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. London Whale saga continues as ex-JP Morgan trader continues court battle against FCA
There remains only one former JP Morgan trader still involved in court battles surrounding the London Whale scandal of 2012, after a game-changing court ruling staved off several lawsuits two months ago.
In March this year, the UK Supreme Court sided with the Financial Conduct Authority, after allegations were sparked that the regulator didn’t do enough to sufficiently conceal the identities of those involved in misconduct investigations. This judgement led to a number of JP Morgan traders dropping their cases, leaving former JPM employee Julien Grout as the only person not to withdraw his suit.
Grout argues that the FCA’s referral to him as “traders on the SCP” (synthetic credit portfolio desk) fails to conceal his identity as there are only four traders on this desk. Grout’s lawyer reports “Once the group, the collective, is identified, and it is, and once it is established that an individual is a member of the identified collective, anonymity is lost.”
The London Whale scandal was caused by trader Bruno Iskil, whose offsetting bets landed JP Morgan with a substantial trading loss of $6.2 billion. The scandal led to hefty fines, with JP Morgan having to pay out $920 million to four different regulators as well as admitting to a violation of US federal securities laws.
Julien Grout is next scheduled to fight the FCA’s appeal in July.
JP Morgan continued to feature in the news this week as it was reported the US bank has purchased an office building in Dublin, with the ability to house over 1,000 staff, double the size of its current capability in Dublin.
Expected to be completed in the third quarter of 2018, the acquisition is the first concrete action undertaken by a global bank in its efforts to move operations outside of the UK ahead of its departure from the EU. Senior Analyst for Bloomberg Intelligence Jonathan Bryce has commented that this is just the beginning, with various lobbyists from all over Europe as well some from New York trying to win business that will be moving out of London.
2) US Takeover: Firms generate $4.6bn in London last year as Clifford Chance introduce changes to boost remuneration
The impact of US law firms on the London legal market remained an inescapable theme in the legal press this week, following the publication of The Lawyer’s Top 50 US Firms in London report and partners at Clifford Chance voting in another round of remuneration changes to introduce more flexibility to pay top billers.
The extent to which US firms have established themselves at the highest end of the UK market, and made moves to strengthen their position, was highlighted in the report that found the UK operations of the 50 largest US firms in the UK generated $4.6bn last year.
The biggest US law firm in London was White & Case, with a total UK revenue of $290m, followed closely by Latham & Watkins on an estimated $280m. This has followed an aggressive lateral hiring policy by both firms – with recent editions including Patrick Sarch for White & Case and Stephen Kensell for Latham’s – as well as a number of initiatives to secure upcoming talent. Last week, White & Case announced that it was boosting associate pay, where fellow US firm Cadwalader Wickersham & Taft extended paid maternity leave to 26 weeks among a host of other changes to its benefits package.
The impact of significant lateral hiring from US firms, and other situational factors such as Brexit and the weakness of the sterling, cannot be underestimated, with the administration of the European arm of King & Wood Mallesons, the biggest law firm collapse in UK history, resulting in significant team hires for the likes of Goodwin Proctor, Reed Smith and Covington & Burling.
Closing the gap in partner remuneration between London leaders and US firms investing heavily in the City could be the reason why the partnership at Clifford Chance voted in favour of another round of remuneration reforms, which were last updated in 2015.
This would allow the firm’s senior management more flexibility to hike compensation for top earners, with unconfirmed reports stating that CC is prepared to either offer 150-point deals – 50% over its core City plateau – or 130-point deals topped up with additional bonuses, enough to push earnings over £2m.
This comes as two of the big four have also pushed through reforms to boost pay flexibility in attempt to compete with US rivals. Earlier in the year, Allen & Overy confirmed it broke lockstep for a second time for a New York finance team hired in February from Paul Hastings, whist Linklaters partners voted to accept changes to the firm’s lockstep last November.
Such asymmetry in the resources and gravitas of US law firms in London, combined with greater market share, puts pressure on the UK elite to either merge (as seen earlier this year with Eversheds Sutherland) or continue to grow organically, offering increased remuneration and benefits packages. With US law firms here to stay, UK firms must observe and adapt to these shifting market dynamics in order to remain competitive.
3) Movers & Shakers of the week
Chubb finalises its UK panel review since ACE acquisition
Standard Chartered completes most recent global panel review since 2015, with many firms reappointed
With former general counsel Simon Callander departing to join SuperGroup, Addleshaw Goddard has appointed deputy general counsel Sarah O’Neill into lead role
Channel 5 GC secures regional promotion
General counsel for Channel 5 Marcus Lee will serve as GC for UK, northern and eastern Europe for Viacom International Media Networks (VIMN), under media conglomerate Viacom
Former CC managing partner departs new venture
Peter Charlton, ex-managing partner at Clifford Chance has left his role as managing partner at London litigation boutique Joseph Hage Aaronson
Corporate partner Daniel Dusek exits Skadden Arps Slate Meagher & Flom for Kirkland & Ellis in Hong Kong
Charles Russell Speechlys bolsters Middle East offering
King & Wood Mallesons lose further partner with Ghassan El Daye leaving the firm to join Charles Russell Speechlys’ litigation practice. He will sit in the firm’s Bahrain office
Cooley further expands City offering
Cooley has hired Rod Freeman, international product law head at Hogan Lovells, to join its burgeoning London office
Irwin Mitchell gains new product head
Former head of real estate for Pinsent Masons Adrian Barlow is set to join Irwin Mitchell as the firm’s national head of real estate
Pillsbury makes a double finance partner hire
Ex-business and finance head for Morgan Lewis & Bockius Chris Harrison joins Pillsbury Winthrop Shaw Pittman in its London office along with Mayer Brown’s finance partner Trevor Wood
Olswang partners break away to set up European boutique
Munich partner Thomas Lynker departs Olswang to launch Taliens, an IP, tech and media boutique, with Olswang counsel Monika Stoehr also joining. The boutique will have Munich and Paris offices, with Olswang partner Clara Steinitz and Jean-Frederic Gaultier leading the Paris office
Mergers & Alliances
DLA Piper confirms Nigeria alliance through local firm Olajide Oyewole
Ashurst retains Chinese capabilities as it renews strategic alliance with local Beijing firm Guantao
Taylor Wessing makes 10 partner promotions globally, one based in Londo
Debevoise & Plimpton promotes eight in total, with one in the City
Travers Smith promotes four women to partner
The Compliance Bulletin: Your weekly round-up
MiFID II Best Execution Requirements for Investment Managers [tabbforum]
FCA advice post-NHS cyber-attack [FCA]
SFO probe into Petrofac over Unaoil [The FCPA blog]
Regtech could save banks £2.7bn on AML compliance [Global Trade Review]
“Brexit will have no bearing on MiFID implementation” [Thomson Reuters]
Former JP Morgan trader is the last man standing in battle over “London Whale” with FCA regulator [Bloomberg]
FCA ‘disappointed’ almost half of firms provide unacceptable disclosure [Citywire]
Surge in hiring for those with technology skill set [ComplianceX]
JP Morgan purchases new office building in Dublin to house over 1,000 staff [Business Insider UK]
How US states are approaching bitcoin regulation [Bitcoin Magazine]
Regtech is not about competition, it’s about collaboration [Bobsguide]
FCA to repeat suitability review in 2019 [Citywire]
Lloyds re-privatised as government sells last shares [Citywire]