Dominic Bacon, head of legal and compliance at Gulf International Bank (UK) (GIB UK) says that working for a Middle-eastern bank in the current political climate brings interesting challenges. Since the 11 September terror attacks, Bacon’s primary focus has been the review of GIB UK’s anti-money laundering policies. Bacon says: “In the current political climate we want to ensure that we reflect best practice and that we’re in a position where we have addressed any possible reputational issues before they arise.”
But dealing with compliance is just one of the many issues that occupies Bacon’s day-to-day routine. His other principal areas of responsibility include advising the bank on material and strategic issues such as the launch of a new hedge fund, reviewing business critical IT contracts and HR issues.
After spending three years as an associate in Theodore Goddard’s corporate department, Bacon decided to flee the City because he did not see a future in private practice.
In 1992 Bacon joined Standard Chartered Bank. During his nine-year stint there, he was seconded to Miami for three years where he headed the North and South American legal and compliance teams, with 17 people reporting to him from New York, Venezuela, Colombia and Peru. Having managed a large team, Bacon decided that returning to Standard Chartered’s head office was a sideways step, so he decided to look for a position where he could lead his own legal department.
Seven months ago, Bacon joined GIB UK, a subsidiary of the high-profile Bahrain-based Gulf International Bank. GIB UK, which is fully regulated by the Financial Services Authority, has a complementary set of businesses to its parent, which focuses on corporate banking and project finance. In London, GIB UK specialises in asset management, corporate finance, financial markets and private equity.
Each time GIB UK sets up a new fund, Bacon is responsible for supervising the work of external lawyers. He says: “There’s no point in me second-guessing what our lawyers are doing. But if there’s a particular issue in the documents that I think might put our reputation at stake, or that is likely to cause our chief executive officer or deputy-managing director to lose sleep over, then I’ll get involved in that.”
For example, GIB UK launched a capital-protected hedge fund earlier this year. The purpose of the fund was to ensure that despite market volatility, investors had 100 per cent protection of their principal at maturity. Bacon’s focus during the launch of the fund was not so much on the content of the investment management agreement, but on the circumstances in which Barclays Capital, which provided the capital protection, could remove that protection.
Other strategic issues handled by Bacon include the review of business critical IT contracts such as the one relating to the new system installed for the asset management division. The system provides seamless operational support for the bank’s front-end and middle office and helps to produce detailed and focused client reports.
On the policy and administration side, Bacon is responsible for managing GIB UK’s relationship with its panel firms and ensuring people within the bank understand the panel’s function. This involves making sure that the panel’s work is of a sufficiently high quality and keeping a close eye on costs. Bacon is also working on standard documents and templates, including a discretionary portfolio management agreement and a template for credit derivative trading.
Bacon explains that because he is the only lawyer at GIB UK, he regularly calls on the bank’s legal panel for support. The panel comprises Allen & Overy (A&O), Barlow Lyde & Gilbert, Dechert and Slaughter and May and has recently been extended to include Norton Rose. Historically, each of the panel firms has advised on a specific area. Slaughter and May advises on corporate work, Allen & Overy on capital markets, Dechert on funds and some capital markets and Barlows on litigation.
However, Bacon recently invited the panel firms to pitch for work. He says: “Dechert has advised on funds work, but I think it’s appropriate to invite Slaughter and May to pitch for that too because it’s also on the panel.”
Bacon also points to individual partners and cites the importance of his relationship with Gary Eaborn of Slaughters. He says: “I knew that he’d give me a better service than our size would permit us to have at Slaughter and May. Gary would look at me and say: ‘I know this guy, he’s a friend’.” Similarly, Bacon explains that he deliberately made Gary McClean of A&O the relationship partner to ensure GIB UK is taken seriously. He says: “I don’t go for firms, I go for individuals. There’s no real difference between the magic circle firms.”
Barlows’ relationship with GIB UK has been extended to allow the firm to advise on all of the bank’s IT contracts. On the basis that the firm is invited to advise GIB UK on all the bank’s sizeable business critical IT contracts, Barlows has agreed to handle “quick and dirty” reviews of the smaller contracts for a fixed fee. Following each review, Bacon can then to decide if the contracts need to be marked up. “Barlows has been happy to accommodate GIB UK’s demands because the firm knew that it will be rewarded with the larger IT contracts,” says Bacon.
The fixed fee concept is something close to Bacon’s heart and he is talking to A&O and Dechert in an attempt to extend this to ISDA and capital markets documents. But he is less confident about securing a fixed fee arrangement with the firms that advise on these areas. Bacon is testing the water with a beauty parade relating to a securitisation. He says that it is possible to ask firms to do the work on a fixed fee basis because the deal is almost identical to the bond collateralisation programme launched by GIB UK earlier in the year. Firms outside the panel have been invited to bid because Ashurst Morris Crisp and Weil Gotshal & Manges, two of the pre-eminent firms in this area, are not on the panel.
During the process, Bacon was interested to discover the different meanings each of the firms attached to fixed fees. Ashursts and Weil Gotshal said in their quotes that they would stick to their fixed fees, while Dechert said its fees would be substantially fixed. In other words, if the assumptions on which the fixed fee is based changed during a deal, the firm could revert back to billing hourly or add a premium to the fixed fee.
Bacon says: “The problem with some of the fixed-fee quotes received by us is that some of the assumptions are so detailed. Most firms are wedded to the idea of hourly billing. But if investment banks will give fixed fees, why can’t lawyers?”
Head of legal and compliance
Gulf International Bank (UK)
|Organisation||Gulf International Bank (UK)|
|Sector||Banking and financial services|
|Operating income||$67.4m (£42.4m) total assets $4.12bn (£2.59bn)|
|Annual legal spend||£750,000|
|Legal capability||One lawyer and one company secretary|
|Head of legal and compliance||Dominic Bacon|
|Reporting to||Chief executive officer Matthew Snyder|
|Main law firms||Allen & Overy (capital markets), Barlow Lyde & Gilbert (litigation and IT), Dechert (funds), Norton Rose (banking and capital markets), and Slaughter and May (corporate)|