to be seen what impact these foreseeable changes could have on firm culture. It is well-known that operating an eat-what-you-kill model intensifies competition within a firm, and has the potential to discourage teamwork and collaboration, something which has been fostered by top UK firms since their outset. Law firms have also worked hard to implement favourable agile working policies, but the implementation of a merit-based system could risk creating a work-life balance adverse to what they are trying to achieve.

It seems likely we will be seeing more changes to many firms’ lockstep structures over the coming year and Linklaters recent partner vote on assessing its remuneration process is testament to that, with the firm voting to maintain its lockstep structure. The varied approaches by each of the Magic Circle firms will show us over the course of the year which structure proves most successful. It could be seen that Freshfields experience fallout from their second tier after having made significant changes. Conversely, Linklaters’ lack of mobility could make their top performers vulnerable to US firms. Whether partner remuneration is amended for defensive or attacking purposes, a law firm without the ability to retain and indeed attract leading talent will face difficulties in an increasingly active lateral recruitment market.

Hello and welcome to the Fides Weekly Update. Here we provide you with a breakdown of this week’s key moves, news and developments in the legal market.

Tweet us @Fides_Search with your thoughts and comments – we always love to hear them!

This week:

1) Magic Circle overhaul lockstep

Freshfields Bruckhaus Deringer and Clifford Chance featured in the news this week in relation to their partnership remuneration models. In Tokyo, Freshfields saw the introduction of an alternative lockstep ladder that will run parallel to their existing lockstep. This serves as a means to recalibrate less productive partners or those who are in markets that are not as profitable, and will prevent partners from reaching historically high levels of remuneration. The new lockstep runs from 15 to 30 points, and is likely to affect a quarter of partners globally. Clifford Chance has also announced that it has launched a review to assess a possible move to a full equity partnership. This has again sparked speculation in the news of an overhaul in remuneration, especially the models operated by Magic Circle firms and the trickle-down effect this will have on the rest of the industry.

Other modifications to remuneration include creating additional bonus facilities to compensate top performing partners. This has become increasingly common amongst the top UK firms, with Clifford Chance introducing superpoints to their remuneration system whilst Linklaters plan to introduce gates within their equity structure. Although all these firms consider themselves to be true lockstep firms, these tweaks to their models imply a gradual move towards a merit-based pay system may be underway.

The level of competition amongst firms has intensified due to the growing globalisation of the legal industry, which signals that lockstep may no longer be sufficient for international firms to both retain and attract star performers in the market. Arguably, for firms with a greater UK presence (e.g. Macfarlanes, Slaughter and May, Travers Smith) traditional lockstep remuneration systems may be sufficient. Despite this, with the aggressive expansion of US firms in London, as shown with recent lateral hires by Baker & McKenzie, Morrison & Forrester and Cooley’s amongst others, a number of top UK firms are sacrificing the rigidity of their structures in order to remain competitive.

2) Probe into Legal Services announced

Thursday saw the announcement that the Competition and Markets Authority (CMA) are launching an investigation into UK legal services. The study will examine the affordability of civil legal services, and consider whether the £30bn industry is providing adequate service to consumers and small businesses.

More specifically, the study plans to investigate if there is effective competition and if consumers are protected from potential harm and whether they are capable of gaining redress when necessary. The study will also consider how regulation affects the competition and supply of legal services. After an initial six-month investigation, the CMA will decide whether to refer the market for a more in-depth tier 2 investigation.

This comes in the wake of recent research conducted by the Legal Services Board, which revealed that one in 10 users of legal services in England and Wales thought they received poor value for money. On the other hand, only 13% of small businesses viewed lawyers as cost effective, with half admitting that they only used legal service providers as a last resort to solve business problems.

It has been 15 years since competition in the legal profession was reviewed by the CMA’s predecessor the Office of Fair Trading, in a report that eventually led to the Legal Services Act 2007. It comes before a government-led consultation, expected to be launched in spring, on removing barriers to entry for alternative business models, and on making legal service regulators independent from their representative bodies.

3) Busy week for DLA

DLA Piper are well on track in their plans to expand their banking and financial services offering after making a slurry of hires over recent weeks. On Wednesday, the firm appointed Andy Kolacki as a partner in their Debt Finance team in London. He joins from Latham & Watkins, having previously worked at Freshfields Bruckhaus Deringer. This hire comes shortly after the announcement that Mark Dwyer, ex-head of Derivatives at Slaughter and May, and Vincent Keaveny, ex-head of Structured Capital Markets at Baker & McKenzie have also joined the firm. The firm have also made an additional hire this week, taking on Simmons & Simmons’ international commercial practice head Mark Dewar.

These hires support the firm’s sector-driven growth strategy, which was introduced in September. Based on factors such as cost-effectiveness, existing client base and potential for growth, increased responsibility has been placed on sector heads to meet KPI’s and drive further profitability within the firm. This has included the announcement of a new co-head of banking & finance Philip Butler, who will sit alongside Frankfurt-based partner Frank Schwem. Spearheaded by co-chief executive Simon Levine, the firm is also looking to expand in Africa having split from its alliance firm relationship with Cliffe Dekker late last year to launch its own office in Johannesburg.

Movers and Shakers of the week:
Moves

Barclays appoints new UK/EME GC
Victoria Hardy has been appointed Barclays’ general counsel for the UK, Europe and Middle East region

KWM’s Europe and ME managing partner steps down
William Boss is resigning after one year in his role as managing partner of Europe and Middle East for King & Wood Mallesons, leaving his position in April.

Winckworth Sherwood hire three partners in London
The firm has hired corporate partners Catherine Moss and John Burnand as well as disputes partner Robert Paydon, all from Fasken Martineau.
De Pardieu Brocas Maffei makes capital markets hire
Former Linklaters counsel Jeremy Grant joins De Pardieu as a partner in their Paris office.

Pinsent Masons hire new head of flexible resourcing
Matthew Kay has replaced Pinsents’ Vario founders Alison Bond and Katherine Thomas as the head of Vario.
Ashurst restructuring partner joins Weil Gotshal in Frankfurt
Ingo Scholz has left Ashurst’s German finance practice to join Weil Gotshal & Manges in their global Business Finance & Restructuring department.

Pinsent Masons financial services chief to join Hogan Lovells
John Salmon will join Hogan Lovells as a partner in their corporate practice.

BLP litigation partner to join Squire Patton Boggs
Squire Patton Boggs has hired litigation partner Chris Webber, who has joined the firm from Berwin Leighton Paisner.

Jones Day boost competition capability in Brussels
Mario Todino joins Jones day as a partner in their Antitrust & Competition Law practice in Brussels from Gianni, Origoni, Grippo Cappelli & Partners.

Partner Promotions

Reed Smith promotes 24 lawyers, including six in London

Restructurings

Reed Smith axes 45 lawyer roles across US, UK and Europe
Reed Smith has laid off 45 lawyers across its offices in the United States, Europe and the Middle East, as well as a number of non-legal employees.

See you all for the next Fides Weekly Update!

In October 2015 we published Shifting Sands: The Impact and Consequences of the FCA’s new Regulatory Regime. This analysis identified core regulatory developments that have come to define the post-crisis era – prohibitively high financial penalties, increasing focus on individual accountability, pressures on banks to ‘self-police’ and preventative action by the FCA if they didn’t. It concluded that such developments only added pressure to financial institutions already operating under a state of regulatory fatigue.

Despite this, the fast-paced and ever-changing nature of the UK’s financial regulatory regime means that a lot has changed in the past three months, leading many commentators to hail the end of the so-called era of ‘banker bashing’. A change in approach by the FCA, the UK’s regulator of financial services firms, has been evidenced by three major changes in structure and policy; the resignation and departure of former CEO Martin Wheatley, changes made to the Senior Managers Regime (SMR), and the recent shelving of a planned inquiry into banking culture.

After being informed that his contract would not be renewed by the Treasury, the unexpected departure of Martin Wheatley in September signalled for many that the regulatory outlook was changing. Initially appointed in for his hard line on the industry, Wheatley led the FCA from its inception by pledging to “shoot first and ask questions later” when it came to banking misconduct and consumer detriment. The global search for Wheatley’s successor has been underway for the past six months, and appears to be no closer to completion with interim CEO Tracy McDermott, hotly tipped to take the role permanently, withdrawing her candidacy stating that she “did not want the job”.

Despite ‘unfinished business’ at the regulator, a recognised success of the Wheatley era was the introduction of the Senior Managers Regime, which comes into force in March. Replacing the discredited Approved Persons Regime, this framework ensures greater accountability for individual actions by more clearly defining the roles and responsibilities of those in senior functions. A mechanism for achieving this was embedded in the reverse burden of proof – the idea that when regulatory misconduct is discovered, the senior manager in charge is guilty unless proven otherwise. However, this was scrapped a month after Wheatley’s departure after major intervention by the industry and replaced with a ‘duty of responsibility’. Although it remains a statutory requirement for senior managers to take reasonable steps to prevent regulatory breaches, the burden has now been placed back on the regulator to prove that the senior manager failed to do this, bringing the SMR back in line with core tenants of the Approved Persons Regime.

Finally, New Year’s Eve saw the quiet admission by the FCA (well the FT) that it was scrapping its review into UK banking culture. Intended to determine whether change programmes were “driving the right behaviour”, the review was dropped in favour of the FCA engaging individually with banks to improve their culture, and is perhaps the largest indication that policy-makers are softening their stance towards the sector. Alongside the culture review, it has emerged in the past week that the FCA has also dropped two other studies on retail investment advice and the misuse of personal data, and Monday saw the announcement that the ‘deep dive’ investigation into HSBC’s Swiss banking arm had also been abandoned. After much political debate, and admission of Treasury Select Committee head Andrew Tyrie that the decision to halt the inquiry was “odd”, FCA chairman John Griffith-Jones and acting CEO Tracey McDermott have finally been summoned to appear before the Committee on 20^th January.

So does this mean that the era of banker bashing is coming to an end? Well, maybe. The FCA has levied record fines on the industry since it has come into existence, the key question remaining as for how long the intensity and volume of this regulatory activity is sustainable. One can also not ignore the political landscape, with HSBC due to decide at the end of this month whether to relocate its global headquarters out of London and the fact that the government needs favourable conditions to sell its enormous stake in RBS. The definitive answer to this question will only come when they announce Wheatley’s replacement, until then the search continues…