Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
1. Linklaters hits refresh
This week has seen Magic Circle firm Linklaters dominate the legal press as details emerge of its ‘Strategy Refresh’, the outcome of a wide-ranging consultation of partners and clients led by global managing partner Gideon Moore.
Most notably, the firm is to phase out individual partner metrics and annual assessments in order to focus on broader measures of team and firm performance. As such, annual partner appraisals will be scrapped in favour of more regular feedback sessions for individual partners and teams.
This is a marked shift from the metric-based performance review system introduced by former managing partner Tony Angel, which focused on individual partner performance and billing targets, adopted widely throughout the legal market in the 2000s.
This new system of performance review aims to ensure assessments give added weight to practice performance as well as client-winning, business development, training and innovation to focus on the combined value that partners bring to the firm and spur entrepreneurialism.
Other new measures include the pilot of a fixed hour working week for associates in Germany, and an increased emphasis on agile working and alternative routes to partnership by management, both aimed to increase the retention of upcoming talent.
2. FCA Business Plan: What you need to know
This week saw the release of the Financial Conduct Authority’s (FCA) Business Plan for 2017/18, laying out what the UK regulator will be focusing on in the coming year.
Many of the themes come as expected, with PPI mis-selling complaints and firm culture and governance featuring as sector priorities, whilst also touching upon plans for Brexit, identifying it as a further key area of focus for the regulator.
Below we have outlined some of the most relevant aspects of this year’s Business Plan and the possible aftermath of these for financial institutions:
As much of the current regulation is expected to remain the same post-Brexit, the plan admits to a lack of clarity surrounding Brexit negotiations, which “creates a number of uncertainties with the potential to affect the UK and European financial markets.”
The regulator has raised its fees for FCA authorised firms by 1.5 per cent, which will include an extra £2.5m within the budget for Brexit costs. The document relays hope that the solid relationships forged between UK and EU regulators will bring about smooth cooperation, highlighting that “a robust framework that provides for continued cooperation will be fundamental regardless of the outcomes of the negotiations.”
Treating customers fairly remains a top priority for the UK watchdog and is being evaluated across all financial services sectors. From improving communications and treatment of legacy customers, to introducing healthier competition and transparency in the asset management industry, firms will have to refocus their efforts on improving services for customers and investors.
Having referenced the interim report of 2016’s Asset Management Market Study, the plan also reinforces a number of remedies expected to be enforced this year, including increased transparency and standardisation of costs and charges for institutional investors. It states that the final report will be published in Q2 2017.
The FCA has claimed it is taking a forward-looking approach with innovation in the financial services industry when it comes to assessing both potential growth and emerging harm. An existing concern the FCA is hoping to tackle is the lack of investment being made to legacy IT systems, which would obstruct the process of digitalisation and automation to financial markets. Updating current systems will pave the way for the new era of regtech and fintech movements, which will “play a key role in firms moving towards less capital-intensive business models” and render market activities, financial products and services to be faster, cheaper and better.
Cyber resilience and financial crime controls must be placed under scrutiny as we enter a new age of innovation and see the appearance of greater opportunities for cybercrime. The regulator has committed to building its own expertise in resilience and cyber security to develop and evolve regulatory tools alongside advancements in financial technology.
In order to achieve this, the regulator has set up scenario-testing for operational resilience, which will “assess how well they respond to a range of situations that might cause a major operational disruption.” Using this data, they have constructed, with the help of the PRA and specialist cyber agencies, a cyber resilience toolkit which is expected to be rolled out to a large number of financial institutions over the course of 2017/18.
Movers & Shakers of the week:
Ropes & Gray has lost Hong Kong managing partner Paul Boltz, along with corporate partners Brian Schwarzwalder and Michael Nicklin and private equity partner Scott Jalowayski, who all join US rival Gibson Dunn & Crutcher
Weil, Gotshal & Manges has hired real estate finance partner Paul Hibbert in London from Baker Mckenzie
The Serious Fraud Office’s joint-head of bribery and corruption Ben Morgan has joined Freshfields Bruckhaus Deringer as a partner in its corporate crime and global investigations practice in London
Office Openings & Closings: