Regulation weight

Why don’t top US firms have in-house City regulatory funds practices?

US firms that have launched private equity funds practices in London claim to be able to offer the same service as their UK rivals with added American capability, but the example of Weil Gotshal & Manges suggests otherwise.

Weil launched its City funds practice late last year with the hire of three of the area’s leading partners – Ed Gander, Nick Benson and Nigel Clark – as well as tax partner Jonathan Kandel, but one thing it does not have in London is a regulatory partner.

This should not be much of a problem for Weil, which can use a senior associate to advise on regulatory issues related to fund formation, but for more detailed matters the team turns to Norton Rose partner Jonathan Herbst, who counts regulation in the funds sphere as one of his focuses.

This is no defeat – Herbst is one of the City’s top regulatory partners – but it gives UK competitors a stick to hit Weil with. Clifford Chance, from which Gander, Benson, Clark and Kandel joined, will be just one of the firms that claim in-house regulatory expertise in Europe as a selling point over US firms. They would admit US outfits have the necessary Employee Retirement Income Security Act (ERISA) pensions expertise needed to deal with US pensions investor issues, but would insist they themselves have the Solvency II and other regulatory nous that US firms lack.

Whether such a claim has any weight is another matter. There is simply not enough regulatory work to warrant an in-house partner unless the team has five or six core fund formation partners bringing in the work, says a City funds partner. Hence, other firms snatch the referral work.

Even Clifford Chance’s funds team has turned to outside regulatory lawyers in the past, with Travers Smith partner Margaret Chamberlain – a “doyen of the industry” according to another partner – advising the firm’s clients on a number of occasions. It is thought that Norton Rose’s ties to the Weil team were not brought over from Clifford Chance.

Proskauer Rose, meanwhile, has no funds regulatory partners in the City, according to its website.

Regulatory? Who needs it?