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. Asset managers to help recover costs of MiFID II
The FCA released a paper on Wednesday announcing that wealth and fund firms will assist in settling the costs incurred in introducing MiFID II.
In a consultation paper labelled CP16/33 Regulatory fees and levies: policy proposals for 2017/18, the FCA has proposed a plan to increase fees to recover the costs of bringing in the EU’s Markets in Financial Instruments Directive (MiFID II). The paper has declared that the firms most affected by MiFID II will be the ones paying for it.
Financial services companies are allocated into different fee blocks depending on what services they offer. The FCA are yet to decide the proportions of how much each fee block will contribute, but it is expected that portfolio managers, fund managers and pension scheme operators will all be incurring these fees.
The FCA have stated: “When we complete cost recovery in 2018/19, we expect to have sufficient information to moderate the allocations for fee-blocks with lower proportions of firms benefiting directly from MiFID II. We will set out the final position in spring 2018.”
Along with the cost recovery of MiFID II, the paper also touched on changes to the fixed fee rates that asset managers are normally charged.
Firms currently pay a minimum fixed-rate of £1,067 for service companies with incomes up to £100,000. The paper proposes a plan to retain the minimum fixed-fee rate of £1,067, and add a variable rate fee of £1.80 per every extra £1,000 of income.
With MiFID II not coming into play till January 2018, asset managers are already seeing the effects of the new regulation. These fee increases are only the latest notice of MiFID II costings, with news breaking last month that the incoming regulation’s new research rules will also be hitting asset managers’ bottom lines.
It is still unknown exactly what impact MiFID II will have on wealth and fund firms, but one expectation is that the regulation could result in a reduction in the range of investment choices available to customers. Perhaps this, along with the aforementioned costings, could hit the asset management industry harder than initially expected.
In addition to MiFID II additional costs and the announcement today of the initial suggestions of the FCA’s Market Study into asset management, it looks as though the asset management industry will have to bring in new innovative ways to draw investors and remain competitive in terms of pricing.
2. Three-way merger takes a toll on Olswang
As the infamous three-way merger between CMS Cameron McKenna, Nabarro and Olswang continues to push forward, Olswang is struggling to retain talent with news breaking of a further departure for the firm.
Two partner departures were reported at Olswang this week, with their co-head of patent prosecution Justin Hill exiting for Dentons to lead their European patent prosecution and opposition practice.
The Lawyer then revealed later in the week that the former Asia managing partner Rob Bratby has also opted against joining the mega-merger, departing for City firm Arnold & Porter.
Hill is the second IP partner to be leaving Olswang since the merger was announced after their co-head of life sciences Stephen Reese joined Clifford Chance in October.
These departures could be signs of further exits anticipated during the next few months, not only in IP but across the firm. The firm gave partners until 10th October to sign a lock-in agreement committing to the merger, and those not signing have until May 2017 to move on.
It’s widely reported that Olswang has been struggling to retain partners in recent times, with the firm losing over 30 partners in the last 20 months, as reported by Legal Business. It’s unknown whether these mass departures are as a result of the impending merger or if it could in fact be a lifeline for the firm, allowing partners an opportunity to work on larger deals and broaden their platform.
The three-way merger is just one of a numerous mergers taking place in the legal sector as we witness another wave of market consolidation. Interestingly a recent study by Harvard Business Review has looked into the ways in which abnormally high levels of merger activity can affect industries. It has found that mergers don’t in fact have a discernible effect on productivity and efficiency. Despite this article being a reflection on many industries, the new wave of mergers within the global law firm landscape will mean firms constantly striving for the benefits of economies of scale and strategic synergies through successful integration. As has been seen with CMS Nabarro and Olswang there is always an inevitable fall out at the outset and during the integration phase and time will tell as to the final make up, strength and market reputation of the combined entity.
Movers & Shakers of the week
Justin Hill, Olswang’s co-chair of the patent prosecution group, is set to join Dentons as the head of their European patent prosecution and opposition practices
Simmons & Simmons have hired IP partner Michael Knospe, along with counsel Caroline von Nussbaum and supervising associate Massimo Bellitto-Grillo, all joining the firm’s Munich office from King & Wood Mallesons.
Former head of commercial telecoms and Asia managing partner Rob Bratby has decided to leave Olswang to join Arnold & Porter
Australia managing partner at DLA Piper John Weber will be retiring from the firm by the end of April
Mergers and Alliances