In an interesting example of an ALSP formally partnering with a major law firm, Factor and US-based Mayer Brown, along with specialist financial risk group Acadia, have created a flat-fee service for derivatives compliance needs, known as CAN Comply.
The technical bit here is that they will be working on ‘EMIR compliance requiring the review of collateral and netting arrangements’ for derivatives, which in English means they have to make sure any derivatives contracts Mayer Brown’s clients make will meet European market infrastructure regulations that were created to reduce systemic counter-party and operational risk after the financial crisis of 2008/9. In short: let’s make sure we don’t end up with another Lehman Brothers. So, this has got to be a good thing.
But, beyond that, and perhaps of more importance to most readers, is that this is an example of both using an ALSP to have a more process-capable approach to handling this flow of documents, and also it’s priced with a flat-fee. I.e. better processes and better pricing. Who said that nothing will ever change in the commercial legal world…?
So, how does it work?
‘Clients simply identify the counterparty relationships they would like analysed and all relevant information is shared via the secure digital Acadia Agreement Manager platform. Factor and Mayer Brown analyze the data provided, perform cross-validation checks, and provide a certificate that the client can present demonstrating compliance, with ongoing annual checks to confirm continued compliance available too,’ they explained.
Presumably the law firm handles the more complex and higher risk bits of this review, with Factor handling the rest – as well as escalating hot potatoes up to the lawyers at Mayer Brown. We have seen similar projects in relation to LIBOR repapering, for example, with Allen & Overy.
Chris DeConti, Factor’s Head of Strategy, noted that: ‘Regulations contribute to the growing avalanche of workloads facing in-house departments. By integrating our respective strengths, we’ve created a client-centric service that enables robust compliance without excess burden or cost.’
Edmund Parker, Partner and Global Head of Derivatives at Mayer Brown, added: ‘Clients have been so focussed on the implementation aspect of initial margin, it would be easy to overlook some of EMIR’s ongoing obligations. With a simple, minimum fuss, data extraction model, our combined offering elegantly solves this problem.’
While Richard Barton, Head of Product Management at Acadia, concluded: ‘This collaboration adds a valuable application for clients using Agreement Manager, enabling them to leverage their centralised agreement data and ease of access to reduce costs and streamline compliance.’
Derivatives may not be a subject that gets you going in the morning, but this is an excellent example of legal review operating under a collaborative and process-focused model using a mix of an ALSP, expert legal talent, and a tech backbone to steer things. Great stuff.
(Main pic credit: RT – New York’s business district, where the world realised that creating derivatives without any safety measures can be very, very dangerous, as Lehman Brothers found out.)