29 November 2004
Invesco UK is implementing a new investment strategy. Renowned for its strategic decisions when investing other people’s money in investment trusts and offshore funds, the asset management giant has recently turned introspective and has begun beefing up heavily in its in-house legal team.
The turning point for this change in focus came two years ago, when the company brought Michelle Moran on board from Lovells to shake up the UK and Irish legal team. Since then, under the guidance of John Taylor, deputy general counsel for Amvescap (Invesco’s US parent) and head of legal for Invesco outside North America, Moran has helped to steadily build up the business’s reliance on its in-house legal team.
Moran says this started with the simple idea of showing Invesco UK’s staff that including the legal team in all aspects of the business could save them time and money in the long run.
She also aimed to develop a level of trust with the group’s managers, where they are now comfortable approaching her on any issue, knowing that she will provide commercial advice rather than incomprehensible legal jargon.
“If you compare the team here with external counsel,” she says, “external counsel give you the legal options with caveats, but the in-house lawyers will now take full responsibility for their legal decisions. A knock-on effect of this is an increased dependency on our service, where people are involving us in discussions earlier to avoid issues arising later.”
To facilitate this, the in-house legal team now covers all legal issues, from being facilitators in the development of new product and investment structures to minimising the legal risk associated with the corporation’s operations.
The team is also aware of the regulations in play in the many jurisdictions within which Amvescap operates. Significant credit should be given to the team for this knowledge, as the Amvescap group of companies has offices in 18 countries and sells investment products into more than 100 countries.
Moran’s strategy to make in-house legal crucial to the business paid off handsomely earlier in the year when she was promoted to the role of head of legal for Invesco in the UK and Ireland. But her promotion appears to be just the start of a slew of appointments within the in-house legal team.
Invesco recently began the search for a new head of legal and compliance for Continental Europe, just days after appointing Stephanie Ehrenfried from Merrill Lynch as the group’s new head of legal and compliance for Middle Europe, based in Frankfurt.
The asset manager is also advertising for a new head of product development and legal within Ireland, plus an additional full-time lawyer. But this has been necessitated partly by the imminent departure of the current head of the Irish team Jeremy Crean.
Although it is clear that Moran and Taylor have made significant inroads in developing the group’s use of its in-house legal capabilities, it is questionable just how much credit the dynamic duo can take for the sudden decision to bolster the group’s legal capabilities. Instead, a hefty amount of credit (or blame) must be given to the $450m (£242.3m) fine imposed on Invesco’s parent company by the US regulators in August for improper trading in mutual funds.
This followed a year-long investigation by the Securities and Exchange Commission (SEC), which found that the group had allowed some hedge fund managers preferential treatment as to when they bought and sold units in their funds, putting long-term investors, such as retail and pension funds, at risk.
Taylor concedes that, as a result of the investigation, Amvescap has implemented a range of changes to its operations in a bid to minimise the threat of another massive fine from the regulators.
However, he remains adamant that the decision to beef up Invesco’s UK legal team has little to do with the problems faced by its US parent. “The fact that in-house lawyers are becoming more involved in all aspects of the business is the key driver in the decision to increase the legal staff,” he insists.
When pushed, Taylor admits that the decision earlier this year to integrate Amvescap’s legal and compliance departments outside the US, so that the compliance team now reports to him, was a direct result of the SEC investigation. He also confirms Amvescap’s decision to install a global, 24-hour confidential telephone line for staff to report suspicious or illegal activities and its current development of an international operational risk management unit. Denying that the SEC fine was the cause of both these changes, though, would be a notably difficult public relations challenge.
“It’s obvious from the market timing settlement that was entered into with the US regulators that there was a breakdown in the system, and the group is now putting in much strengthened mechanisms to seek to address some of the lessons that have been learnt by that settlement,” concedes Taylor.
Head of legal for UK and Ireland
|Legal capability||Three in England, two in Dublin and five in Europe|
|Head of legal for UK and Ireland||Michelle Moran|
|Reporting to||John Taylor, Deputy general counsel for Amvescap and head of legal for Invesco outside North America|
|Main law firms||Ashurst (corporate), Linklaters (corporate, funds, regulatory and outsourcing), Lovells (pensions, funds, data protection and regulatory), Macfarlanes (funds and regulatory) and Simmons & Simmons (employment)|