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). As MiFID II launch date approaches, what’s in store for financial institutions?
As the final countdown to the Markets in Financial Instruments Directive’s (MiFID II) launch date begins, there remains much to clarify for financial institutions, and news outlets are considering some of the outcomes that MiFID II will impose in the near term.
Primary concerns for funds in particular is the rules on costs for third party research. The FT reported last week the assembly of an emergency summit, with the attendance of both banks and asset managers, who met with the Financial Conduct Authority (FCA) to try and resolve some of the outstanding queries around the incoming regulation. Although no answers were given during the meeting, the FCA gave the impression that senior individuals at the FCA, European Commission and Securities and Exchange Commission (SEC) are aware of the gravity of the problem and attempting to resolve it.
On a positive note, the FCA have expressed that they will not commence taking formal action against those who aren’t fully compliant from MiFID II’s start date (3rd January 2018), although all firms must be able to demonstrate best efforts in achieving compliance.
Even without the immediate fear of the eye of the regulator, MiFID II seems to be presenting other problems for some institutions.
According to Bloomberg, UBS recently released a report that indicated Deutsche Bank is likely to be most affected by MiFID II in terms of revenue, with Barclays following the German bank as the second most affected. The report states in the event that European trading revenue slumps by 9 per cent next year, Deutsche Bank could see its growth hit by as much as 4.7 per cent, whilst Barclays should expect a 3.7 per cent drop in revenue. This is due to their level of trading activity within European markets, whereas their U.S. counterparts, namely J.P. Morgan, Morgan Stanley and Goldman Sachs, only generate about a quarter to a third of their trading revenue in Europe.
A further outcome MiFID II could bring is a rise in the level of dark trading, says Bloomberg. The regulation apparently allows flexibility for certain venues in how they share prices. As regulators have attempted to restrict the use of dark pools and flow trading back through the stock exchanges, traders have a found a loophole using alternative platforms that could potentially cause overall dark trading to increase, rather than decrease under MiFID II.
In the run up to the 3rd Jan, as regulatory compliance functions and senior management are under pressure on readying themselves for the incoming regulation, it’s only a matter of time until we see what exact impact MiFID II will have on the industry, and of course on firms’ revenue.
2). Expansion continues in the Irish capital
Simmons & Simmons has become the third international firm to open an office in Dublin, following the hire of Mason Hayes & Curran investment funds and financial regulation head Fionan Breathnach.
The office will service the firm’s asset management clients, and is the first office opening for Simmons since opened in Luxemborg in 2015.
They follow in the steps of Pinsent Masons, who became the first international firm to open in Ireland in June this year, complementing the firms’ pre-existing base in Belfast. The office launched with a trio of partners from local firms: investment funds partner Gayle Bowenfrom from Walkers; outsourcing partner Andreas Carney from Mathesons; and corporate partner Dennis Agnew from firm Byrne Wallace.
US firm Covington & Burling is also planning on launching a life sciences and technology practice in the city, pending regulatory approval from the Irish Law Society.
These sit alongside other UK and Irish firms with bases in the Irish capital, including Eversheds Sutherland, DWF, insurance firms DAC Beachcroft, Kennedys and BLM and US firm Dechert. It is believed that other international firms, such as DLA Piper, are also considering a launch in the city.
The Irish legal market has become increasingly attractive for UK and international businesses since the Brexit vote last year.
Like their major clients in the banking sector, many law firms have been examining their post-Brexit footprints to ensure they continue to have access to the European Union (EU) single market and the EU’s courts and decision-making bodies when the UK leaves the EU.
The number of solicitors qualifying in Ireland has also hit record highs, with 810 English qualified solicitors joining the roll in 2016.
Movers & Shakers of the Week
Partner Arun Velusami has joined Hogan Lovells from Norton Rose Fulbright’ finance practice and will also sit in the firm’s Africa practice, energy and natural resources group and the infrastructure, energy, resources and projects team
Head of investigations and enforcement at TLT Jake McQuitty has joined Eversheds Sutherland as a partner in London
Andrew Carpenter joins DWF after missing out on senior partner election
Tim Hewens joins Osbourne Clarke after 16 years at Squire Patton Boggs
Peter Harwich moves to Latham’s as the latest in a string of high-profile M&A hires from A&O
Tracy Evlogidis, Head of Immigration at Morgan Lewis is set to join Withers, whilst Rubin Weston joins Stephenson Harwood from Baker Botts.
Office Openings & Closings
Mergers & Alliances