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1. Law firms criticised for making ‘painfully slow’ progress on gender diversity, as SRA launches wide-raging consultation to clarify the reporting of misconduct
MPs have criticised law firms for making ‘painfully slow’ progress on gender diversity, in a report by the Business, Energy and Industrial Strategy Committee released on Thursday.
The report, which evaluated the effectiveness of the first year of gender pay gap reporting, described the exclusion of partners from last year’s reporting as making ‘a nonsense’ of efforts to tackle the pay gap.
As well as calling for the compulsory inclusion of partner remuneration figures, the committee also called for last year’s threshold for inclusion of 250 UK employees to be reduced to 50, meaning that smaller UK and US firms could be obliged to report from 2019.
“Whilst this approach might limit comparability with the first year of data and require some swift consultation, there is benefit in establishing reliable figures which can hopefully form a consistent database for years to come,” the report states.
Whilst the committee acknowledged the challenges to implement changes to the requirements in time for next year’s gender pay reporting, it asks for the UK Government to make it clear how partner pay should be calculated and included in time for the deadline next year.
The report also issues renewed criticism of Allen & Overy’s (A&O) handling of its gender pay gap reporting, after the firm refused to give up its partner figures when called upon to do so by the government earlier this year. A&O was the only magic circle firm that did not provide its 2016-17 partnership gender pay gap figures to the committee after it wrote to all five firms to request the data.
“We recognise that there are different ways of calculating figures for partners, but this is no excuse for failing to publish any figures at all”, the report noted.
In line with the report, the Government Equalities Office launched guidance on research-backed ways that firms can reduce their gender pay gap. This includes having multiple women on shortlists for recruitment and promotion, using skill-based assessments and structured interviews, introducing transparency to promotion, pay and reward processes and appointing diversity task managers and/or task forces.
At the same time, the Solicitors Regulation Authority (SRA) has launched a wide-ranging consultation on the reporting of misconduct, aimed to clarify when law firms should report inappropriate behaviour, and what kind of behaviour they are mandated to report.
In particular, the consultation hopes to clear up when firms are required to report a potential breach – in the earliest stages of a complaint, or after it has been determined that a regulatory breech has occurred – with the core objective being to establish a set of rules and guidance that firms can adhere to.
The updated guidance would also look to address the widespread use of NDAs to prevent the reporting of professional misconduct within their own businesses.
2. Legal & General compliance failings reported to FCA
Whistleblowers at Legal & General Investment Management (LGIM) have reported the asset manager to the Financial Conduct Authority (FCA), attesting multiple risk and compliance failures, as well as a ‘toxic’ company culture.
The Financial Times first reported on the potential misconduct this week, having gained access to the original whistleblower report.
At least three employees have been expected to appear in the report, raising a number of concerns around the nature of LGIM’s risk and compliance procedures, and alleging that the company’s attitude towards conduct needs to be drastically improved.
The document highlighted a specific failure in reporting trading errors, which may have led to discrepancies in certain client transactions, likely resulting in a loss of money for the client.
In terms of the company culture, it appears to be the biggest risk for LGIM, with one employee declaring: “I feel obligated to report these issues now because I feel the risk culture of LGIM has become so toxic that it is reaching a crisis level.”
The lax approach to governance combined with the pressurised conditions for staff can create a hostile environment in which employees are not comfortable questioning bad practice.
These issues have already been investigated internally within the asset management arm, after being flagged through internal whistleblowing procedures. However, it is speculated that this process was badly managed, and one complainant’s identity was poorly protected, with LGIM not adhering to the confidentiality standards put in place.
The fund manager has undergone a major growth phase over the last five years, securing its spot as 11th largest global asset manager (based on AUM in December 2017).
With senior management concentrating all its efforts on continuing on this upward trajectory and entering new markets, it seems the company’s internal culture has suffered.
As LGIM’s chief exec Mark Zinkula prepares to depart his role in 2019, and FCA begins to probe into the real nature of the fund manager’s internal procedures, the UK insurer’s $1tn asset management arm is certainly in its least stable position in the last few years.
Movers & Shakers of the week
Hoping to “grow the London practice and further deepen client relationships”.
The firm has also appointed newly hired private equity partner Anu Balasubramanian as global vice-chair of private equity.
Armstrong was previously an associate in Pinsent Masons’ office in the Northern Irish capital, where she advised private and public sector clients on a variety of employment issues.
Tosi was previously a counsel at Shearman & Sterling, and his areas of expertise include capital markets, particularly high yield, private equity and general corporate law.
Santiago joins from Allen & Overy’s Luxembourg office, while Dascotte was formerly managing partner of Brussels-based boutique tax firm Tiberghien Luxembourg.
The firm has hired Simpson Thacher & Bartlett private and investment funds counsel Sam Wilson
Oliver will join the firm in September from Freshfields Bruckhaus Deringer where he led the team responsible for technology strategy and underlying IT architecture.
Moritz Keller was previously at Freshfields Bruckhaus Deringer. Keller specialises in international commercial and investment arbitration.
Financial services regulatory partner Alix Prentice is joining from Withers, foreign investments specialist Mark Schaub and arbitration and white-collar partner Meg Utterback, who are both moving to the UK from KWM’s Shanghai office.
Jonathan Askin – a non-contentious commercial law specialist – joins from Weightmans, alongside Stowe Family Law partner Daniel Jones, who advises high-net-worth private clients.
Mergers & Alliances
Office Openings & Closings