Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
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1. Process not Politics: High Court rules Brexit will not take place without parliamentary scrutiny
In one of the most constitutional court cases in generations, the High Court has ruled that Parliament must vote on whether the UK can start the process of leaving the EU.
In holding the executive to account, the judiciary has created a nightmare scenario for Prime Minister Theresa May who insisted the government alone would decide when to trigger Article 50, intending to formally notify the EU of the UK’s intention to leave by the end of March.
Within minutes of the ruling by the Lord Chief Justice and two other judges, Liam Fox, the international trade secretary, told the House of Commons that the government would appeal to the Supreme Court, scheduled to take place on 7-8 December.
The legal dispute focused on the interpretation of the wording of Article 50 of the treaty on European Union, which says any member state may leave “in accordance with its own constitutional requirements” – an undefined term.
Nevertheless, in the landmark ruling the three judges looking at the case unanimously, rejected the government’s argument that it could use its “prerogative”, or executive powers to trigger withdrawal under Article 50.
They added that triggering Article 50 would fundamentally change UK people’s rights – and that the government cannot change or do away with rights under UK law unless Parliament gives it authority to do so.
This has huge implications on both the timing and terms of Brexit, and could make any future deal subject to parliamentary control.
As for now, questions remain as to whether the Supreme Court will uphold the decision – most definitely causing the PM’s March timetable to collapse – and if so, if Parliament are likely to vote in the same way as the people. Despite the majority of MP’s voting against Britain’s exit, many of them represent constituencies that wanted to leave.
Although the nature of how parliament will be consulted remain unclear, critics argue that triggering Article 50 as a result of an act of parliament would steer the UK towards a ‘softer’ exit with more ties to the union and a more open immigration policy.
Whatever the decision of the Supreme Court, the significance of this ruling lies in its interpretation of the law in spite of the pressure of politics. With the constitutionality of the Government’s right to trigger Article 50 unfounded, and the future impact of this yet to be foreseen, ultimately this case represents democracy in action as an independent judiciary holds executive powers to the account of the people.
2. Former BlackRock manager pleads guilty to insider trading
A former BlackRock manager has pleaded guilty to insider dealing as the FCA turn their attention back to investigating those who trade using inside information.
Ex-BlackRock portfolio manager Mark Lyttleton appeared in Southwark Crown Court on Wednesday where he pleaded guilty to two counts of insider dealing, using information he gathered during his time at BlackRock.
Lyttleton gained knowledge of a proposed takeover of EnCore Oil by Cairn Energy in October 2011 whilst sitting in the Fundamental Equity Team at BlackRock. He then traded in securities related to these companies, amounting to 175,000 worth of shares, which was conducted through an overseas asset manager trading on behalf of a Panamanian registered company. The indictment also claims that Lyttleton subsequently dealt in call options after also learning of Cairn’s discovery of oil in Greenland.
In the UK, the maximum sentence for insider trading is seven years, although the judge presiding over the case has declared that Lyttleton’s early plea will be taken into account. He is due to be sentenced at Southwark Crown Court on 21st December.
During his stint at the global investment management firm, Lyttleton was tipped to be one of their rising stars, with colleagues particularly commending him for his management of BlackRock’s UK Dynamic and Absolute Alpha portfolios. He left the fund manager ahead of his arrest in 2013, for reasons unrelated to the investigation, the FT reports.
The FCA first prosecuted for insider trading in 2008 and has racked up a total of 30 convictions relating to the crime to date. The regulator handled one of the UK’s largest cases for insider trading earlier this year, which resulted in four convictions and three acquittals. Labelled Operation Tabernula, the case brought about a record four year prison sentence for ex-Deutsche Bank MD Martyn Dodgson and was the first major investigation for the FCA following the extensive probes into the manipulation of Libor rates.
This guilty plea comes at a time when the FCA is carrying out an extensive review of the asset management sector, focusing on competition between buy-side institutions and the sustainability of its regulatory regime. The review, due to be published in early 2017 will no doubt produce areas of concern and weaknesses, that will need to be addressed.
Movers & Shakers of the week:
Appointments
TLT head to lead the firm for 18 years
TLT managing partner David Pester has been re-appointed in his position for a further three years, which will bring his total number of years leading the firm to 18
Ropes senior partner set to retire this year
Maurice Allen, Ropes & Gray’s co-founder of the London office and senior partner, has announced his retirement will take place at the end of the year. His replacement is yet to be announced
Asahi Europe appoints new head of legal and company secretary
Former group senior counsel Edward Perks is promoted to head of legal and company secretary after having acquired European beer makers SABMiller
Linklaters makes changes to senior management of their corporate team
Newly appointed head of corporate at Linklaters Aedamar Comiskey has given three corporate group head roles to Simon Branigan, Nick Rumsby and Iain Wagstaff.
Moves
Legal AI start up gains former magic circle managing partner
Artificial Intelligence start up TagDox has added former Linklaters managing partner Tiny Angel to its advisory board
Santander UK hires new COO and legal and regulatory counsel
John Bennett has departed his role as GC at the Bank of Ireland to join Santander UK as their senior counsel for legal and regulatory as well as their chief operating officer
KWM loses five lawyer team in Germany
King & Wood Mallesons’ German banking and finance head Sabine Schomaker will be joining Taylor Wessing along with fellow partner Clemens Niedner plus one counsel and two associates
Cooley gains new member of global management committee
London tax partner Natasha Kaye has been appointed a position on Cooley’s global management committee
PwC Legal gains six new partners in Sydney and Melbourne
PwC Legal has hired six new partners in Sydney and Melbourne including Clifford Chance Australia co-founder and DLA Piper’s former Australia head
Freshfields partner joins Matrix Chambers
Raj Parker is leaving his roles as dispute resolution partner at Freshfields Bruckhaus Deringer to join Matric Chambers as an associate member
HSF bolsters Paris real estate capability
Real estate partner David Lacaze, along with one associate, leaves Paul Hastings’s Paris office to join Herbert Smith Freehills
W&C has added three more HSF partners to its Australia offering
Senior associates Adeline Pang and Ged Cochrane, and special counsel Michelle Keen are all leaving Herbert Smith Freehills to join White & Case in Melbourne as partners
Office Openings & Closings
Norton Rose sets up in Monaco
Norton Rose Fulbright will be opening an office in Monaco early next year in a bid to grow shipping practice
Mergers & Alliances
Simmons & Simmons sign on to a joint law venture with Singapore firm JWS Asia Law
Partner Promotions
Latham & Watkins announces a global promotions round of 27, including two in London
Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
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This week:
1. Upcoming trends in the legal sector: PwC Annual Law Firm’s Survey Released
This week saw the annual release of the PwC Law Firms Survey, which marks its 25th anniversary this year. One of the most extensive insights into the UK legal sector, this week’s newsletter highlights the report’s key findings and suggests how this will impact future trends in the industry.
Overall, the survey found revenue and profit growth in 2016 to have been modest, reflecting challenging market conditions and a sector saturated with supply outstripping demand. Whilst global fee income increased across the board, the Top 10 at least, this was attributable to foreign exchange rates.
There has been continued growth in UK revenues across most firms, although achieving profitable growth across the sector has been challenging, with all bandings in the Top 50 firms reporting reduced net margins. The same also holds true for the expansion of UK firms into North America, with average margins being as low as 10% in comparison to 35% last year.
Key challenges to net profit include continued pressure from clients for fixed or contingent fees alongside higher staff costs as a result of increased headcount and/or increases to base salaries to attract and maintain top talent.
The survey found PEP performance to be flat (on average) across the Top 50 firms, whilst the profit performance of the Top 25 continues to lag significantly behind that of the Top 10. This suggests further consolidation of the mid-tier, with firms reconsidering their global strategy in terms of structure and international coverage.
Regarding people, firms have continued their focus on recruitment into 2016 with headcount increasing both domestically and internationally in Top 50 firms. Increased demand for top talent and the influence of US firms within the London market has led to inflated salary costs, with average full-time fee earner cost increasing by 10% in the Top 10 and 21% in the Top 11-25.
Greater diversity and inclusion within the sector remain a key theme, with the gender balance at partner level remaining disappointing at 17% and 18% in the Top 10 and Top 11-25 respectively. The introduction of gender pay gap reporting in the UK from next year will force firms to better consider the flow of diversity through their organisations in the future.
Unsurprisingly, the impact of Brexit features heavily on the survey’s findings. Regarding employment, the Brexit vote has clearly influenced firms’ outlook on performance and headcount needs, with some institutions delaying salary reviews or putting in place salary freezes.
As can be seen with the recent fluctuation of the pound, exchange rate movements exacerbated by the global volatility of the Brexit vote, now pose a significant risk to global law firms. Impacting not just financial results, but the remuneration of global partners, inter office transactions and the negotiation of single-currency contracts with clients, law firms need to consider exchange risk and risk mitigation and consider hedging mechanisms to protect against volatility (As seen with the overhaul of associate salaries at Akin Gump)
Information security, in particular cyber-attacks, were also identified as another area of risk that needs to be better managed by law firms, 73% of all firms surveyed suffering a security incident this year – most commonly through phishing attacks (84%) and infection by viruses / software (55%).
Information technology systems also play a critical role in helping law firms identify opportunities to increase efficiency in areas such as pricing and resource management which directly impacts profitability. With the utilisation of technology being critical to enable the future delivery of innovative services to clients, the fact the majority of firms outside the Top 10 do not consider their IT systems to be a ‘strength’ is worrying.
In looking to the future, the survey concluded that it would take positive responses and significant financial investment by law firms to overcome the challenges faced by the sector. In particular, the need to invest heavily in new technologies and processes to streamline workforce models and the management and deployment of resources emerged as key strategic priorities for the future.
As such, the onus is now on firms to be agile in adapting to change and utilising difficult market conditions.
To read the full report, please click here.
2. ‘A very sorry history of scandals’: The FCA opens consultation on future mission
The Financial Conduct Authority has launched a public consultation on its mission statement which aims to set out the organisation’s priorities for the 56,000 firms and the 130,000 approved persons that it regulates.
“Our mission will set out a framework within which we prioritise our work, ensuring we focus our resource in the right places,” said chief executive Andrew Bailey, as the regulator tries to move on from a “very sorry history” of financial scandals and subsequent record-breaking fines.
The mission statement, open for consultation until the New Year, does not intend to relax the regime but rather be clearer on what things meant.
Mr Bailey’s first major policy initiative since taking the job in July, the mission statement does not reposition the FCA as either pro-city or pro-consumer and will serve to guide the agency through the UK’s post-Brexit relationship with the EU.
The document pledges to intervene sooner to protect particularly vulnerable consumers, make regulation clearer and be more active against financial organisations committing misconduct outside of the FCA’s remit (Such as payment protection insurance and interest-rate hedging products). What role the FCA plays in financial compensation schemes is also to be discussed.
Regarding enforcement, the mission statement said redress would play a more important part in any sanctions for wrongdoing, but added that just because an investigation was launched did not mean a penalty would be automatic. The organisation also promised to review the use of its ‘private warnings’.
This consultation on the priorities of the FCA comes at a critical juncture, as research released by think tank New City Agenda earlier in the week concludes that the FCA risked sleepwalking into the next financial crisis unless it stood up to politicians and stopped watering down rules.
Since the ousting of Martin Wheatley last year the regulator has been accused of taking the pressure off the banking sector and relaxing its enforcement regime. Markets thrive on stability but with June’s EU referendum result and the government’s decision to delay triggering article 50 until early 2017, institutions have been operating in turbulent times.
Encouragingly, the recent positive profit announcements by UK and U.S banks shows a strong showing for many business areas that last year underperformed which is a relief to shareholders as the remain campaign painted predicted apocalyptic downturns.
The FCA, with Andrew Bailey at the helm has a window of opportunity to provide the markets with a sense of direction and stability with a clear message on its approach and focus for the future and hopefully his first meaningful strategy will deliver this.
3. Movers & Shakers
Appointments
Mark Rigotti confirmed as sole CEO at Herbert Smith Freehills
After the Anglo-Australian firm announced that it was phasing out its joint CEO leadership structure, Rigotti is confirmed over Leydecker to hold the post solo.
DLA appoints new London Managing Partner
Corporate M&A partner Tom Heylen has been appointed as managing partner of DLA’s London office succeeding Lord Clement-Jones who is stepping down after six years in the role.
Moves
Clifford Chance disputes veteran to join Dechert’s London base
Dechert has recruited Clifford Chance (CC) litigation partner Stephen Surgeoner in a boost for the US firm’s London office.
Latham magic circle hires continue with Allen & Overy M&A star
M&A partner Edward Barnett joins Latham’s London office after 20 years at A&O
KWM halts recapitalisation programme after the resignation of four London partners
The firm confirms the resignation of UK investments funds head Michael Halford, private equity partner Jonathan Pittal, corporate partner Andrew Wingfield and former managing partner Rob Day. It has since emerged that Wingfield and Day have joined Proskauer Rose.
Kirkland takes US private equity partner from Freshfields
New York-based corporate partner Doug Bacon joins Kirklands Huston office
Willkie Farr to launch London competition practice with KWM partner hire
Philipp Girardet joins the London office of Willkie Farr with senior associate Rahul Saha
Partner Promotions
Ropes and Gray adds two to partnership in 11-strong promotion round
Ropes & Gray has made up London lawyers Andrew Howard (Tax) and David Seymour (Real Estate) in a reduced global round
Taylor Wessing confirms two London partner promotions
Josef Fuss (Corporate) and Gareth Lawson (Finance) made up in 15-strong global promotions round
Office Openings & Closings
Clyde & Co close Libya office amid political instability
Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
We are delighted to announce that we will be welcoming our first work experience placement next week. The student will be joining us from Westminster Kingsway College for the week and was sent to us by our partnered charity Fitzrovia Youth in Action (FYA).
For nearly 20 years FYA has been supporting disadvantaged children and young people to overcome the barriers they face in everyday life. Since FYA’s formation they have supported over 5,000 young people through youth volunteering, outreach work and employability programmes; helped young people gain over 900 AQA qualifications and organised over 100 community events including street parties, healthy living festivals, football tournaments, inter-generational programmes, film showcases and community events.
For more information on Fides’ CSR strategy and what you can do to get involved with our charity partner please contact gopi@fidessearch.com
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1. CMS, Nabarro and Olswang merger begins to take shape
CMS, Nabarro and Olswang get closer to becoming the new global mega-firm as the latest news surrounding the merger this week reveals that Nabarro is dropping out of its European alliance.
Nabarro will be withdrawing from their European alliance Broadlaw Group as it commits fully to the three-way tie-up with CMS Cameron McKenna and Olswang. The Broadlaw Group features a number of well-established European firms, such as Germany’s GSK Stockman + Kollegen and France’s Lefevre Pelletier & Associes. Nabarro, however, will soon have access to CMS’s extensive European network, which would include CMS Hasche Sigle in Germany and CMS Francis Lefebvre in France.
Various details of the merger have been revealed so far, most significantly that the firms have all voted in favour of sitting under the CMS brand as it was announced the new firm will be called CMS Cameron McKenna Nabarro Olswang LLP.
This firm is expected to house over 1,000 partners and generate revenues of £450m in the UK, €1.2bn globally and will rank as the sixth largest law firm by headcount.
Whilst there has been a confirmation of the three-way merger, there still remains a lot for the law firms to work out. We have heard some speculation in the news around where the merged firm will be based, with The Lawyer commenting that CMS’s Canon Place office will be put up for sale following the merger, but will move in Nabarro and Olswang’s teams into the two vacant floors at their London HQ for the time being.
The firms will also need to consolidate their support services and review how they can best integrate all three business support functions. Legal Week posted this week that the result of this will most likely lead to job losses as it did when CMS merged with Scottish firm Dundas & Wilson. Combining those two firms led to a cull of 60 support roles whereas, this merger involves a much greater number of support staff. According to Legal Week: “CMS has 269 UK-based support staff out of total of more than 2,000 across the global CMS network. Nabarro has 118 support staff in London and 313 across the entire firm, while Olswang has 200 in London out of a global total of 263.”
Law firm mergers are undoubtedly a high-risk move, with many firms struggling with integration and breeding a consistent, coherent firm culture. However, if successful, the merger will unlock a wealth of opportunities for the new entity and those working within it.
For Olswang, the benefits of the merger will be in broadening their platform and offering partners a greater spectrum of deals to work on. Olswang have been struggling with partner exits over the last year and the merger is a much needed incentive for their partners to work bigger transactions and get on more client panels.
CMS are already seeing the benefits of the deal. The firm has previously suggested that they would be open to a transatlantic tie-up and the scope of this upcoming merger has already made them more noticeable to their US counterparts and will give the new firm more power when entering discussions with US peers. This week brought rumours that US outfit Hunton & Williams is in talks with CMS, Nabarro and Olswang about a further tie-up with the Virginia-based firm. The Lawyer reported the firms are in “late-stage merger talks”, which could see a four rather than three-way tie-up taking place by May 2017. If Hunton & Williams did manage to join the party, there could well be a comfortable fit given their heavy US presence and smaller international offering meaning the local integration in London, Brussels and Asia might be easier. However the global integration both physically and culturally of these three, or indeed four firms is a challenge that will only become more visible in time.
2. Incoming MiFID II rules to hit asset manager profits
A report has suggested that the research unbundling rules coming into force under MiFID II could cut asset manager profits by as much as 29 per cent.
Global research firm Crisil, a subsidiary of S&P Global, presented a report that examined the effect that new rules about research costs will have on asset managers. At present, investors are often charged research and execution costs together and haven’t previously been required to disclose a breakdown of these costings. Under upcoming MiFID II rules, asset managers will need to either absorb the research costs or set up a research payment account (RPA), which will involve additional disclosure, budgeting, reporting and auditing.
Woodford Investment Management is one of the first firms to unveil their plans for abiding by these new regulations. The firm is expected to absorb research costs and has committed to stop charging investors for research by April 2017.
Most firms are likely to take the same strategy as Woodford as the conditions of setting up an RPA are fairly long-winded. With this in mind, Crisil’s report suggests that, depending on what percentage of assets are exposed to equities, asset managers could anticipate operating profits to be hit from anywhere between 17 to 29 per cent.
These changes are predicted to lower costs for investors, and given the complexities of abiding by different regulations across jurisdictions, the US are likely to introduce similar research unbundling rules once MiFID II has been implemented in Europe.
MiFID II still carries uncertainties over key requirements under the regime. The 12 month delay that pushed the implementation date back to January 2018 has eased pressures slightly, but there continues to be questions surrounding the details of the regulation and indeed how the changes will affect asset managers and their business models. Research costs is only one requirement of the new regime that could result in lower profits and it remains to be seen to what extent MiFID II will impact on their bottom line.
Movers & Shakers of the week
Appointments
Bird & Bird appoints new head of consulting arm
Edoardo Monopoli will take on the position of CEO at Baseline, Bird & Bird’s consulting business, replacing Dominic Cook who left the firm August
KWM appoints new European senior partner
Michael Cziesla has been appointed the first non-London EUME senior partner for King & Wood Mallesons after Stephen Kon’s unexpected resignation last month
Moves
W&C boosts European banking offering
White & Case has hired former Ashurst banking partner Gianluca Fanti in Milan
A&O add to London finance team with hire from HSF
Nick Bradbury will be leaving Herbert Smith Freehills to join Allen & Overy as a partner in their financial services regulatory team in London.
Ropes & Gray also gains partner from HSF in London
Debt finance expert Malcolm Hitching is set to join Ropes & Gray from Herbert Smith Freehills as a partner in their London banking practice
Addleshaws loses incentives head
Employment incentives head Michael Carter leaves Addleshaw Goddard to join Osborne Clarke’s incentives and wider tax practice
Bakers makes 10-lawyer team hire in Switzerland
Baker & McKenzie sees a team of five partners and five associates join their Swiss office from Floriep. The partners joining are Beat Barthold, Pascal Richard, Ansgar Schott, Boris Wenger and Alessandro Celli
Osborne Clarke loses COO after nine months in the role
First ever COO for Osborne Clarke Claire Binyon has left the firm after nine months
Office Openings & Closings
Latham to open in South Korea
Latham & Watkins have been granted a licence to open a foreign legal consultant office in Seoul
Mergers & Alliances
Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
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This week:
1. Bank and MLRO fined for SMR and AML failings
Bangladesh’s largest bank was hit with a multi-million pound fine this week for serious AML failures at its UK arm.
The Financial Conduct Authority (FCA) demonstrated to the industry their refusal to accept weaknesses in AML policies, state-owned institution Sonali Bank was fined £3.3m and prevented from accepting new deposits for five and a half months, a rare enforcement act to be implemented by the regulator. The bank’s money laundering reporting officer (MLRO) Steven Smith has also received a penalty of £17,900.
The FCA released a statement that claimed they found “serious and systemic weaknesses [that] affected almost all levels of its AML control and governance structure.” The Bangladeshi bank had previously received clear warnings about these shortcomings, which persisted from 2010 to 2014, and failed to follow the recommended steps provided by the FCA.
This case highlights the importance to all financial institutions of maintaining oversight of all branches and ensuring systems and controls follow requirements sufficiently. The FCA further argued that they have set well-defined obligations to abide by when it comes to AML policies and procedures and therefore expect all regulated firms to be effective in enforcing these.
Amongst the consequences of these failings are the penalties faced by Sonali Bank’s MLRO Steven Smith. Smith will receive not only a £17,900 fine, but has also been restricted from taking on another MLRO role or further performing any compliance oversight functions. Although the regulator has revealed that Smith was ‘unsupported and overworked’, the FCA’s emphasis on the accountability of senior managers stipulates that the numerous failures to escalate and report concerns in areas for which he was responsible is his personal wrongdoing.
Combating money laundering is a significant objective for the FCA and they intend to crackdown on any institution who fails to comply with the requirements. With senior management accountability measures in full force, there lies serious reason to ensure that financial crime compliance is met and any weaknesses swiftly identified.
2. Lloyd’s Banking Group cuts panel
Lloyds Banking Group has finalised its UK legal panel review, cutting core panel firms from ten to eight with DLA Piper and Norton Rose Fulbright losing their places on the roster.
Led by Group general counsel Kate Cheetham, existing panel firms CMS Cameron McKenna, Eversheds, Herbert Smith Freehills, Hogan Lovells, Linklaters, Allen & Overy, Ashurst and Addleshaw Goddard have retained their places on the bank’s panel.
As a Lloyds spokesperson said: “Following a rigorous and competitive tender process, we have finalised the list of the group’s legal core panel. The panel will include eight firms which have been designated ‘core’ as they are able to offer either alternative resourcing options, technology solutions and/or the ability to offer a wide range of complex legal advice.”
Legal Business revealed in February that Lloyds was planning to review its core advisers, with the expectation that the panel would reduce in size.The bank last conducted a full panel review in August 2014, and is expected to unveil its 16 UK sub-panels later this year.
A ‘robust’ tender according to partners familiar with the process, there was a strong focus by the bank on pricing via hourly rate as firm’s submitted quotes via reverse auction.
This follows widespread legal restructuring at Barclays, who reduced the total amount of law firms it worked with by 60% in July. In a more holistic approach to the tendering process, law firms were assessed on their ability to collaborate and innovate with an overarching goal to cut costs for Barclays.
In the face of harsh cost cutting measures, with Lloyds revealing another 1,340 job losses this week under its restructuring programme, it has never been more critical for tendering firms to be flexible on pricing, resources and delivery of service through technology.
With regulatory uncertainty surrounding Brexit and ring-fencing reforms assuring the bank’s need for high-quality external legal advice, what has been made clear from the panel reviews conducted at Lloyds and Barclays is that legal expertise is now considered by clients as a given, and not enough alone to justify inclusion on their panel.
As such, the challenge on law firms is now to adapt and better articulate how they provide value to clients through their services – whether this be through fixed pricing, technological solutions or flexible resourcing.
Movers & Shakers of the week:
Appointments:
Eversheds duo in line for key management roles
Keith Froud is set to be appointed managing partner, whilst Ian Gray is stepping into a leadership role relating to clients in ‘tripartite leadership’ under new chief executive Lee Ranson
New London managing partner appointed at Morgan Lewis & Bockius
Frances Murphy appointed as new London managing partner replacing Peter Sharp
Moves:
White & Case boosts regulatory offering with hire from BNY Mellon
James Greig, EMEA Regulatory Counsel and Head of the Office of Public Policy and Regulatory Affairs at BNY Mellon joins White & Case in London
Winston & Strawn hires Middle East M&A heavyweight from White & Case
Campbell Steedman joins Winston & Strawn to head Middle East office
Simmons & Simmons strengthens real estate practice with hire from DLA
Richard Hopkinson-Woolley joins Simmons & Simmons real estate team in London
CC’s global co-head of banking joins White & Case
Patrick Sarch, global banking co-head at Clifford Chance has joined White & Case in London
Sherman Brussels competition partner quits to launch boutique after Quinn talks
Trevor Soames has left Sherman’s to start his own boutique after it emerged that he was in talks with fellow competition partners to join Quinn Emanuel Urquhart & Sullivan
Quinn Emanuel strikes in Paris with Allen & Overy and HSF hires
Michael Young, global co-head of arbitration at A&O and Isabelle Michou, head of Paris disputes at Herbert Smith Freehills join Quinn’s dispute resolution practice in Paris
Office Openings & Closings:
Specialist real estate planning boutique launched by partners from Herbert Smith Freehills, KWM and Gowling WLG
Planning partners Simon Ricketts (KWM), Patrick Robinson (HSF) and Clare Fielding (Gowling WLG) are teaming up with planning barrister Mary Cook (Cornerstone Barristers) to launch new firm
Partner Promotions
White & Case makes up eight London partners in 40-strong global promotions round
Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
Why not follow us on Linkedin for regular market updates?
This week:
1. Celebration for Innovation
This week saw a celebration of innovation in the legal press as the FT announced the 2016 winners of its Innovative Lawyers Awards and Reed Smith launched a first of its kind innovation hub to encourage collaboration with clients.
Launched in 2006, the FT Innovative Lawyers Awards assesses law firms on both innovation for clients and within their own business models, emphasising what the users of legal services want and need to know to successfully navigate today’s dynamic business environment.
Those firms ranked as the most innovative in Europe were scored for both legal expertise and the business of law, which were benchmarked against other submissions to arrive at the final rankings.
These celebrations followed the launch of Reed Smith’s Innovation Hub earlier in the week, with a dedicated 538sq ft ‘thinking space’ in the City where clients can meet and collaborate with the firm on projects they deem important.
Headed by recently appointed Innovation Manager Alex Smith, the firm will also work internationally with clients to develop technology that cuts costs and enhances legal services.
The need for innovation across the legal sector is broadly accepted, with firms forced to adapt to satisfy greater internal and external drivers for change. Here, a marketplace characterised by greater client demand for value and increased competition on pricing by ABS firms, meets generational challenges for firms to offer a more favourable working environment to retain top talent.
As such, firms have sought to develop technology, flexible working practices and more efficient operating models (alongside tools to ensure they conform to regulatory compliance) as they strive to become more efficient, more profitable and develop new revenue streams.
The stories in the news this week celebrate and share genuine innovation in the legal sector, and further underline that the individual lawyer, the nature of legal advice and the way in which that advice is delivered needs to undergo deep change to keep pace in the global economy.
2. Aviva fined £8.2m for client money failings
Insurance group Aviva have been penalised by the FCA this week as it emerged they have failed to comply with Client Assets Protection Regime (CASS) regulations.
The £8.2m fine was handed out for client money failings on an outsourced platform. The regulator declared that certain activities outsourced by Aviva didn’t have in place the correct controls and oversight arrangements to sufficiently monitor the client assets on the adviser platform.
The FCA also used this as an example to relay that outsourced CASS functions are still under the responsibility of the regulated firm and it is up to them to ensure that client assets are protected.
Last year, Aviva Investors were fined £17.6m over failures to manage conflicts of interests fairly, whilst a former investment analyst at the firm was also banned and fined £139,000 for exploiting weaknesses in Aviva’s trading systems and controls to in order to delay the booking and allocation of trades.
CASS has become an essential piece of regulation since new rules were enforced in 2014. It was demonstrated how vulnerable client assets were after the fallout of Lehman Brothers and MF Global and the extent to which ring-fencing rules needed to be reformed. Eight years on from the collapse, regulators and asset managers continue to prioritise the systems and procedures for implementing client money rules.
Back in June this year, Merrill Lynch, the brokerage unit of Bank of America Merrill Lynch, was fined for similar failings, with the Securities and Exchange Commission (SEC) charging a $415m settlement for the failure to safeguard customer assets. The investment bank seemingly used $5bn of customer cash to finance its own trading activities whilst also reserving up to $58bn per day of customer securities in a clearing account as opposed to a reserve account, which exists to protect the funds if the bank were to fail. It marked the second largest Wall Street penalty ever and led to a wider investigation into the industry to probe for other breaches of client asset rules.
The Aviva case indicates the importance of complying with preventative regulation, specifically that concerning the protection of customer money and assets. Although no client assets were actually lost in this incident, the previous high-profile insolvencies that have occurred in this industry in the past has caused CASS compliance to remain top priority for global regulators.
Appointments
New chairman appointed at the CLLS
Edward Sparrow, litigation partner at Ashurst, will take on the role of chairman at the City of London Law Society from Alasdair Douglas, former senior partner of Travers Smith
Moves
Sidley grows London restructuring team
Restructuring partner Jifree Cader joins Kirkland & Ellis in London from Sidley Austin
Southampton FC gains new legal director
Tim Greenwell, former general counsel of Toyota UK, is set to join Southampton FC as legal director
Nokia litigation head returns to private practice
Head of litigation at Nokia Richard Vary moves to Bird & Bird in London as a partner
Shearman loses Paris partner duo
Paris private equity partners Arnaud Fromion and Frederic Guillox, along with counsel Adrien Paturaud, leave Shearman & Sterling to join Goodwin Procter in their Paris office
Shearman experiences further loss with London tax head
London head of tax Sarah Priestley quits Shearman & Sterling
Ashurst regulatory partner decides to remain at the firm
James Perry, who resigned in April to join Gibson Dunn & Crutcher, has chosen to remain at Ashurst
Olswang restructuring head departs during merger talks
Alicia Videon leaves Olswang to join McDermott Will & Emery in its London transactions practice
Office Openings & Closings
Litigation finance provider set up its own law firm
Burford Capital has launched ABS Burford Law in London and hired Akin Gump litigation partner Tom Evans
Partner Promotions
Goodwin Procter promotes 15 to partner, one in the City
Covington makes up 13, including first City promotion since 2014
Kirkland promotions round sees 81 join partnership, with six in London
Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
Scroll down to take a look at our featured blog written by Directors Phil Burdon and Tom Spence, which looks into the reasons why a collaborative approach is so necessary in a law firms today
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This week:
1. CC provides competition for A&O’s OTC derivatives regulation tool
Clifford Chance (CC) have announced a new tool developed with Thomson Reuters that supports their bank clients with new regulatory requirements for over-the-counter (OTC) derivatives transactions.
The solution will allow financial institutions to meet regulatory obligations for complex, multi-jurisdictional contract work concerning uncleared OTC derivatives. It has been created specifically in line with new margin requirements, which are expected to put further cost pressures on financial institutions.
The tech compares to MarginMatrix, a tool developed by Allen & Overy (A&O) and Deloitte, announced in June, which helps bank deals with similar regulatory challenges brought about by the European Markets Infrastructure Regulation (EMIR).
The collaboration between A&O and Deloitte was fairly ground-breaking and combined impressive legal expertise and managed services. The most recent tie-up with CC and Thomson Reuters has followed suit, pairing up a similarly impressive regulatory offering with a leading provider of information and software solutions.
Thomson Reuters has applied its contract automation software Contract Express to the tool which enables it to generate regulatory compliant documentation that as well provide greater economies of scale by producing more contracts at a much quicker rate.
CC describes how the new flexible service has come about as a result of client responses. Paget Dare Bryan is a banking partner at the magic circle firm and said: “Clients didn’t all want a one-sized package; they wanted to be able to disentangle what they wanted from it, from templates to teams of people – they might be able to run some aspects of it themselves. They are going to use us and Thomson Reuters in a way that fits in with their pricing model.”
This flexibility has been welcomed by clients and signals an understanding from law firms that the delivery of legal services must best suit their clients’ needs, which can often be met by the innovative solutions from businesses such as Thomson Reuters and Deloitte.
2. FCA revisits the Senior Manager’s Regime
Six months after the introduction of the Senior Managers and Certification Regime (SMCR), responsibility for the conduct and culture of financial services firms continues to be obscured, argued new chief executive of the Financial Conduct Authority Andrew Bailey.
Despite firms making a “substantial effort to get this right,” in his first opinion piece since taking up the role three months ago, Bailey highlights evidence of overlapping and unclear allocation of responsibilities under the SMCR and even cases of firms sharing responsibility amongst more junior members of staff to obscure who is genuinely accountable.
“This goes against the intention of the senior managers and certification regime and should not continue,” he said.
Introduced as part of the UK’s financial regulatory framework in March, the SMCR ensures greater accountability for individual actions by more clearly defining the roles and responsibilities of those in senior functions. While it currently applies just to lenders and insurers, the rules will be extended across the financial sector — including asset managers and hedge funds — by 2018.
The banking industry is particularly cautious about the new regime as the FCA have predicted it will bring about a greater amount of enforcement action against individuals.
Bailey made public his comments on the application of the regime, ahead of the FCA’s announcement that it has published feedback on the implementation process over the last six months and proposed measures to further reinforce the importance of the regime, particularly at the most senior levels.
The proposed amendments also dictate that those with poor conduct records may find harder to find new work if they’re looking to move as employers may not be as able to provide references. Moreover, the changes will also affect their remuneration as bonuses transferred to new employers for a regulated senior manager can be forfeited or taken back by the former employer.
Since its inception, there has also been a lack of clarity over how the SMCR affects in-house legal functions. It has been highlighted by the Law Society of England and Wales that lawyers, if included in the SMCR, will struggle to provide honest legal advice to their employees, which would indicate a conflict of interest. ‘In some circumstances general counsel may, by virtue of being included in the Senior Managers Regime, feel obliged to disclose legally privileged information,’ the Law Society said. The FCA have therefore launched a discussion paper to explore this challenge further and explain better how legal functions should be treated under the regime.
Appointments
Senior management re-elected for another three-year term at Charles Russell Speechlys
Both managing partner James Carter and senior partner Christopher Page ran unopposed in Charles Russell Speechlys’ management team elections
Clydes senior partner steps down
Senior partner at Clyde & Co James Burns will be stepping down and taking on a new role as head of the Americas. The firm are to appoint a new senior partner next month
Moves
HSF loses Middle East rainmaker to Jones Day
Nadim Khan exits his post as Middle East finance head for Herbert Smith Freehills to join Jones Day and serve as their head of Middle East banking and finance practice
Osborne Clarke makes two City corporate hires
Former head of corporate Edward Persse and fellow corporate partner Paul Smith both depart Irwin Mitchell to join the London corporate team at Osborne Clarke
Ashurst retains banking partner
Banking partner Nigel Ward remains a partner at Ashurst after it was announced he would be leaving for Paul Hastings
Olswang loses life sciences co-head to magic circle firm
Stephen Reese, IP partner and co-head of life sciences, departs from Olswang to join Clifford Chance in London
Quinn bolsters City FS offering
Quinn Emanuel Urquhart & Sullivan have taken on Macfarlanes’ financial services head David Berman, who will sit in their white collar and investigations practice
Covington hires ex BG GC
BG Group former general counsel Graham Vinter will be returning to private practice, joining Covington & Burling’s London project finance offering
Office Openings & Closings
EY Law loses international law capability in Singapore
EY Law’s network firm in Singapore DA Partners has shut down, leaving the firm without an international offering, with only a domestic law offering in the country with local practice PK Wong
Cadwalader shuts down in China
Cadwalader Wickersham & Taft announces office closures in Beijing and Hong Kong
Mergers & Alliances
CMS, Nabarro and Olswang discussing a three-way tie up
Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
Follow us on Linkedin for daily market updates
This week:
1. FCA’s robo-advice unit takes shape
At the BBA FinTech Banking Conference this week, the FCA announced that nine firms will be receiving advice from their specialist robo-advice unit.
The regulator launched the robo-advice unit in June this year, allocating a £500,000 budget to the department for its first year. They aim to initially provide individual feedback to those applying for FCA authorisation, and consequently produce further general guidance and regulatory toolkits for those developing automated advice models. Eight out of the nine firms taking part are said to be ‘established firms’ in financial services, with the FT adviser reporting that online investments service True Potential are amongst them. True Potential offer an end-to-end advisory service, incorporating an online platform, fund advisers and back-office systems into one simple tool.
The FCA representative speaking at BBA conference was Christopher Woolard, Director of Strategy and Competition at the FCA. His speech not only addressed the news concerning their robo-advice unit, but also covered further advancements made in other divisions of Project Innovate.
On the current status of the Regulatory Sandbox, Woolard explained their efforts in solving issues concerning the implementation of distributed ledger technology. He highlighted the opportunities it offers for KYC and AML requirements and also revealed that they have received Sandbox applications from a number of blockchain firms, which should hopefully allow them to better monitor the technology and explore future risks.
Woolard also touched on regtech and its potential to ‘free up large sums of operational and capital expenditure currently spent on compliance’. They are hosting a range of hackathons to explore some of potential tech solutions that can be used in regulatory teams and which products would be best to bring into the market. The FCA seem to be embracing regtech and are encouraging innovation in this space as it could offer more efficient and effective ways of meeting regulatory standards, making it simpler for firms to fulfil their regulatory requirements.
In the two years that Project Innovate has been running, they have received 19 applications for the robo-advice unit, 69 applications for the Regulatory Sandbox and assisted 300 firms in navigating the regulatory system. The FCA’s appetite to embrace new technology and push the envelope with ventures, such as Project Innovate and the robo-advice unit have allowed the FCA to remain the leading regulator for start-up fintech firms, with London retaining their place as a first-rate location for this sector. This is an especially vital area of business for the UK following the EU referendum result and provides much needed incentive for financial services firms to maintain their UK operations.
2. Shearmans consider demoting partners from equity in profits push
In response to challenging market conditions, Shearman & Sterling are considering demoting some of its equity partners in a bid to boost profitability and re-focus the business around priority practice areas.
As reported by Legal Week, plans were discussed in a meeting between the firm’s global and regional managers in New York on Wednesday, with potential changes being implemented from the firm’s annual compensation period in January.
With partners in the less profitable practice areas and regions understood to be the most affected, there could also be a reduction in practice group heads.
“As with all firms, we regularly review how and where we invest equity and manage head count,” the firm said in a statement Tuesday. At time of release, the 839-lawyer firm has 162 equity partners and operates across 20 offices globally.
The removal of underperforming partners from the firm’s equity has been a major problem for senior management in the past, with the Shearman’s partnership agreement requiring a supermajority of 75% of equity partner support to remove a member from the equity partnership.
Despite this, it is possible to de-equitise partners with individual consent, which could be gained under management provision to reduce the compensation of equity partners by up to 25%.
It is understood that there has been growing frustration at the firm’s stalled growth, with gross revenues growing just under 2% last year and average PEP falling 4% to $1.8m. This followed two strong years financially for the firm, which posted a 19% growth in PEP in 2013.
Despite this, Shearman’s adopted Cravath’s new salary scale in June and has continued to grow its younger tier of partners, promoting 25 in the last two years, many to fixed-share status.
With law firm’s obsession with PEP and profitability tables not seemingly abating, there is huge pressure on firms to perform in this challenging global economy.
Whilst the redistribution of equity is a sensitive point of discussion within law firms and the market, Shearman are not alone in facing difficulty to balance the books across their international and full service business.
As we have seen earlier this year at Freshfields, impetus has been placed on large firms to reassess and evolve their partnership structures to maintain coverage of markets and sectors aligned to their strategy, despite contrasting levels of profitability.
Movers & Shakers of the week
Appointments
K&L Gates appoints two lawyer to become chair and global managing partner
Michael Caccese and James Segerdahl are set to become K&L Gates new non-executive chair and global managing partner respectively.
Moves
Eversheds grows construction and engineering team
Disputes partner Jonathan Douglas joins Eversheds from Nabarro to sit in their construction and engineering team in London
Baker Botts build out Moscow office
Ivan Marisin, Moscow office head, and arbitration partner Vasily Kuznetsov leave Quinn Emanuel Urquhart & Sullivan to join Baker Botts with Marisin acting as head of their Russian disputes offering and Kuznetsov serving as co-chair of their international disputes practice
Simmons gain corporate partner in Brussels
Ashurst’s Brussels managing partner Carl Meyntjens will be exiting the firm to join Simmons & Simmons in their Brussels office along with corporate counsel Kelly Cherrette
A&O expand London IP team
Simmons & Simmons’ IP partners Mark Heaney and David Stone will be joining Allen & Overy’s IP litigation team in London
Forsters take on former KWM City tax head
Heather Corben, former head of Tax at King & Wood Mallesons will be joining Forsters in London
Mergers & Alliances
DLA Piper agree merger with Canadian IP firm Dimock Stratton
Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
You can also follow us on Linkedin for daily market updates
This week:
1. Slaughters enters new age with AI technology
Slaughter and May are the latest in a string of firms to strike a deal with an AI provider, bringing their practice into the new era of legal services
Luminance Technologies are a UK start-up that have developed artificial intelligence (AI) to assist lawyers with the due diligence in mergers and acquisitions. As Slaughters have a long-standing relationship with Mike Lynch, who funded $3 million in the technology start-up, the magic circle firm have decided to adopt Luminance’s AI technology after testing and piloting it on previous transactions.
Mike Lynch is one of the most prominent figures in British technology, having founded and acted as the former chief exec for UK software group Autonomy. His involvement and funding into AI in the legal industry is a significant endorsement for the technology, and proves how much it has developed and strengthened over the last few years.
Slaughters senior partner Steve Cooke says that Luminance will be of great advantage to the junior lawyers at the firm. “It gives them their lives back. A lot of the due diligence work is not the most exciting work for lawyers” says Cooke.
AI has been most well accepted by law firms for carrying out due diligence tasks. The technology uses machine learning, where a computer is able to teach itself to grow and change after new data is inputted, with results becoming more refined after each usage. Tasks such as due diligence are time-consuming, tedious processes which, as a result, can expose themselves to human error and leave junior lawyers to carry out basic tasks rather than gaining experience in the more challenging parts of a deal. AI can now extract and review this diligence data and compile it into a report in a fraction of the amount of time it would take a human.
There are a number of firms who see the benefits of integrating AI into legal processes, with Clifford Chance and DLA Piper both signing up with Kira Systems, and Linklaters and Berwin Leighton Paisner choosing to sign on with RAVN technologies as their AI provider.
With most of the magic circle embracing artificial intelligence, including Slaughters who are arguably the most conservative firm in UK legal industry, it marks a significant step towards revolutionising the way the law firms work and enhancing the efficiency and quality of legal services across the UK market.
2. AAM told to increase regulatory capital buffers
Aberdeen Asset Management must increase the minimum amount of cash it holds as a regulatory capital buffer following a periodic review by the FCA, the firm announced on Monday.
Europe’s third-largest listed funds house was told to boost the level of capital it holds from £335m to £475m to cover any ‘unsighted and unquantifiable risks’.
Initially holding an additional self-imposed capital reserve of £100m and £118m rainy day fund, FCA requirements for Aberdeen to increase its capital buffer have led the asset manager to scrap this internal policy, and will now only hold an additional £78m in capital above the new regulatory requirement.
This is the latest sign of how regulators are taking a closer look at the UK asset management sector which has expanded exponentially since the financial crisis.
A perceived risk factor for some time, it is unlikely that Aberdeen were the only asset manager required by the FCA to hold additional regulatory capital.
Indeed, a recent report from Morgan Stanley found great disparity in the level of capital held by large asset managers, with the quartile of the most highly capitalised firms holding three times more capital than the quartile of companies that are least capitalised.
Increased regulatory pressure on the sector has been building for some time. Last year the FCA banned asset management companies from insuring themselves against unexpected losses, such as through fines or litigation. This follows on from the launch of their market study into competition and fees in the industry in November 2015.
The decision by the FCA that the sector can no longer insure themselves against some risks, and instead must hold additional capital to cover such risks themselves, has far-reaching implications for the asset management industry.
With regulator attention on the fund industry’s capital requirement historically being low – especially when compared with banking and insurance – the FCA’s demands for greater capital buffers will, at best, cause asset managers to re-visit their dividend policies, and at worse cause significant worry for firms who have struggled with outflows in recent years and not had the ability to build up significant surplus capital.
At a fundamental level, with more capital set aside for regulatory buffers, this is likely to have an effect on the way fund houses operate, and ultimately on their investors and shareholders.
It will now be critical for shareholders and investors alike to carefully monitor capital, largely unconsidered in the sector until now, with industry experts predicting that levels of capital will become a key differentiator between firms, with asset managers with a higher level of additional capital being expected to fare better in the future in terms of fund sales and share price performance .
Movers & Shakers of the Week
Appointments
Clearys appoints next managing partner
Private funds partner Michael Gerstenzang has been named Mark Leddy’s successor as managing partner for Cleary Gottlieb Steen & Hamilton
Moves
Ashurst faces five more partner exits
Singapore managing partner Shaun Lascelles leaves Ashurst, rumoured to be joining Vinson & Elkins
Ashurst’s former head of banking and capital markets Nigel Ward will be joining Paul Hastings
Hong Kong managing partner Lina Lee departs for Allen & Overy, along with fellow capital markets partner Jonathan Hsui.
Ashurst’s Abu Dhabi managing partner Alastair Holland has also exited the firm for the Dubai office of US firm Curtis Mallet-Prevost Colt & Mosle.
W&C gains co-head of tax
Berwin Leighton Paisner’s head of tax Michael Wistow departs for White & Case, where he will serve as their EMEA co-head of tax, based in the City
Mischon strengthens City funds capability
Partner Daniel Greenaway, co-head of funds at Pinsent Masons, has joined Mischon de Reya’s corporate practice in London
Office Openings & Closings
Herbert Smith Freehills launch a new alternative legal services hub in Melbourne
PwC opens first base in Singapore
Mergers & Alliances
Norton Rose Fulbright makes third Canadian acquisition in Vancouver firm Bull Housser
Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
You can also follow us on Linkedin for daily market updates
This week:
1. How dangerous is passive investing for the asset management industry?
A top US research and brokerage firm has released a note claiming that the rise of passive asset management in the industry could cause serious detriment under a capitalist economy, more so than if we were to operate in a Marxist economy.
The note titled “The Silent Road to Serfdom: Why Passive Investing is Worse Than Marxism”, was published by Sanford C. Bernstein & Co, and warns that passive investing is a threat to asset management as a capital economy should naturally be run as an active market.
They claim: “a supposedly capitalist economy where the only investment is passive is worse than either a centrally planned economy or an economy with active market led capital management.”
In recent times, the asset management industry has seen a rise in legal and regulatory policy initiatives as well as considerably less prosperous market conditions, leading to a dip in the performance of active, high-risk funds. With this lack of performance and sky-high fees, the market has encountered an uplift in the demand of exchange-traded funds and other passively managed vehicles as investors look for more prudent strategies.
Bernstein argues that this method of investing goes against the grain in a capitalist society, where capital should be managed in the most productive manner, seeking the highest returns, which should in turn create new jobs and raise the standard of living.
Bernstein’s head of global quantitative and European equity strategy Inigo Fraser-Jenkins argues that ‘The commonality between both active market management and the Marxist approach is that in both cases there are a set of agents trying – at least in principle – to optimise the flows of capital in the real economy. It is just such a feature that is lacking in passive investment management.’
Although this seems to be a fair argument, it is common for all economies to weather a variety of market trends, in particular, during the recession and expansion phases of the economic cycle. There is a possibility that the popularity of passive investing is purely a temporary stage in asset management, and the inevitable return of investor confidence in financial markets will undoubtedly bring active funds back to the fore. But whilst the FCA is in process of their thematic review of the Asset Management industry and with fees at the top of their agenda, it is perhaps a matter of time before investors decide that the active fund managers still have a part to play in the development and growth of wealth.
2. Nearly half of senior associates regret legal career – what’s the solution?
With only four out of 10 senior associates surveyed that they would choose to become a lawyer again if they had the chance, it seems the legal profession doesn’t provide as much job satisfaction as one might think.
New research carried out in The Lawyer Salary Survey revealed that only 37 per cent of senior associates would take the same path given a second chance. This was the lowest figure compared to all those both higher and lower in experience. Trainees seemed the most happy about their decision, with 59 per cent claiming they would make the same choice.
These figures also highlight that lawyers become much happier with their choice when joining the partnership, as the numbers from 7+PQE to Partner jump by nearly 10 per cent.
The survey highlights the alarming number of lawyers who aren’t happy with either the profession or their position in their respective firms and businesses. With such a small proportion of senior associates making it as a partner, law firms need to improve, or even create, a solid path of career progression outside the traditional partnership track.
Moreover, the statistics also emphasise how low the level of job satisfaction for lawyers is across the board. The exceedingly long hours, combined with pressing deadlines, and the constant struggle with adversity all contribute to the amount of dissatisfaction. Many of these factors, however, can be overcome by the numerous initiatives that law firms are gradually beginning to implement.
Bringing in and adhering to initiatives, such as diversity and inclusion and agile working, is crucial when trying to provide lawyers with a necessary work/life balance and foster the kind of firm culture in which lawyers find their jobs rewarding and engaging, as opposed to challenging and fundamentally unrewarding. It is this final point that might hold these statistics back. Despite firms’ best efforts, how do law firms motivate senior associates who know their goals of partnership are continually diminishing and are therefore questioning the decade or more they have spent working towards this goal? Some do make it to where they want to be but unfortunately the majority don’t and keeping the majority motivated is clearly a challenge law firms and the industry in general is failing currently.
Movers & Shakers of the Week
Appointments
Greenberg overhauls management structure
London chair Paul Maher, global practice chair Patricia Menéndez-Cambó and regional operations chair Richard Edlin have all been appointed global vice-chairs of Greenberg Traurig
Moves
Eversheds’ international arbitration head to join Freshfields
Will Thomas, head of international arbitration at Eversheds, joins Freshfields Bruckhaus Deringer in the City
Linkaters corporate head takes a GC role
Head of Corporate London for Linklaters Stuart Bedford moves to private equity house LeapFrog Investments as their general counsel.
A&O loses two German partners to US firms
Latham & Watkins hired Allen & Overy’s international capital markets group head Oliver Seiler in Frankfurt, whilst corporate partner Michael Ulmer also leaves the magic circle firm’s Frankfurt office for Cleary Gottlieb Steen & Hamilton
Olswang sees two exits from City office
Corporate partner Duncan McDonald departs Olswang for Taylor Wessing and Howard Cartlidge, former London competition head, joins DWF
Office Openings & Closings
Mergers & Alliances
Dentons set up association in Iran with local firm Arman Pirouzan Parvine Legal Institute (IPP)
Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
Tweet us @Fides_Search to let us know your thoughts.
This week:
1. Chadbourne Partner launches $100 million class action
Efforts to improve gender equality within the legal sector were hit with a reality check this week, as Washington D.C. Litigation partner Kerrie Campbell filed a $100 million class action complaint against her employer Chadbourne & Parke on Wednesday.
The complaint, filed on behalf of current and former female Chadbourne partners since 2013, claims that the firm routinely underpays women and offers them fewer leadership opportunities in comparison to men.
A spokesman for Chadbourne has denied the gender discrimination claims.
The root of this, Campbell claims, is the five-person all-male management committee who consistently made compensation and promotion decisions that discriminated against her and other women by arbitrarily awarding male partners more points.
Last year, 11 of Chadbourne’s 18 female partners were allotted a significantly lower number of points than male colleagues, a long term trend as women were awarded up to 1,000 points in the firm’s compensation system from 2013 to 2015, whilst male partners got up to 2,250.
The firm’s culture has been further called into question by the fact that, of the 20 non-partner lawyers who left Chadbourne’s Litigation team last year, 17 of them were women.
Despite having combined experience of 27 years at two major law firms, being a partner and consumer product safety head at each, Campbell contends that the management committee assigned her 500 partnership points for the $2 million she was projected in her first year.
This was well below the 1,000-1,400 points a number of less productive male colleagues received, with the complaint stating that one male partner received 850 points despite only billing $253,000 in 2014.
Campbell also claims to have brought in more than 20 clients and $5 million in revenue in her less than three years at the firm, placing her amongst Chadbourne’s highest earners. Despite this, she contends that she received a smaller paycheck with no annual bonus that left her in the bottom third of partner pay, and that Chadbourne has underpaid her by more than $2.7 million dollars during her time there.
Upon taking her case of gender and pay discrimination to the management committee in early 2015, citing gender and pay-based discrimination, the compliant claims that management rallied against her – refusing to provide adequate staffing for her cases, manipulating her collections to undermine her origination fees and refusing to acknowledge Campbell by name in the firm’s marketing and promotional materials.
Eventually, in January 2016, Campbell was asked to leave and was told that her practice representing clients with defamation, First Amendment and consumer product safety issues was not a good fit with the firm.
The complaint further alleged that upon immediately asking her to leave, the firm slashed her pay without benefits to $180,000 – well below that of a first year associate at the firm – and withheld more than $440,000 in her capital account.
Unfortunately, Campbell’s case is not an isolated one, with Insurance partner Traci Ribeiro launching a class action suit against San Francisco-based firm Sedgwick last month.
Cases such as this do not bode well for future diversity in the profession, especially within the highest levels of law firms. In the US, women only hold 18% of big law partnerships, only rising from 16% a decade ago, with female partners routinely earning 20% less than that of their male colleagues (Female partnership numbers in the UK don’t fare much better, averaging 19% across the Top 20).
Perhaps more challenging is the fact that, despite offering an insight into closely-guarded law firm compensation, this case shows the way in which law firms ‘push out’ partners that they no longer want. In a highly competitive legal market place, law firms need to seriously rethink their culture in order to attract and retain the best talent.
For a copy of our Research article A Path to Parity: Reassessing Gender Balance within UK Law Firms please contact research@fidessearch.com
2. Digital currencies make their way into financial markets
The world of digital currencies and blockchain may be about to enter the mainstream financial market as a new digital currency is being developed by four of the largest banks.
The consortium, pioneered by UBS, consists of global banks Deutsche Bank, Santander, BNY Mellon, as well as broker ICAP, who have developed the “Utility Settlement Coin” (USC), a new digital currency that is able to use blockchain technology to clear and settle securities trades in financial markets.
There have been a number of digital and virtual currencies entering the market since their inception, the most famous being Bitcoin introduced in 2009, but the issues surrounding price volatility and lack of confidence in the decentralised system (that is where no individual party oversees the transaction) has led to a number of obstacles for growth.
(For a more in-depth explanation of blockchain technology, please see this article by the Wall Street Journal)
However, USC concentrates more on the use of blockchain technology than it does acting as a widespread currency. It will be linked to global currencies and the central bank, which will provide stability for the digital currency unlike some others which are publicly issued, such as Bitcoin. The currency will be used to speed up transaction and clearing processes as cash from a trade will be converted into utility settlement coins, to then be placed on a distributed ledger (i.e. the blockchain) and immediately exchanged for the financial securities being traded. The ledger bypasses the need for third-party verification, and enables trades to be carried out in a matter of seconds as opposed to two or three days.
They first announced the development of USC in September last year and are now planning to test it in a real market environment. The banks are hoping to launch the product in early 2018.
Regulation of fintech products such as digital currency and blockchain has been the largest question when implementing these new technologies in financial markets. Integrating digital currencies to current securities transactions may leave a number of grey areas that could cause failures if they were to be introduced too soon. Regulators need to be certain that the complex, sophisticated workings of blockchain technology will comply with rules already laid out, and if not, how regulation needs to be adapted in order to incorporate the potential risks involved.
The FCA is the leading regulator in Europe to focus on new technology and enabling start-up fintech businesses, as demonstrated by the revolutionary Project Innovate. It’s widely praised “Regulatory Sandbox”, which allows new technology and businesses to be tested in a live market under predetermined parameters, has allowed London to remain the fintech hub across Europe. It is key for the development of the banking system, which is still antiquated in its technology and speed of process that new digital currencies such as USC are allowed to develop whilst also being fit for purpose.
Financial crime is another crucial element to consider with digital currencies. Without full regulatory coverage, these currencies can become attractive for criminal activity, such as money laundering and terrorist financing. On the other hand, it has been said that the blockchain technology used to operate these currencies, if executed correctly, can in fact play a major role in the fight against financial crime. It would introduce complete transparency across all parts of a financial transaction, and in turn reduce fraud, by providing a common, visible platform for transactions.
If the Utility Settlement Coin does become an industry standard, used in transactions by all major banks and financial institutions, it could pave the way for further use of blockchain technology within financial services as well as other industry sectors generally.
Movers & Shakers of the week
Appointments
Tamara Box becomes EME Managing Partner in management shake up at Reed Smith
Reed Smith has carved up Rodger Parker’s role as EMEA Managing Partner, with Tamara Box taking the reigns in Europe and the Middle East
M&S appoint new GC
Marks & Spencer’s general counsel Robert Ivens will be retiring from his role after 31 years at the company, with Verity Chase being promoted into the role
Moves
W&C hires 10 partners from HSF to launch Australian team
Eight partners from Herbert Smith Freehills’ Sydney and Melbourne offices will be moving to White & Case, along with two partners in Asia
CC hires another high profile partner in Germany
Funds partner Sonya Pauls leaves King & Wood Mallesons to join Clifford Chance’s Munich office and head up their private equity funds practice
Hogan Lovells hires innovation director
Former DLA Piper innovation director Stephen Allen will take on a new position at Hogan Lovells as head of legal services delivery, exiting DLA after one year in the role
Cadwalader builds out City offering
Bird & Bird’s co-head of dispute resolution Stephen Baker has joined Cadwalader, Wickersham & Taft to sit in their litigation & international arbitration practice
Proskauer boosts PE capability
Partner Eleanor Shanks is set to join Proskauer Rose from Dentons in London where she will add to their global corporate and M&A practice
Proskauer loses two partners to fellow US firms in London
Private equity partner James Howe will be leaving Proskauer Rose to join Gibson, Dunn & Crutcher whilst Olivier Rochman is moving to Morrison & Foerster in their global private investment funds practice
Ashurst looses four finance partners to US rivals
Paul Hastings picked up structured finance trio Michael Smith, Diala Minott and Cameron Saylor, whilst regulatory partner Nicola Higgs joins Latham & Watkins
Slater & Gordon’s former UK CEO leaves the firm amid restructuring
Former S&G UK CEO Cath Evans returned to Australia amid the firm’s restructuring and office closures in March
Office Openings & Closings
CMS set to launch in Hong Kong
Herbert Smith Freehills launches new alternative legal services provider in China
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