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). The Fed stunts Wells Fargo growth and orders the bank to improve risk and compliance functions
Last Friday marked an end to Janet Yellen’s stint as chair of the Federal Reserve, on which day she ordered Wells Fargo to replace four members of its board and barred the bank from further growth “until it sufficiently improves its governance and controls.”
By the end of last year, Wells accumulated $1.95 trillion in assets. In a rare move by any regulatory body, the Federal Reserve has demanded that the bank cannot surpass this figure until it proves to have made adequate changes to its lacking governance and controls measures.
It has been estimated this growth cap will cut profits by $300 million this year, with S&P already downgrading the bank, and consequently losing a ratings advantage it had over both JPMorgan Chase and Bank of America.
The reasons for such serious restrictions on Wells Fargo have been highlighted by the Federal Reserve: “The firm did not have an effective firm-wide risk management framework in place that covered all key risks. This prevented the proper escalation of serious compliance breakdowns to the board of directors.”
These breakdowns were brought to light when it was discovered 3.5 million fake accounts had been created in the names of customers, which allowed employees to artificially hit internal targets, and left customers with unauthorized fees and charges.
The bank reached a $190 million settlement for this scandal with the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency and a Los Angeles prosecutor in September 2016.
Wells Fargo has responded, stating that it is confident they can satisfy the listed requirements. Within 60 days, the bank will submit a plan outlining the improvements made on its firm-wide compliance and operational risk management programme, and has committed to replacing three current board members by April and a fourth board member by the end of the year.
2). Leading Chinese Law Firm to Open in London
AllBright Law, one of China’s largest full-service law firms, is to open its first international representative office in the City of London next month.
Through an agreement with UK firm Bird & Bird, AllBright will launch its London presence on the 15th March with around 90 partners relocating from its Chinese offices. The delegation will join Bird & Bird’s City office at New Fetter Lane.
The purpose of the office is to enable both firms to work together effectively on joint business development mandates, as well as allowing AllBright to service cross-jurisdiction work in Europe.
AllBright senior partner Guo Zhongqing said: “AllBright has been more cautious in globalisation compared to some of our competitors. We are responding to the urgent demand from our clients, who need a network of foreign lawyers in different jurisdictions.”
AllBright posted revenue of $272.5m (£205.7m) in 2016, placing the firm in fifth place in The American Lawyer’s China top 40. Its firmwide lawyer count that year was 1,661 behind Dentons, King & Wood Mallesons and Zhong Lun.
Bird & Bird already has a significant presence on the ground in the Asia-Pacific region, with three offices in Beijing, Shanghai and Hong Kong, in addition to bases in Japan, Singapore – where it has an association forming Bird & Bird ATMD – and Sydney.
The firm also has cooperation agreements with domestic firms in South Korea, Indonesia and Malaysia and a formal association with Chinese firm Lawjay Partners, through which it offers PRC law.
3). Movers & Shakers
Corporate partner Dan Coppel and financial institutions regulatory partner John Ahern depart for Morrison & Foerster and Katten Muchin Rosenman respectively
Berlin public affairs head Wolf Spieth, Duesseldorf environment and regulatory partner Herbert Posser, and Berlin disputes partner Benedikt Wolfers leave the Magic Circle firm to establish public law boutique.
Gibson Dunn & Crutcher global co-head of finance Stephen Gillespie has left the firm’s City office to join private equity house LetterOne.
Ashurst has boosted its Asian banking and finance practice with the hires of Fangda Partners partner Eric Tan and Allen & Overy (A&O) counsel Daniel Lau.
Satyen Dhana joins the EU, Competition and Regulatory practice at Simmons & Simmons
Latham & Watkins’ global co-chair of private equity Jennifer Perkins is to join Kirkland & Ellis
Office Openings & Closings