Price Waterhouse's European legal network hit its first problem with the US Securities and Exchange Commission (SEC) last month.
Paul Downing, head of the network, has admitted that the firm had turned down the offer to do the legal work on a bond issue in the Netherlands two weeks ago because the audit engagement partner had said the SEC may disapprove.
Arthur Levitt, chair of the SEC, which regulates the New York Stock Exchange, publicly warned three months ago that accountancy firms moving into legal or consultancy services could be “over-riding” the agreed framework for the audit profession.
The SEC disapproves of the same organisation both auditing and giving legal advice to companies registered with it, where that legal advice is material to the client's consolidated financial statements.
Law firms tied to the big six accountants claim this is not a problem because the SEC has used the word “material”. The hope is that work for clients in Europe will not necessarily be material to the accounts of the client's parent company with a listing in New York.
Chris Arnheim, senior partner at PW's English law firm Arnheim & Co, said: “We consult with the relevant PW audit engagement partner before providing legal services to any PW SEC-registered audit clients or their subsidiaries or investees.”
Downing, who was appointed from Pinsent Curtis last September, said: “This is the first time I've come across this. I think that's pretty good considering how many law firms and lawyers we have in Europe.”
Hodgson said: “I was interested in the challenge. It's a green-field practice at Arnheim & Co. Also I was spending about two and a half days a week in London in any case, since that's where my clients are.”
Banking and capital markets lawyer Sam Hampshire, at Slaughter and May for nine years, and Sandra Honess, a media and IT lawyer at Clifford Chance, both become partners at Arnheims in April.