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. Andrew Bailey’s first week on the job
On Monday, Former Deputy Governor of Prudential Regulation Andrew Bailey commenced his first week as the new Chief Executive of the Financial Conduct Authority (FCA). It seems he has come into the organisation at a tumultuous time, as the outcome of the EU referendum will result in a heavy work stream for the regulator, alongside the wave of changes that are being made to numerous regulations.
Bailey has already had his first dealings with the aftermath of Brexit as the UK’s biggest commercial property fund decided to close its doors following the vote. Standard Life Investments, closely followed by Aviva and M&G, chose to suspend trading on their UK property fund on Tuesday, the first time Standard Life have stopped investors from taking money out of the real estate fund since the financial crisis in 2008. Bailey signed off on the suspension, but claimed that monitoring the behaviour of these funds is necessary while also highlighting his reservations in the press earlier this week, commenting that the design of these funds needs to be reviewed due to the illiquid nature of the assets.
This is just another reason for the asset management industry to be placed under further scrutiny. The new chief exec has arranged to meet with the country’s largest asset managers to discuss the effects of Brexit on the industry, whilst the FCA’s upcoming asset management review could likely bring about fundamental changes to the £6.6 trillion industry.
As FCA head he will also oversee changes to a number of important directives that will be coming into play over the coming year. Solvency II and MAR are just a couple of examples of newly implemented regulations, not to mention the delayed implementation MiFID II. It’s too early to tell what effect Brexit will have on the UK financial services regulation, but it’s clear that Bailey’s main priority will be ensuring market stability and maintaining European regulations may be the best approach to do so.
The market will be watching how Andrew Bailey approaches this new tenure and drives the direction of the FCA as he considers the best approach to securing the stability of the UK financial services sector and the effectiveness of current and incoming regulation. If he manages to navigate this well, not only could he transform the financial services landscape, but there is also talks that he will have put himself in good stead to return to the Bank of England as the next Governor.
2. Financials season
It’s that time of the year again, and law firm financial postings are flooding in. On the whole, the results have been encouraging, albeit showing fairly moderate gains, with most firms posting revenue rises in single digits.
Out of the magic circle firms, Freshfields Bruckhaus Deringer announced the greatest uptick in revenue, posting a 7 per cent rise to £1.327bn, in comparison with Linklaters, Clifford Chance and Allen & Overy reporting increases of 3.5 per cent, 3 per cent and 2.3 per cent respectively. Freshfields is one of the few UK based law firms to have experienced significant growth in the US, which is one the key reasons for their promising 2015/16 figures. It seems their offices across the pond remain a priority in the firm’s growth strategy, as they continue concentrating on corporate enlargements in the jurisdiction, further validated by the appointment of NY based partner Valerie Ford-Jacob to co-lead the financial institutions sector group.
Most firms have experienced modest uplifts in both revenue as well as profit per equity partner (PEP), but the two to note that have posted some of the best results for 2015/16 so far are Clyde & Co and Herbert Smith Freehills (HSF).
Clyde & Co has seen the largest rise in turnover amongst law firm results so far with an impressive 13 per cent increase in turnover to £477.3m. This exceeds their previous year’s similarly remarkable 9 per cent revenue boost, whilst this year’s PEP climbed to £665,000 from £600,000. The firm have been aggressive with their expansion plans, merging with six office Scottish firm Simpson & Marwick last year as well as taking on a 30 lawyer team from Sydney firm Lee & Lyons. A further boost in headcount is also in the pipeline, with a new Miami office opening in July, which will see a 40 litigation lawyers joining from the acquisition of five partner strong litigation firm Thornton Davis Fein in May.
Meanwhile, HSF’s joint CEO Sonia Leydecker said their financial results marked “the third consecutive year of significant progress for the firm.” The firm turned over £870m, a rise of 6.7 per cent from 2014/15. PEP was also up by 5 per cent to £840,000, although this showed a slight slowdown compared to an 8 per cent rise in PEP in 2014/15. Their achievement has largely been attributed to their European offering. Paris and Madrid have proved noteworthy offices for the firm, and Germany has been highlighted as an “ongoing success story”, with their fourth German office opening in Düsseldorf in November 2015.
This year’s results has unfortunately highlighted Ashurst’s continuing struggles, as it marks the second consecutive year of decline for the firm. The firm’s revenue dropped 10 per cent to £505m, which follows last year’s 4 per cent decrease. Ashurst’s PEP took a hard hit in 2015/16 as it fell by 19 per cent from £747,000 to £603,000. Since the merger with Blake Dawson in 2013, Ashurst’s figures have been anything but promising. With a lot of lateral partner movement flowing in and out of the firm, along with a shake-up of its executive management team, the firm has experienced a turbulent year, and after two years of falling revenues, the next twelve months will prove critical for the firm.
On the whole, it’s been a stable year for UK law firms, although growth may have slowed for many compared to last year. It will also be interesting to see how firms react to the challenges and opportunities that will be brought about by the current political climate and, in turn, volatile financial markets.
Movers & Shakers of the Week
Linklaters appoints global head of corporate
Following the end of Robert Elliot’s five-year term in October, M&A partner Aedamar Comiskey will take over as Linklater’s global head of corporate
OneSavings Bank hire new GC
Jason Elphick has joined OneSavings Bank as their group general counsel after departing Santander where he served as their head of banking legal.
Simmons makes further hire in Amsterdam
Simmons & Simmons appoints Erwin Bos as a partner in their financial markets team in Amsterdam. He was previously a counsel at Allen & Overy.
Simmons adds to International Projects team
Simon Moore joins Simmons & Simmons as a partner in their projects team. he joins from Mudabala Development Company, where he was the general counsel for projects globally.
Cadwalader makes rare City hire
King & Wood Mallesons loses former European finance chief Jeremy Cross. He will join Cadwalader, Wickersham & Taft in their London office, and marks the first lateral hire for the US firm since March 2015
Latham hires SEC chief
Former chief of the U.S. Securities and Exchange Commission’s office of international corporate finance Paul Dudek will be joining Latham & Watkins as counsel in the firm’s corporate department
Squire Patton Boggs boosts Madrid capability
Manuel Mingot has been hired by Squire Patton Boggs as a financial services partner. He was previously head of the Madrid finance practice at Broseta Abogados, and co-head of its UK desk in London
Shoosmiths strengthens City corporate practice
Adam Chamberlain has left RPC as a senior associate to become a corporate partner in Shoosmiths’ London office
Ashurst takes on funds finance partner from KWM
King & Wood Mallesons lose finance partner Robert Andrews to Ashurst in London