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. Celebration for Innovation
This week saw a celebration of innovation in the legal press as the FT announced the 2016 winners of its Innovative Lawyers Awards and Reed Smith launched a first of its kind innovation hub to encourage collaboration with clients.
Launched in 2006, the FT Innovative Lawyers Awards assesses law firms on both innovation for clients and within their own business models, emphasising what the users of legal services want and need to know to successfully navigate today’s dynamic business environment.
Those firms ranked as the most innovative in Europe were scored for both legal expertise and the business of law, which were benchmarked against other submissions to arrive at the final rankings.
These celebrations followed the launch of Reed Smith’s Innovation Hub earlier in the week, with a dedicated 538sq ft ‘thinking space’ in the City where clients can meet and collaborate with the firm on projects they deem important.
Headed by recently appointed Innovation Manager Alex Smith, the firm will also work internationally with clients to develop technology that cuts costs and enhances legal services.
The need for innovation across the legal sector is broadly accepted, with firms forced to adapt to satisfy greater internal and external drivers for change. Here, a marketplace characterised by greater client demand for value and increased competition on pricing by ABS firms, meets generational challenges for firms to offer a more favourable working environment to retain top talent.
As such, firms have sought to develop technology, flexible working practices and more efficient operating models (alongside tools to ensure they conform to regulatory compliance) as they strive to become more efficient, more profitable and develop new revenue streams.
The stories in the news this week celebrate and share genuine innovation in the legal sector, and further underline that the individual lawyer, the nature of legal advice and the way in which that advice is delivered needs to undergo deep change to keep pace in the global economy.
2. Aviva fined £8.2m for client money failings
Insurance group Aviva have been penalised by the FCA this week as it emerged they have failed to comply with Client Assets Protection Regime (CASS) regulations.
The £8.2m fine was handed out for client money failings on an outsourced platform. The regulator declared that certain activities outsourced by Aviva didn’t have in place the correct controls and oversight arrangements to sufficiently monitor the client assets on the adviser platform.
The FCA also used this as an example to relay that outsourced CASS functions are still under the responsibility of the regulated firm and it is up to them to ensure that client assets are protected.
Last year, Aviva Investors were fined £17.6m over failures to manage conflicts of interests fairly, whilst a former investment analyst at the firm was also banned and fined £139,000 for exploiting weaknesses in Aviva’s trading systems and controls to in order to delay the booking and allocation of trades.
CASS has become an essential piece of regulation since new rules were enforced in 2014. It was demonstrated how vulnerable client assets were after the fallout of Lehman Brothers and MF Global and the extent to which ring-fencing rules needed to be reformed. Eight years on from the collapse, regulators and asset managers continue to prioritise the systems and procedures for implementing client money rules.
Back in June this year, Merrill Lynch, the brokerage unit of Bank of America Merrill Lynch, was fined for similar failings, with the Securities and Exchange Commission (SEC) charging a $415m settlement for the failure to safeguard customer assets. The investment bank seemingly used $5bn of customer cash to finance its own trading activities whilst also reserving up to $58bn per day of customer securities in a clearing account as opposed to a reserve account, which exists to protect the funds if the bank were to fail. It marked the second largest Wall Street penalty ever and led to a wider investigation into the industry to probe for other breaches of client asset rules.
The Aviva case indicates the importance of complying with preventative regulation, specifically that concerning the protection of customer money and assets. Although no client assets were actually lost in this incident, the previous high-profile insolvencies that have occurred in this industry in the past has caused CASS compliance to remain top priority for global regulators.
New chairman appointed at the CLLS
Edward Sparrow, litigation partner at Ashurst, will take on the role of chairman at the City of London Law Society from Alasdair Douglas, former senior partner of Travers Smith
Sidley grows London restructuring team
Restructuring partner Jifree Cader joins Kirkland & Ellis in London from Sidley Austin
Southampton FC gains new legal director
Tim Greenwell, former general counsel of Toyota UK, is set to join Southampton FC as legal director
Nokia litigation head returns to private practice
Head of litigation at Nokia Richard Vary moves to Bird & Bird in London as a partner
Shearman loses Paris partner duo
Paris private equity partners Arnaud Fromion and Frederic Guillox, along with counsel Adrien Paturaud, leave Shearman & Sterling to join Goodwin Procter in their Paris office
Shearman experiences further loss with London tax head
London head of tax Sarah Priestley quits Shearman & Sterling
Ashurst regulatory partner decides to remain at the firm
James Perry, who resigned in April to join Gibson Dunn & Crutcher, has chosen to remain at Ashurst
Olswang restructuring head departs during merger talks
Alicia Videon leaves Olswang to join McDermott Will & Emery in its London transactions practice
Office Openings & Closings
Litigation finance provider set up its own law firm
Burford Capital has launched ABS Burford Law in London and hired Akin Gump litigation partner Tom Evans