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). FCA softens since crisis
The Financial Conduct Authority (FCA) has published papers reviewing its approach to enforcement and supervision, following claims it has become less stringent on banks, with a significant drop in the value of its financial penalties over the last five years.
Whilst the Approach to Supervision report highlights a forward-looking approach and analysis of a firm’s business model and strategy as the key themes, the Approach to Enforcement report cites the regulator’s needs to review its penalties policy and increase transparency.
Having witnessed fines fall from the billion-pound levels in 2014 and 2015, to its record low since the crisis of £22.2m in 2016, the UK regulator has been criticised for failing to remain strict in relation to more recent high-profile investigations.
The mammoth financial penalties being handed out four years ago were largely attributed to the Libor and foreign-exchange rigging scandals, as well as a new policy which allowed the FCA to increase fines at its discretion. The same approach however has not been taken with current scandals, such as RBS’ poor handling of its Global Restructuring Group. It took four years for the regulator to release the report of the GRG investigation and many misled GRG customers are still awaiting compensation.
In response to this, Andrew Bailey has spoken up, arguing that light-touch regulation “was the prevailing philosophy before the crisis and we have learnt some hard lessons.”
Alongside a review of the organisation’s Penalties Policy, which will result in a consultation paper published later this year, there is a clear focus for the FCA going forward to adopt a more holistic approach to financial regulation, and prioritise the mitigation of misconduct as well as the correction of it: “We need to use all of our powers and functions (including authorisation, supervision, competition and enforcement) to fulfil our objectives.”
The FCA also recently released a discussion paper on “Transforming Culture in Financial Services”, which you can read about here.
2). Kirkland & Ellis becomes world’s highest earning law firm
Kirkland & Ellis revealed a $500m revenue hike this week to surpass Latham & Watkins as the world’s highest earning law firm, as revenues grew 19% to $3.165bn.
Profit per equity partner (PEP) also rose nearly 15% to $4.7m, making Kirkland one of the world’s most profitable law firms behind Wachtell Lipton Rosen & Katz and Quinn Emanuel Urquhart & Sullivan. The firm’s headcount rose 13.5% to 1,997 lawyers, while revenues per lawyer increased 5.2% to $1.585m.
Latham on the other hand boosted gross revenue by 8.5% last year to $3.064bn, about $100m shy of Kirkland’s new record. The two firms are the first in history to cross the $3bn threshold.
The firm – which has never engaged in a significant merger – counts its success down to investing in the highest priced geographies and practice groups.
Kirkland’s London office, which has been growing aggressively in recent years, is understood to account for roughly 10% – about $316.5m (£257m) – of global revenue. Since 2013, headcount is also up 42% in New York (503 lawyers) and 36% in San Francisco (126 lawyers), with the Houston office growing to 107 lawyers since opening in 2014.
Regarding the firm’s practice areas, Kirkland’s M&A team ranked fourth by the value of the deals it advised on in 2017, according to data compiled by Mergermarket. Kirkland also advised on more transactions (489), than any other firm, and saw the largest increase in the value of the deals it advised on from the previous year (up 63.5% in 2017 to $432bn). The firm also handled twice the number of private equity deals (304) than its closest competitor, Latham (156), as well as leading on the value of those deals, at $131.6bn – up 12% from the prior year.
The firm’s restructuring and litigation practices had a strong year also, with the firm representing the debtor in three of the four largest Chapter 11 bankruptcies filed in 2017, arguing seven cases in front of the US Supreme Court, and helping clients to 34 victories at trial and 93 appellate wins respectively.
Notable hires over the past year include Freshfields Bruckhaus Deringer private equity heavyweight David Higgins, who quit the magic circle firm to join Kirkland as London co-managing partner and is expected to land in his new role later this year.
Market insiders point to key hires over the last two years – including Sean Lacey and Jonathan Birkes from Freshfields and Stuart Boyd from Linklaters – as factors accelerating Kirkland’s performance in the last year.
3). Movers & Shakers
Financial services regulatory partner and fintech adviser Ben Regnard-Weinrabe was hired by Allen & Overy as a partner, joining from Paul Hastings’ London office
Eversheds Sutherland has taken on a 10-strong employment team, bringing over partner Marco Ferme along with nine associates, from local firm Beiten Burkhardt.
Former head of IP practice and co-head of life sciences Marianne Schaffner has left Dechert to join Dentons, along with her team of one counsel and associate
Baker Botts partner Robin Mizrahi is set to join Covington & Burling as a partner in London, along with former Baker Botts senior associate Laure Berthelot, who joins as special counsel
Simmons & Simmons has hired partner Guillaume-Denis Faure from Winston & Strawn in Paris into its dispute resolution practice
Partner Maria Isabel Manley departs Bristows to launch a life sciences practice at Sidley Austin in London
Paris headquartered Gide Loyrette Nouel has M&A Olivier Diaz from Skadden in Paris, returning to the French firm after 20 years.
Mergers & Alliances