IFLR 1000
The Guide to the World's Leading Financial Law Firms

"There's an avalanche of regulatory reform coming at UK, Euro and global level and we're spending a lot of our time advising on this." This comment from one regulatory partner sums up succinctly where the market finds itself with a raft of new regulation and legislation coming at the market from all sides. No practice area has escaped and indeed most finance and corporate partners have found themselves offering their clients regulatory updates on a more frequent basis than they would have had to do in the past. "The big thing is the constant march of regulation into every single area, which perhaps to date had not been regulated," says one partner. "So if anything has the slightest nexus with the financial market, the view now is that it should be regulated."

On the domestic front a major talking point has been the reorganisation of the UK Financial Services Authority. Effectively the organisation is being split into three parts: The Financial Policy Committee (FPC), The Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). The FPC will govern the wider financial system rather than institutions, the PRA will be responsible for prudential regulation of institutions relating to capital, liquidity and other structural matters and the FCA will regulate the conduct of business of all regulated entities.

It is rare to find an issue where you can claim to have a full consensus, but in this case everybody interviewed for our research possessed a wholly negative opinion of the proposed system. "On the face of it, a rather disruptive and unnecessary piece of re-ordering of the architecture," was one partners opinion and another concurs: "I think the pure logistics of that let alone the impact on the industry hasn't been addressed properly yet, so while they are making lots of warm reassuring noises I think there's a lot of very difficult stuff to come. The idea that you can entirely re-order the whole thing and not feel any ill effects from doing that in an 18 month timescale is close to ridiculous."

The main point of contention is the possibility of overlap, particularly between the PRA and FCA as regulated firms will be examined by both. "There's clearly overlap, there's clearly a need to work together I think its going to take a lot of people in those organisations to make the two things work together over and above the staff you'd need if they were to be combined into one organisation," says another partner. Another adds: "You'll have two regulators interpreting the same law and the worry is duplication, inconsistent interpretation and I think the concern is that there needs to be stronger legislative support to ensure that these two bodies speak with the same voice on the same issues."

There is also annoyance at the increased bureaucracy and disruption brought about by the change, as one partner explains: "In the mean time, the day job, which gets busier and busier and more and more difficult still has to be done and we're seeing real problems in terms of turnaround times on perfectly normal business as usual activities."

In the wider arena practitioners have noted a need to broaden the scope of their advice, bringing up points of European and global regulation even on matters which would be perceived to be largely domestic. "The UK market is being beset by issues not only from the UK but also from Europe and increasingly internationally," explains one partner. "People are realising that it is not enough to have just a UK or European response to an issue, we see an increasing dovetailing of the regulatory approach to common issues which impact upon, not just global systemically important global institutions, but even through a process of osmosis into those which are only domestically centred, so it actually has a knock on effect on issuers who regard their market to be solely European or solely UK."

Linked to this is the ongoing development of the ESAs (European Supervisory Authorities) which will introduce three new bodies: the European Securities and Markets Agency (ESMA), the European Banking Agency (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA). The question surrounding these bodies is really how they co-exist with national regulators: "One of the things that is very clear is that the decision of national regulators will cause some of their decisions to change," says one partner. "They can only step in in quite an extreme situation if there is a perception that a particular regulator is being particularly lenient towards its national banks." Where the limits are though and how much muscle these bodies will show is yet to be seen, as one partner points out: "The biggest issue is that the ESAs have a lot more power, but will there be a ramp up where they do what they have to do?"

On the contentious side, practitioners have noted that the regulators are pursuing issues with more aggression than had been seen in the past. "They are becoming a lot more combative and a lot more intrusive so we're helping clients deal with the new FSA's approach," says one partner. "The FSA remain keen to show that they can bring criminal investigations on the market review side, they have yet to get any significant names or big institutions and no doubt they would like to do that."

A part of this new approach is try to instil in companies a greater sense of individual responsibility. This has come down not only through increasing individual liability but also from greater scrutiny of company directors. "I think from the regulatory perspective the enforcement division has really come of age, they've now got real clout, real muscle and they're exercising it," explains one disputes lawyer. "There is much more focus now on individuals and individual accountability and the role of a single person can be quite a worrying state."

The drive will see directors and executives being forced to go through much more rigorous regulatory training with the aim of removing the idea that maintaining regulatory knowledge is something that can delegated. "Ultimately whether something is the right thing to do or the wrong thing is down to individual judgement so you have to have individuals who are in the right frame of mind," explains another lawyer. "Historically compliance has been looked as something of a box ticking necessity, it's a back office thing. Individuals now need to have an appropriate eye for compliance."

Another issue, which is gaining a lot of press attention, has been the FSA's focus and campaign on payment protection insurance (PPI) and the miss-selling of this product by banks and insurance companies. This issue has already thrown up cases for firms and no doubt there will be more to come.

Allen & Overy's wider financial regulatory group is split between financial services, funds, M&A and derivatives and structured products.

The firm benefits from its banking links and thus is often called in to provide regulatory advise to these key clients. However the feeling in the market remains that it is still some way behind the leading practices in both the contentious and non-contentious areas.

One key client is Co-Op Financial Services and last year Etay Katz acted on the establishment of dormant accounts reclaim funds. The deal involved negotiations with the British Bankers Association.

Linked to M&A, Katz also advised BNP Paribas on the regulatory aspects related to the integration of Fortis following the bank's acquisition of parts of its business in 2009.

On the contentious side Damian Carolan acted for the GLG Group in relation to litigation related to the holding of client money by Lehman Brothers International's European arm LBIE. The case revolved around how client money should be separated from house money, with the decision being referred to the Supreme Court.

Making use of the firm's strength and connections in the derivatives space, most notable the relationship with Isda (International Swaps & Derivatives Association) the firm continues to advise on various issues related to the regulatory changes within the derivatives space.

Ashurst's financial services regulatory team consists of seven partners led by James Perry and it received a significant boost in 2010 with the hire of Rob Moulton from Nabarro. Moulton focuses on European regulation and enforcement and the market was of the opinion that he would certainly raise the practice's profile. "Ashurst I have come across, they have acted for the FSA," says one practitioner. "They have James and now they have Rob Moulton, James is an extremely impressive regulatory lawyer."

Alongside providing more general advice last year on issues such as Mifid, Emir and derivatives regulation, the non-contentious team also advised RBS on the establishment of an in-house management structure for the distribution of its structured products.

On the contentious side, one highlight saw the team act for Winterflood Securities as it challenged a decision by the Financial Services Tribunal in regard to the need to have an actuating purpose in a finding of market abuse. The team also advised Mehmet Sepil in regard to an FSA (Financial Services Authority) investigation.

The financial regulatory department at Bingham is led jointly by Peter Bibby and Helen Marshall and the team has a strong focus on mandates related to the FSA.

In line with this, last year both partners were involved advising a financial institution over the FSA's investigations into payment protection insurance (PPI). Bibby has also been involved in advising several other (confidential) clients on FSA investigations.

The firm also advised the Financial Services Compensation Scheme (FSCS) as it analysed the collapse of a number of investment product providers related to Lehman and Keydata. The FSCS needed to determine the scale of potential compensation claims arising from investors. The team also defended the FSCS in judicial review proceedings brought by over 200 independent financial advisors in regard to the FCSC's imposition of an interim levy.

Clifford's non-contentious practice stands tall alongside magic circle rivals Freshfields and Linklaters at the top of the market. Backed up by the talents of its deep banking and structured finance practices, the firm is well set to advise on any regulatory issues clients may have.

"I think no-one in their right mind would disagree with having Clifford Chance, Linklaters and Freshfields in tier one. They are obviously practices of considerable size and of considerable structure," says one peer.

The firm advises on a wide array of issues including business reorganisations and regulatory advice to companies branching out into new areas of business. In the latter area, last year Simon Crown acted for a major UK retailer on the development of its new cash handling business. As the new venture involves offering strictly regulated services the firm had to provide advice on the FSA's licensing process and the subsequent proposal and documentation provided to the FSA.

African work has been a key area of interest for UK teams recently and alongside the obvious project finance and other banking work that parts of the continent have thrown up, there is of course a demand for regulatory advice running in unison. In one interesting project led by Riyadh based Tim Plews and Andrew Henderson, the firm acted for a public body of one African country on the regulatory aspects of the establishment of a new financial services centre. The project is being developed following the model established by the Dubai International Financial Centre (DIFC), a semi-autonomous space with individual regulations designed to encourage foreign investment. The team could draw on its experience advising on the establishment of the DIFC itself to move the project forward.

Led by the twin leading lights of Michael Raffan, who advises on non-contentious and corporate matters and David Scott, who leads the dispute resolution practice, Freshfields is arguably the most rounded practice in the market able to channel equal resources into both straight regulatory advice and any matters which take on a contentious angle.

The team received a further boost in January 2011 when Guy Morton returned to the cut and thrust of everyday practice following his stint as senior partner.

"One of the reasons we use them that much is that they do provide a good level of service, they are very appreciative, they provide advice in a very easily digestible way, they make it straightforward to follow," says one client of Michael Raffan, who also points to a unique factor: "They are very aware of things, one thing which may distinguish them in the market is that to a degree Freshfields are the market leaders in terms of how many prime brokerage companies they support and they have set up a regular forum on the subject so they are helping the industry collectively."

The misuse of payment protection insurance (PPI) has been a subject of much press coverage in the UK in 2011 and the firm found itself in the midst of the debate when Orton also acted alongside David Scott advising members of the British Bankers' Association (BBA) on a judicial review application against the FSA and the Financial Ombudsman (FSO). The main crux of the application questioned the legality of the approach taken by the FSA and FSO in seeking compensation for customers of PPI schemes. Specifically it questioned how far the FSA could go in seeking 'fair and reasonable' jurisdiction on such cases. This was one of the rare occasions when the FSA had been challenged by a judicial review of this size and is borne out of the body's more aggressive approach to regulation following the financial crash.

In another case, Andrew Hart worked alongside corporate partner Mark Kalderon acting for Deutsche Bank in its defence against a recent FSA enforcement action against subsidiary DB Mortgage. The matter was settled in February 2011.

The firm also receives praise from clients in regard to its resources: "One of the most impressive things about them as a department is that they have the strength and depth to throw resources to meet our needs in a short period of time," says one client. "We are working on a large multi-jurisdiction transaction, they were concise, precise, commercial in their view, showed real understanding of our business and knew how to present to our people."

Another client with broad experience of different practices points out the firm's specific strength: "Freshfields I would view them as best placed to advise on regulatory permissions, Mifid (Markets in Financial Instruments Directive) and so forth, they have a more European driven view. They are good at stuff that is very technical and European, its not day to day stuff."

On the non-contentious side, practice head Raffan acted alongside Simon Orton for Goldman Sachs on proceedings related to the Abacus CDO project. The team acted for the bank on the FSA's enquiries into system and control failures related to an SEC internal investigation report. This led to the bank being fined £17.5 million.

The firm also drew on its corporate strength acting on the regulatory aspects of Credit Suisse's acquisition of ABN Amro's Prime Fund Solutions funds business. The transfer required advice relating not only to the regulation surrounding the funds and the considerations of various regulatory bodies in that light, but also the nature of client relationships and connected services agreements.

The firm has also been working hard this year to boost its US practice with an eye on the increasing cooperation between the likes of the FSA and the SEC. In this light the firm brought three new partners into its US team in the forms of Marshall Fishman, Walters Stuart and Tim Coleman.

The financial services regulatory team at Herbert Smith is positioning itself as a full service practice with equal strength on the contentious and non-contentious side. Although best known for its work in the former category, building on its incredibly strong litigation team, it has been making a concerted effort to build up its non-contentious practice as well, which has been recognised by peers. "Herbert Smith, very good firm on the non-contentious side," says one peer. "I get the sense that the practice is quite small. I think the combination of the contentious and non-contentious sides means that they are quite rounded and pretty good." As a result the firm moves up to tier two this year in the non-contentious table.

Backing up this new status the team acted for a large fund manager as it responded to an FSA consultation paper, 'The Retail Distribution Review', regarding the new rules relating to the regulation of the retail funds platform. The team also advised various clients including fund managers and investment banks on the FSA's 'Remuneration Code' which has been extended.

On the contentious side the firm remains extremely strong: "For financial crime Herbert Smith would always be my preference, the Herbert Smith team are more technical in terms of general regulatory advice," says one client.

The firm has taken steps to boost its manpower in the last year. Following last year's considerable hire of partner Jenny Stainsby, the former head of regulatory at the Lloyds Banking Group, this year Karen Anderson, Susannah Cogman and Nik Kiri have all been promoted to partner within the department.

One client of Patrick Buckingham points out that he has "a very practical approach to the disputes side of the regulatory environment. He's not a traditional private practice lawyer who looks at things from one view, he's sat on the trading floor with me and understands that viewpoint". The same client continues: "I think he's first class in the regulatory arena. I always go to him to find out about developments, I think if you want a technical view on stuff he's great."

The team is led jointly by Martyn Hopper and Buckingham, with Hopper a well-known name among his peers. "Herbert Smith we hear about. I know some people who are big fans of Martyn Hopper," says one. However some in the market do see the practice as dominated and reliant on these leading figures: "Herbert Smith are very reliant on Martyn Hopper, who is an ex-regulator, and the fact that he is an ex-regulator. But being an ex-regulator is only useful for a relatively short period," says one peer.

Clients though have no qualms: "Best regulatory practice in the city coupled with Martyn's experience," says one, although he does say: "He's very busy, getting hold of Martyn was a challenge."

The firm continues to provide regulatory advise to the likes of Credit Suisse, EDF, Goldman Sachs, Lloyds Banking Group, RBS and UBS.

"In a sense I'm quite glad to see Shearman & Sterling here. I think Barney Reynolds is good and he's got some good guys. They merit being there," was one practitioner's view of Shearman & Sterling, a view which chimed with general market opinion which had practice head Reynolds held in high regard by his peers. Clients also had praise: "Highly technically adapt, he knows the background of what he is talking about, he's at the cutting edge of what is going on, it comes easy to him."

As with some of its US peers, the practice is relatively small compared to some of the larger operators in the market. "Barney is a one man practice, he's a good guy and he has good clients but I think it is just him," says one lawyer.

The firm's work last year was largely focused on derivatives work and clearing related matters. Highlights included acting for DTCC on setting up a new subsidiary DTCC Derivatives Repository to run its European operations. In a similar mandate the team was also involved providing advice to a central bank on the development of structures related to OTC derivatives clearing.

On this latter deal, Reynolds worked alongside Patrick Clancy and the pair also provided advise to ICE (Intercontinental Exchange) on the continuing structuring of its CDS clearing operations.

Making good use of its Latin American links, the team also acted for BM&F Bovespa the securities and commodities exchange of Brazil on its application to the FSA (Financial Services Authority) to be recognised as an overseas investment exchange and clearing house.

The prevailing image among peers of Slaughter and May is that the financial services regulatory practice largely acts in support of the firm's phenomenally strong corporate team. "Slaughter and May, I perceive them as being corporate support, they get work because they are Slaughter and May," says one peer and another agrees: "I think a lot of the work that goes in is support for other areas of the firm in terms of the size of the practice."

In this regard, it is often the non-contentious practice, which has been most visible, however the small but notable contentious team has also been engaged on a number of noteworthy matters.

The dispute resolution team is led by Richard Clark with other notable names including Elizabeth Barrett, who last year acted for HM Treasury in its High Court, Court of Appeal and Supreme Court proceedings linked to the failure of the Icelandic bank Kaupthing. The proceedings revolved around the deposits of £147 million held by Kaupthing at the time of its collapse, with the Treasury successfully arguing that the funds should be transferred to the Financial Services Compensation Scheme (FSCS). The team also advised other European banks on issues arising from Kaupthing's collapse.

Another highlight saw head of financial regulation at the firm Ruth Fox acting for an asset management group on issues related to the FSAs new client money rules. The firm's client entered into dialogue with the regulatory body after identifying a potential issue with compliance.

In terms of the firm's bread and butter, corporate linked work, highlights include advising on the regulatory aspects of Santander's acquisition of a number of bank branches from RBS and acting for Aviva on the termination of its joint venture with RBS. The team also acted for RBS, specifically its Asset Management division on the acquisition of Whiteaway Laidlaw Bank from Manchester Building Society.

Ben Kingsley was also kept busy acting for Resolution on the regulatory aspects of its acquisition of Axa's UK Life business and Standard Life on the sale of Standard Life Healthcare to a South African subsidiary of Discovery.

In light of the wave of new regulations that have washed in in recent years, the firm has, like several of its peers, also taken steps to keep its client base updated on developments through its Financial Regulation Weekly Bulletin.

Travers Smith is well respected in the market for largely domestic non-contentious work. Peers recognise the dual talents of practice head Margaret Chamberlain and Mark Evans and although the firm is seen as having quite a narrow focus, this allows it to focus on its strengths. "Travers Smith have some very good people who are advising on bits of the market," says one peer, "Mark Evans for example I see on Crest work." Another says: "Travers Smith has a very good practice focused on the non-contentious side, they do all the work for Euroclear."

The firm's experience with Euroclear is seen as one of its aces and last year Evans acted for Reigate Capital Markets, on whose panel the firm sits, to advise on a new global clearing and settlement structure.

Clients were particularly taken with Margaret Chamberlain: "Extremely competent on regulatory work, great depth of knowledge, she is involved in number of regulatory groups in London. She knows us and the industry very well," says one. "They are an extremely professional, competent and responsive firm."

The FSA's increasingly aggressive approach has not only led to an increase in investigations but also to a greater scrutiny of corporate management as the regulatory body pushes for greater individual responsibility. Chamberlain has been heavily involved in work related to these issues and has advised corporates not only on their compliance but is also providing advice to senior executives in their preparation for their interviews with the FSA.

On the funds side Jane Tuckley has been active advising Fundsmith on its establishment and regulation. The fund is designed to have a broad appeal through low fees and an internet subscription system.

In straight corporate linked transactions, Tim Lewis provided FSA compliance advice to Arle Capital Partners, an entity formed by the management of Candover Partners, on the acquisition of the same from Candover Investment. Lewis also advised Arle and Candover Partners in their joint acquisition with Pantheon Ventures of certain investments owned by Candover Investments.

White & Case boosted its regulatory team this year through the hire of Stuart Willey from the Financial Services Authority (FSA) where he had been head of the wholesale legal department. Wiley joins the four-partner team led by Carmen Reynolds.

Reynolds advised the Abu Dhabi Islamic Bank last year as it established a new shariah-compliant retail bank in the UK.

The team has also continued to provide input on new legislation as part of its role on several committees including the Alternative Investment Management Association, the Law Society's Company Law Committee Regulatory Sub-Committee and the Financial Markets Law Committee.