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Remediating, mitigating, and managing a crisis

An issue for businesses that has skyrocketed in importance in recent years is sexual abuse in the workplace, which of course is largely due to the success of the #MeToo movement.

The origins of ‘Me Too’ in the context of sexual harassment and assault stretches back to 2006, but the movement, as we now understand it, was sparked to life on social media following the October 2017 viral tweet by actress and activist Alyssa Milano.

The point of the tweet was to bring attention to the scale of the problem by demonstrating just how many women have their own stories of sexual harassment or assault. As we now know, this fairly modest call to action via Twitter could hardly have been more effective. Brought to life by the many vivid and personal accounts – including those of numerous high-profile actors and media personalities – the campaign has dragged the issue firmly into the public discourse.

One of the overriding themes of these personal stories has been how, in many cases, these incidents of misconduct have been enabled by workplace culture and a lack of proper safeguarding. This, rightly, has put businesses in the spotlight too.

Given the reputational damage such allegations can bring, there is now a
huge amount at stake for owners, managers, and directors if they fail to
take the issue seriously and put measures in place to protect their staff.

It’s in this context we spoke with Lauren Casazza and Kim Nemirow. Casazza, a litigation partner in Kirkland’s New York office, heads up the crisis response practice group at Kirkland & Ellis, counselling clients on internal and external communications in high-profile litigation, investigations and crisis situations.

Nemirow, a partner in the government and internal investigations team in Chicago, has a broad range of experience advising clients on government investigations, internal investigations, and compliance matters, and has particular expertise handling highly sensitive workplace misconduct and compliance matters.

How did this team come together?

At Kirkland, we are always trying to find ways to leverage our diverse expertise in ways to support our clients’ needs. Our collaboration was driven by the growing demand from our clients for assistance in all aspects of the #MeToo movement, whether it is installing a best practices workplace compliance programme, investigating thorny allegations against senior executives, or helping manage and communicate about emerging crises in this space.

How big an impact has the movement had on the business world?

It’s been significant. Frankly, this is front and centre for every company. The companies that have battled media attention on these issues are clearly focused on remediating, mitigating, and managing what typically has been a huge reputational hit.

But, more systemically, every company in the world is trying or should be trying to find ways to make sure they can avoid having issues in the first place and/or mismanaging allegations as they emerge.

Even investors should be considering how potential reputational and legal risks around #MeToo – which are very difficult to quantify – impact potential deals and investment value.

In what specifics ways have corporations been impacted?

What we’re seeing is that companies are being more proactive from a compliance and investigations perspective than they were even two years ago.

Companies are hyper-aware that mere allegations lodged publicly, particularly against senior executives or a company’s overall culture, can
create a corporate crisis within minutes, and we are helping our clients with key steps to prevent, deter, and detect these issues so that they can be in the best position legally and reputationally when, and
if, an unpredicted crisis occurs.

What are the key points you convey to your clients?

We convey that risks surrounding the #MeToo movement must be taken seriously, and that thoughtful, proactive compliance and crisis strategies not only help a company manage through a crisis, but can really serve to mitigate these unfortunate behaviours from occurring in the first place.

A key component of any strategy
should be focusing on whether the company maintains the right ‘tone at the top’, which is an essential foundation for a strong corporate culture.

What other advice would you give to lawyers who are talking to their clients about this topic?

We would tell them to advise their clients not to underestimate how quickly a #MeToo issue can become catastrophic for a company. Time and investment in proactive efforts to mitigate and manage these issues is well worth it, and in the long run companies and their hardworking employees will be better off for it.

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#MeTooLaw: when firms do the right thing

It is a year since Paul Philip, chief executive of the Solicitors Regulation Authority (SRA), appeared before the Women & Equalities Select Committee to account for the legal sector’s record on addressing sexual harassment at work. That somewhat testing experience for Mr Philip at the hands of MPs, led to an immediate sharpening of the SRA’s focus on how law firms respond to allegations of sexual harassment within their own businesses, as well as within those of their clients.

Up to that point, very few law
firm employees would have felt empowered to speak up about the sexual harassment they experienced, fearing they would not be believed and would face retaliation, potentially jeopardising their careers.

Even fewer would intervene or raise concerns about any sexual harassment they observed; some unsure about the dynamics of the scene playing out in front of them, others perhaps assuming it was just not their responsibility to deal with it.

Law firm HR professionals were frequently in the unenviable position of being told about an incident but being sworn to secrecy (and inaction) by the victim, who would threaten to resign and deny all knowledge. Consequently, many firms were oblivious to sexual harassment problems in their businesses, or where they were aware of particular instances, they had little legal or commercial incentive to address the issue in a truly meaningful or systematic way.

That has now all changed. The constant press attention following Weinstein and the Presidents’ Club, and the ceaseless efforts of the legal press to persuade sexual harassment victims in law firms to come forward with their stories, mean firms are far more aware of the reputational damage of mishandling sexual harassment allegations.

The stakes are raised even further by the new SRA enforcement strategy which (finally) puts sexual misconduct at a high level of seriousness, treating it on a par with other forms of serious misconduct, such as taking unfair advantage of clients, misuse of client money, dishonesty, and other criminal behaviour.

The SRA recently stated that it is investigating over 50 active cases of sexual misconduct in firms and has estimated it would be sending around 25 cases of sexual misconduct to the Solicitors Disciplinary Tribunal.

Assessing risk

Most firms have acted quickly to #MeTooLaw and have responded by updating their sexual harassment policy and complaints procedures. They have implemented firmwide information campaigns and tailored HR, partner and staff training to ensure that all understand the types of behaviour that can be regarded as sexual harassment, the consequences of engaging in such behaviours, and how the firm will normally respond.

They are putting in place rigorous controls to ensure anyone who raises a complaint about sexual harassment will not be victimised in any way.
Bystanders are being trained to call out and intervene to stop unacceptable behaviours, to distract and divert the alleged harasser from the behaviour where necessary, and to understand their responsibility to report incidents to ensure the burden is not placed on the victim to deal with the problem.

Some firms are undertaking specific risk assessments to identify and address common situations where sexual harassment is typically more likely to be alleged to have occurred – after work events, deal closing celebrations, and overseas conferences. Others are introducing policies to ensure that where a consensual relationship develops between a partner and a junior member of staff, the partner is not left in a position of power and influence over that person and their career.

A very small number have either banned or strictly controlled the use of alcohol during working hours or events, to remove one of the biggest factors in sexual harassment cases. Few have effectively addressed the long work hours culture in law firms that can be a significant contributory factor in these situations.

Questionable commentators

Many commentators say that things are different now: that behaviours which were regarded as minor and unproblematic until recently, are now deemed to be unlawful sexual harassment, potentially amounting to gross misconduct; they often find that troubling and confusing. This is questionable.

Historic cases of sexual harassment which are emerging, reveal that the complainant in those incidents always felt the conduct to which they were subjected at work, was unacceptable and unwanted; they just did not have either the language or the voice to be able to express that view safely, until now.

Firms are now investigating those current and historic allegations, instead of settling them out quietly and rehabilitating the partner with training. They are taking advice on the potential discrimination, partnership, regulatory, and criminal aspects of the allegations.
They are also becoming extremely mindful of ensuring due process and proper support for the alleged harasser, whose career, family life, mental health, and indeed liberty can be devastated by allegations of sexual harassment, whether or not they are well founded.

These situations often come down to one person’s word against another: it is important for both the victim and the alleged harasser to be heard, taken seriously, and supported throughout. Public shamings in the press make for good headlines and potentially mitigating PR for firms, but they also destroy lives, and are, in our view, rarely warranted, especially in cases with conflicting factual accounts.

And what of HR professionals in law firms? In the past they have not necessarily understood that they are personally subject to the SRA regulatory regime, including SRA notification requirements, despite
not being solicitors themselves.
But HR awareness on this issue is changing, so that HR professionals in law firms now feel fully empowered by the knowledge of the regulatory as well as the PR and criminal risks, to escalate sexual harassment concerns to senior management for effective action.

It is important for firms to recognise that what used to be seen as an HR issue, is now also a regulatory issue, so there needs to be open communications between law firm HR and GC teams, to ensure that matters that are reportable are actioned, and that prompt and effective steps are taken to address the immediate issue and ensure
long-term institutional change to eradicate sexual harassment at
work.

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Breaking down barriers: client behaviour in the digital age

One thing is certain, there will always be a need for legal services. Less certain, however, is the way these services will be bought and sold moving into the future.

As recently as the last decade, the weakening of the traditional partnership model combined with the advent of legal technology has given rise to a new and disruptive breed of law firm. These innovative legal ‘companies’ offer services at competitive rates by using technology to cut working time, reducing the need for a lawyer. What has led to this sea change? Clients.

Clients have gained unforeseen leverage over service providers in recent years, and the market has been forced to change accordingly. But what shifts in client behaviour should you be aware of when marketing your law firm, and how do you challenge them?

Clients are less loyal

Much like every other service provider, law firms are at the behest of the client. Firms can’t rely on the lifelong client-lawyer relationships of the past, nor can they depend on reputation or word of mouth alone.

Those methods won’t work anymore, because in a market with an excess of choice, loyalty is fleeting. Why should someone choose your firm over another often similar and equally qualified firm?

It’s crucial then that your firm differentiates itself from its rivals by carving out a niche. By using digital marketing as its tool, your firm must prove to prospects that it is the authority in its area of expertise.

By producing useful and relevant content using proprietary research, your firm will become a thought leader. And data, as you may be aware, is now what drives business forward.

The method in which your firm quantifies and qualifies its data is what your clients want. Clients don’t buy services anymore, they buy information and expertise – so providing both will bring them back for more.

“As ever, it comes down to price. This means that
future-facing legal companies using artificial intelligence (AI) programmes already have the upper hand.”

Clients want cheaper alternatives

As ever, it comes down to price. This means that future-facing legal companies using artificial intelligence (AI) programmes already have the upper hand.

An AI-capable firm can shave off many hours of expensive billable legal work. This means no more long hours of lawyers sifting through documents or reading and writing contracts. Now, the smart software does this instead, in a fraction of the time and therefore at a fraction of the cost.

Remember JP Morgan’s tech that extracted 150 relevant attributes from 12,000 annual commercial credit agreements — an equivalent of 360,000 hours work by lawyers — in mere seconds?
If a tech-savvy firm can do the work faster (cheaper), then as a consequence that firm will win more and more clients. Bad news for those traditional law firms that aren’t yet planning to take on machine learning.

Clients are self-involved and
self-sufficient

The modern client is from a generation that has grown up with marketing — constantly and consistently told what to buy, and which brands to aspire to. This means the client of today is both inured to intrusive marketing and discerning about which brands and services they buy into.

These clients want to work with firms that are at the top of the market, which will show their bosses and colleagues that they are cutting edge.

Consequently, they don’t care about you or your firm, or what it has been doing, so self-serving puff pieces are out. They want content with hard data and information they can use to look good.

And, you’ll need to send it to them directly, because, in the digital age, no one is scouring the internet searching for your website content. They’ll find data-rich content themselves on Google, LinkedIn, even Facebook!

By showing clients how your firm’s data and technology can benefit them — faster service, better accuracy, cheaper rates — rather than simply telling them you have it, will cement it in the minds of the modern client. They can then decide for themselves how to use it.

Clients have rising expectations

Everyone expects more for less, and the same goes in the legal sector. Not only that, the service needs to be faster, always available, and, of course, it needs to be personal.

Alongside the increase in online business comes an increasing dependence on speed — of transaction, of assistance, and of response — that clients are accustomed to.

Some firms are finding success by being available at a moment’s notice, giving 24/7 access with social presence once reserved for the consumer market. Even being available on WhatsApp, or its equivalent will become the norm going forward because the client will demand that level of personal, one-on-one service.

For better or worse, these changes in client behaviour have already changed the legal sector. The certainties and confidence that law firms once had that their sector would not be challenged have proven unfounded. And for future law firms and their lawyers, the onus for satisfying the client’s requests will continue to lie with them, and that how services are delivered rather than service itself, will become the focus.

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When it comes to law firm branding, be bold

Branding processes happen more often than we think. Six companies I have worked in rebranded during my tenure with them; two others immediately after I left them. My experience in the legal profession is limited to commercial law, as CEO of three of Norway’s largest firms, but I have also been fortunate to be involved in international rebrands as a partner in PwC and in Grant Thornton.

The pace of change is undoubtedly picking up in law firms, with mergers, partner moves, and changes in client loyalty all contributing to a rethink in a very traditional industry. There are three typical branding situations, the most common being primarily visual, the second needing more emphasis on communication, and the third requiring a rebrand or repositioning of the entire firm.

The cosmetic approach

Most leading firms are proud of their history and achievements and are resistant to major changes. They often aim for a new look, maybe even a new feel, but don’t try (or even want) to suggest they have changed. This is the classic, almost minimalistic, branding exercise; new logo, new colour palette, revamped website and stationery, and maybe a name change, where Smith, Jones and Brown is shortened to
Smith Jones.

It is rather like putting on makeup; you look better and feel better but most observers will know the firm hasn’t really changed. This may be a good thing, but many of our clients are in industries where the leading players didn’t even exist 20 years ago. Can we really be confident that law firms are exempted from this trend?

Market opinion

Where there is a mismatch between the market’s opinion of a firm’s competence, service level and reputation, and the view held by management and the partners, then a more extensive rebranding is needed. ‘The market’ will usually not only include clients, but also the business community, lawyers outside the firm, students, and market commentators, including law firm rankings.

This can’t be fixed by only implementing cosmetic changes; it must be accompanied by a vigorous communication strategy that focuses on actively updating key players, including the firm’s existing clients, on the skills, services, and true strengths of the firm. Within the bounds of client confidentiality you must demonstrate you have demanding clients that trust you with complex matters, as well as demonstrating thought leadership through active participation in legal and business discussions and forums.

Media exposure can also be a powerful tool, not necessarily using expensive advertising, but preferably by finding topics that interest financial, legal, or industry publications and websites. Getting the message to decision-makers is the key to success.

Walk the talk

However, a comprehensive rebrand is needed to promote a new firm or one that has changed significantly, through mergers, acquisitions, or other major developments. This was our challenge in SANDS.

In March 2015 the firm initiated a total repositioning of itself; essentially transforming a large firm serving a wide range of clients to one tailoring its services for the high-end business market, starting with a new strategy, new management, and a new partner model. There have been a number of radical changes internally and we needed a rebranding project to match and which would educate the market. We decided to pursue a strategy of ongoing rebranding, realising that we could get our message across more easily and more powerfully by actively communicating changes as and when they happened; effectively ‘walking the talk’.

One of our successes was getting the media interested at an early stage. We decided to be very open and honest about our ambitions, plans, and actions. We downsized or terminated non-strategic practice areas and client segments while strengthening others, in some cases building new teams and services from scratch. We also launched a massive lateral hire partner project: in several cases we recruited three-partner teams rather than individuals. We also more than doubled our number of female partners.

These high-profile events attracted attention from the financial press, resulting in more than two years of regular articles and interviews in publications read daily by decision-makers in business. The fact that most new partners came from our leading competitors was obviously newsworthy, but we also initiated discussions and dared to debate our values publicly, such as on work-life balance and the pitfalls of maximum profit as a dominating incentive for partners.

In this way, we were noticed by competitors (useful for recruitment) and the business community long before we launched the visual brand. Another ‘walk the talk’ rebrand project was our offices. We commissioned a new head-office building in Oslo and moved in the same week we launched the new brand.

Visitors are in no doubt they have come to a different law firm, not just due to its size and location, but also because the interior
design team, led by our excellent marketing director, created a client/visitor experience that differentiates us in the market.
We wanted a consistent SANDS look, feel, and quality, so during these last three years we have moved to new, custom-designed offices in three of the other cities we are located and have revamped the interior design at the two other offices.

What’s in a name?

Yes, we also created a new website, chose a new colour palette, modernised our use of social media etcetera. However, the other major decision was to change our brand name and we chose to change it radically. The two name partners both start with S and we chose SANDS, based on S and S. In this way we kept a link to our past, but chose a name that is different, international, very recognisable, and easily branded in our logo and other graphical design contexts.

The most important lessons learned are the need for boldness, intensity, stamina, and consistency. We had fairly small project groups, selecting people who were passionate, but also willing to work hard over a long period of time. Four members of senior management were heavily involved in all the projects, ensuring commitment and that the same thinking, culture, message, and brand were at the heart of all our repositioning work.

Our turnover has increased by 55% in these three years, so the market has definitely noticed that we have changed.

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New government means new rules of business in Italy

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The Italian government’s recent declaration of support for the cause ‘gilets jaunes’ (yellow vest) protesters in France, even going so far as to proclaim ‘don’t give up’, has reinforced their support of the sovereignty of the people of the Republic of France – and at the same time those of the Republic of Italy.

Not yet even 12 months old, the new government, headed by Matteo Salvini (leader of the League party and acting interior minister) and Luigi Di Maio (leader of the 5 Star party and acting deputy prime minister) has reinforced its support for the ‘people’ through a series of legislative decrees. While on one hand this is quite honorable, on the other it can lead to impediments for business.

It all started quite quickly with the passing of the Dignity Decree (Decreto di Dignita), not even
75 days after the government came
to power, which introduced a series of reforms to an Italian labour market that was certainly more favorable to employees than businesses. With the third highest unemployment rate in Europe (recorded by Eurostat at 10.3% in December 2018), it is something which appears needed to be addressed – especially if one takes into consideration that youth unemployment for the same period was recorded at 31.9%.

It is on the youth that the government is especially concerned with as we see through the incentives it has given to business through the Dignity Decree. This includes a 50% reduction on social security contributions for any new employees hired on indefinite work contracts and the reintroduction of vouchers as a payment method for students and unemployed workers. More recently with the 2019 Budget Law there are even more incentives for companies to hire both PhD students under 34-years old and youth (under 30-years old) who are the top of their class with savings of up to €8,000 on social security contributions per new hire on an indefinite work contract – either full or part time.

However, while the government is greasing the labour wheel on one end it is creating impediments for employers on the other – in terms of having a flexible workforce. For example, within the Dignity Decree the amount of time a company can hire a fixed-term worker has been decreased from 36 months to 24 months – and only 12 months if there is no justifiable reason to extend a contract. In addition, the decree has also increased the penalties for employers caught dismissing workers without ‘just cause’ from four to 24 months of wages to six to 36 months.

In addition, if your business has received assistance from the government in the past five years and you decide to transfer your business operations out of the country – as it would be a more efficient for your business – then your organisation will need to repay the Italian government two to four times the value of the financial assistance provided.

Moves such as these are bringing back the shadow of a time when it was incredibly difficult for employers to dismiss workers in Italy. The more obstacles employers have to running a flexible workforce the more difficult it is to run a business efficiently. Constraining employers to hire workers only on full-time contracts is not the answer. In fact, there is a risk it may have the opposite effect and lead to international investors shunning Italy for other countries where labour markets are more flexible. In fact, recent statistics appear to indicate that Direct Foreign Investment in Italy has slowed since the new government was elected.

In 2016 the OECD published the report Enhancing Economic Flexibility: What is in it for Workers which revealed that ‘making employment protection of regular contracts more flexible is associated with more transitions into employment in countries that have above-average activation programs’. In addition, ‘Active labour market policies (ALMP) contribute to creating an environment where making
regular-contract protection more flexible translates into greater hiring chances for jobless people’. Those that are most adversely impacted by flexible labour policies are low-skilled/under-educated workers.

This last group are those the government may be appealing to with its more job protectionist policies. This is perhaps also illustrated by a new incentive in the 2019 Budget Law, at the other end of the scale of the incentive for academic excellence, which offers companies €1,500 in tax rebates for hiring new truck drivers under 35 years of age on full-time contracts (but only if the company reimburses the new employee for the cost of obtaining the special license for the transit of goods).

In Italian, fixed-term contracts are referred to as ‘precarious’ work contracts. We are sure the use of this term does not help the situation as it makes it seem as if such a contract is ‘dangerous’, but it is not. It is only ‘uncertain’ in that it is not permanent. In this labour market a job is a job and we doubt offering a ‘citizens wage’ to those who do not work is going to reinstate confidence in the system, but that is a discussion for another day.

A flexible labour market allows businesses to remove the ‘dead wood’ from their organisations and replace it with a more efficient and proactive workforce. This is what makes an organisation great, an economy great, a country great. Italy certainly is and would be even more if it allows business to operate as it should.

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Collaboration and curiosity are key

Please give us an overview of the current legal market in Finland and how any recent developments have impacted your practice?

Legal services are offered in Finland by variety of different type of actors, mostly by attorneys-at-law offices but also by other law firms and by consulting and accounting firms. The competition has been increasing, but it has also been welcomed and spurred us to work even harder to stay on top of the curve.

Digitalisation has affected legal market in Finland. This means that new digital tools have been implemented, but digitalisation has also had a big impact on legal questions we are dealing with daily. Fintech is not the only, but certainly one, of fields of law that are more and more affected by digitalisation and include more complex substance questions than before.

Also, as around half of Finnish fintechs currently in practice were founded within the past five years, the need for legal services within the fintech industry and lawyers with expertise in fintech has increased. Naturally, also the wide and extensive legislative amendments, in particular in the field of payment legislation and data protection, have made lawyers around Europe busy.

What significant trends exist in the fintech market presently? Are you seeing these just domestically or internationally as well?

Finland has provided a good landscape for the practicing of fintech for a long time and pioneered e.g. online banking in the 1990s.

Currently we have a strong and vivid fintech market in Finland. Especially crowdfunding platforms and B2B services have been particularly strong. Lately, payment platforms and services have strengthened. Such services do still form a big part of the Finnish fintech market.

Another significant trend that we have seen recently has been the growing cooperation between traditional banks and fintechs. Such trend is being seen internationally, but especially in Finland.

In addition, several blockchain projects are live and more are being developed in Finland.

What are the three biggest challenges to practising fintech in Finland?

Many fintechs have found it challenging to keep up with the ever-changing and, to some extent, stringent regulatory requirements.

Another challenge is regulation that does not exist or has unclear scope of application (e.g. companies involved in ICOs must assess whether the ICO falls within the scope of securities market regulation). Third challenge for practising fintech in Finland is how to adequately secure the product and the valuable customer data. Fintechs do face such technical challenges regardless of where they operate, but the Finnish regulatory regime requires adequate data protection and sets several types of notification obligations that need to be taken into account.

How does fintech fit into the firm as a whole? Is it easy to collaborate with other teams?

We see fintech as a complex of various legal questions that relate to several fields of law. This requires seamlessly connected teams that support clients in achieving their objectives and growth.

Putting the most suitable teams together not based on structured practice groups but on the matter at hand has long been at the core of our approach. Fintech requires such an approach, and, thus, fits to our firm well. Taking into consideration that fintech is a shared interest for many lawyers, collaboration with each other is also easy.

What advice would you give to the next generation of fintech lawyers?

Fintech lawyers need to master relevant financial regulations and other relevant fields of law, such as regulations covering the processing of data. To be a good fintech lawyer you would need not only comprehensive legal skills on certain topics, but also an understanding on what fintech – and the particular business – is about.

Compared to some other fields of legal services, fintech is not defined by a specific set of rules and regulations, but rather by the business solutions it provides. Fintech lawyers also need to be curious and keep up with the development.

What are your predictions for fintech in Finland over the next five years?

The Finnish fintech scene has been growing rapidly, and we expect it to do so also over the next five years. As building a company and customer base is to certain extent slow, we will surely see more investments in fintech companies over the next five years.

In particular PSD2 is currently fostering open banking and overall boosting new fintech services in Finland. However, customers will see these new services in a larger scale only during the next few years, as banks have not yet opened dedicated interfaces to allow third-party service providers to access customer accounts.

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Can Paris take advantage of the fintech boom?

Please provide an overview of the current legal market in France and recent developments?

French authorities and regulators have exhibited constant interest for fintechs, which are driving technological innovation and providing additional financing sources. Regulations implemented in the last few years demonstrate French regulators’ commitment to establish appropriate frameworks that foster the development of fintechs companies while ensuring investors’ protection.

In order to bring together fintechs, public authorities and supervisors, the Banque of France and AMF (Securities regulaor) have launched a ‘Fintechs Forum’. The objective of the area is to be a venue for monitoring developments, engaging in dialogue, and making proposals.

Crowdfunding regulation

France implemented a regulatory framework for crowdfunding activities in 2014. The main objective was to ensure investors’ protection and information while allowing crowdfunding activities to develop.

The 2014 reform included a new exemption from the banking monopoly for crowdlending activities, allowing individuals to grant loans through crowdfunding platforms. This exemption from the banking monopoly is limited to individuals (i.e. not businesses) acting outside of their professional activities. Moreover, loans are limited to €2,000 by lender and by project (€5,000 if the loan is without interests), the loan maturity has to be less than seven years, and the borrower cannot borrow more than €1m per project.

Crowdfunding internet platforms have to register with the French securities regulator (AMF) either as crowdfunding intermediaries or as crowdfunding investment advisers. They are not required to register with the French securities regulator if they already benefit from a licence as financial services providers. The regulatory framework details information that crowdfunding intermediaries are required to disseminate to their members in order for them to be able to make informed investment decisions, and information they are required to request from their members to verify their identity.

An ordinance dated 1 October 2016 amended the general regime of promissory notes and established a new crowdfunding debt instrument for them. Those issued via a crowdfunding platform are referred to as ‘minibons’. Since they are not financial instruments, are not subject to the prospectus requirements.

Distributed Ledger regulation

An ordinance dated 8 December 2017 provides for the amendment of article L. 211-3 of the Monetary and Financial Code to authorise the registration of financial securities which are not admitted to a central security deposit on distributed ledgers.

Initial coin offerings (ICOs) regulation

The French Treasury recently proposed a new legislative framework for ICOs that has yet to be adopted.

Under it, token issuers established in France will have the opportunity to request an optional visa from the AMF. This visa would be non-mandatory. This regulatory strategy emphasis on non-mandatory provisions to foster professionalisation and promote sound market practices while avoiding constraining frameworks which might deter innovation and lower the French market’s attractiveness.

Crypto currencies platform

France is contemplating the introduction of a regulatory framework for crypto-asset intermediaries. This draft regulation is currently under discussion to the French National Assemblée and it is planned to be enacted in March 2019. The draft law add a new category of investment services providers, referred to as crypto-asset services providers, which would be subject to either mandatory or optional requirements.

Payment services regulation

France has implemented on 13 January 2018 the Revised Payment Services Directive (PSD2) which obliges banks to establish an access rights to the bank accounts in favour of Third Party Payment Services Providers (TPP) and to an increased diffusion of the information relating to the payment services made available to customers.

Online transactions often rely on third-party facilitators to convey customer money to a merchant. With PSD2 implemented and the creation of PISPs, the merchant and the bank can communicate with each other directly.

Furthermore, PSD2 create and develop Account Information Service Providers.

What significant trends exist in the fintech market presently? Are you seeing these just domestically or internationally as well?

There are three significant trends internationally: the growth of fintech, the importance of the blockchain technology applied to fintech services, and the solution offered by fintech with respect to compliance.

What are the biggest challenges to practising fintech in France at the moment?

The biggest challenges for French fintechs are low use (including lack of notoriety) of services offered by fintech, users’ reluctance regarding security issues, and the various asperities (lack of harmonisation, lack of regulation or legal answers, etc.) in the regulatory framework.

How does fintech fit into the firm as a whole? Is it easy to collaborate with other teams?

The fintech team grew organically over the years within the banking and financial services department. It is not structured as a separate team but rather included in the banking and finance department. All banking and finance lawyers are encouraged to:

  • monitor regulatory changes related to fintechs;
  • improve their understanding of technological issues (such as understanding how a distributed ledger work); and
  • deepen their knowledge of the fintech industry (by monitoring new start-ups, attending industry events, etc.)

Advising fintechs requires understanding the technological challenges faced by startups in this area. Our goal is not to develop an independent fintech practice, but to encourage our banking and finance lawyers to develop an interest and an expertise in technological innovations in the financial industry.

What advice would you give to the next generation of fintech lawyers?

The main advice would be to deepen their understanding of the technological angles. Understanding technically distributed ledger technologies, decentralised applications, crypto-assets, and other technological innovations is essential to advice fintech executives.

What are your predictions for fintech in France over the next five years?

The French fintechs ecosystem should attract more talents and investments in the future, says a survey by Exton Consulting. Conducted on behalf of centre of excellence Finance Innovation, the study draws an overview of fintech in France.

France has ‘comprehensive regulations’ with respect to fintech, with clearly defined rules for companies looking to scale up. Fintech can rely on a strong governmental and ministerial support. Moreover, Paris is home to a high concentration of financial institutions and asset managers.

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Malta’s ‘bull-like’ market

Please give us an overview of the current legal market in Malta and how any recent developments have impacted your practice?

The Maltese legal market is currently thrusting rather vibrantly, particularly in the blockchain and crypto
sphere, following the christening by parliament of a unique, non-intrusive and principles-based regulatory framework specifically regulating DLT platforms and virtual financial assets.

Malta is witnessing a huge bull-like market wherein many big players in the crypto realm are setting up shop and are seeking to obtain certification from the Maltese regulators to avail themselves of the bonding effect brought about by the higher standards and benchmarks propounded by the new laws and regulations. This recent development led to the formation of a dedicated blockchain legal team led by a number of partners across the firm.

What significant trends exist in the fintech market presently?

The most outstanding fintech niches which are setting up in Malta mostly relate to e-payment services, insurtech, DLT solutions, and capital raisings through the offering of tokens on a blockchain. The blockchain hype can also be noticed across a number of jurisdictions in the EU, although not as prominently visible as it is in Malta.

Another trending area is that of equity-based crowdfunding which is augmenting economic growth through new and increasing flows of credit to SMEs. In this vein, the MFSA has also recently introduced a tailored regulatory framework for investment-based crowdfunding (IBC) by publishing a new set of requirements regulating the operation of IBC services under the Investment Services Act.

What are the three biggest challenges to practising fintech in Malta?

One of the biggest headaches for small fintech businesses in Malta, and possibly in other countries in the EU, is that their profile may not fall within the risk appetite of most banks. This wary stance notably weakens their access to loan financing since the banking sector might not be acclimatised to the fast-paced growth within the fintech environment.

Another challenge is the risk of cyber threats, which, if not prevented and/or tackled well, might eventually drive investors back to more traditional forms of financial services. Being the smallest EU member, it is imperative that Malta employs better employment retention mechanisms so as to avoid the brain drain of valid employees moving from the regulator to industry.

How does fintech fit into the firm as a whole? Is it easy to collaborate with other teams?

GANADO Advocates has been at the forefront of fintech and blockchain developments on the island. We have been working closely with regulatory entities and industry leaders to become fully equipped with legal knowledge in this new sphere and we have also been heavily involved in the drafting of the recently enacted legislative framework. This shows that fintech is one of the budding areas which at our firm is given considerable priority.

The blockchain team has been active within the area from its early days, and has since been assisting clients, local and international, with blockchain based projects and cryptocurrency enquiries. Furthermore, the same team smoothly interacts and collaborates with other departments within the firm, especially on specific corporate, and employment matters as well as issues relating to investment services.

What advice would you give to the next generation of fintech lawyers?

The fintech space is a fast-changing environment, which is constantly presenting unprecedented and often mind-boggling dilemmas. Lately, fintech solutions are disrupting the conventional financial services scene in a rather aggressive manner and, in this respect, it is best for lawyers to widen their horizons and to try to understand at least the fundamentals of the underlying technology being utilised.

Frequent meetings with start-ups and tech entrepreneurs will help lawyers appreciate and grasp more the underlying dynamics of the fintech service or product. It is imperative for fintech lawyers to understand how the innovative technology has morphed the traditional legal rights and obligations of both users and service providers, to offer the best possible service to their clients.

What are your predictions for fintech in Malta over the next five years?

The incumbent Maltese government put fintech as one of its top priorities. While sowing the seeds to establish Malta as the go-to blockchain island, another potential market has already been pinpointed, which is that of artificial intelligence (AI). In a recent consultation paper, it has in fact highlighted the prospect of regulating AI solutions under the Innovative Technology Arrangements and Services.

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Fintech to mature in Mexico

Please give us an overview of the current legal market in Mexico and how any recent developments have impacted your practice?

The Mexican legal market has rapidly evolved during the last 10 years, mainly attributable to:

  1. the rapid expansion and establishment of Mexican offices of several international law firms, as well as the ‘re-integration’ of traditional legal practices within the Big 4 firms; and
  2. the enactment of several legal and regulatory reforms during the 2012-2018 presidential term, which led to the liberalisation of several markets (such as telecoms, power, and oil and gas), as well as the reshaping of the regulators in charge of basic economic aspects (e.g. COFECE, IFETEL), market regulation (e.g. CNH, CRE, CENACE, etc.) and environmental and safety policing (e.g. ASEA), among other aspects.

With regards to the fintech market, this has rapidly grown in Mexico since 2013, following the creation of the National Entrepreneurship Institute (INADEM), a public institution specialised in providing attention and solutions to the needs of entrepreneurs and MSMEs, with an emphasis on developing technological, financial and OTT services in Mexico. However, it was until March 2018, with the recent enactment of the Financial Technology Institutions Law (the ‘fintech law’), that the fintech market was deployed. Such event also resulted in the amendment and restatement of several provisions of other financial laws and regulations.

It is now obvious for practitioners, that fintech institutions will be of the utmost importance in the development of the financial and transactional markets in Mexico, and will have an impact not only on the financial regulation, but also on several topics such as privacy, competition, antitrust and consumer protection laws in the near future.

What are the current trends in the fintech market?

On September 2018, the first package of general (secondary) provisions applicable to the fintech law were published. In specific, the Mexican fintech regulatory framework has been recently enacted with: (a) provisions applicable to crowdfunding institutions; (b) general provisions applicable to the operation of e-money institutions; and (c) anti-money laundering and countering the financing of terrorism for fintech institutions.

From the operating point-of-view, fintech institutions have begun to apply for authorisation to operate from the Mexican National Banking and Securities Commission (CNBV), and it is expected that during the following year, at least 50 of the 73 companies that participated in the consultation prior to the enactment of the fintech law, will be authorised as Mexican fintech companies.

Acting as local counsel, we have been involved in regional projects, such as advising a Chilean fund entering the Mexican entrepreneur market, and worked together with our Canadian affiliate regarding crypto-mining and electric power regulation in Mexico.

What are the three biggest challenges to practising fintech in Mexico?

  1. The lack of regulation for application programming interfaces, sandbox models and privacy rules for fintech institutions.
  2. Compliance with the corporate governance rules set forth in the general provisions, as such can become a burdensome process for several companies, especially the small ventures commencing operations.
  3. The political moment in Mexico, as the landslide victory of the opposition candidate in the presidential election on 1 July, will impact the administrative structure of several financial regulators, such as the CNBV and the Bank of Mexico.

How does fintech fit into the firm as a whole? Is it easy to collaborate with other teams?

In our firm, fintech is considered as part of the banking and finance practice and it has become a key topic for our financial services industry as a whole. Our legal practitioners have teamed up with our corporate governance, AML, cybersecurity and risk management teams for the review, elaboration, and finalisation of several papers within our firm, mainly aimed to advice our clients as a truly diversifed ‘one-stop shop’, as well as with the development of fintech labs with the mutual participation of private and public actors.

In Deloitte Legal Mexico, we have been able to advised a roboadvisory company together with our risk management team, and have prepared a preliminary opinion to a crypto-mining company to establish and commence operation in Mexico, together with our transfer pricing and BPS teams.

What advice would you give to the next generation of fintech lawyers?

There is a need of highly specialised services in the fintech market, and now is actually a good moment to begin with the study and discussion of these topics. As the regulation continues to evolve, only those able to understand the market will be capable of advising both public and private clients in complex transactions.

What are your predictions for Mexico’s fintech over the next five years?

The Mexican fintech market will expand during the following two years as authorisations and licences will be granted to several companies during the following months.

From a regulatory point-of-view, an adequate regulation of the application programming interfaces and other
software communication protocols will be essential for the operation and market entrance of new competitors. Also, we predict that further legislation will be enacted to incentivise fintech in Mexico, specifically regarding tax incentives.

We consider that the Mexican fintech market will be in a maturity process during the following five years; however, this evolution will also be important for traditional banking institutions, as they will also apply for crowdfunding and e-money authorisations, and will begin processing crypto-currency payments during the following years.

Finally, sandbox models will become relevant from a legal point-of-view, as an ex ante regulation for this type of projects is impossible, an optimal ex post regulation together with the appropriate supervision and risk analysis will be the key factor for incentivising innovation while developing a more accurate regulatory framework.

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Brexit fears are overstated

Please give us an overview of the current legal market in the UK and how any recent developments have impacted your practice?

The UK fintech market has been very busy over the last year, and appears not to have been significantly impacted by Brexit as yet. We are starting to see legal work in fintech move more often from pure start-up work to either partnerships with large incumbents, or to those large incumbents seeking to carry out fintech projects themselves and looking for lawyers with experience of working in the area. This has in turn led to growth and stabilisation of the practice area.

What significant trends exist in the fintech market presently? Are you seeing these just domestically or internationally as well?

There is a significant growth in the work around open banking as the area develops and matures, and the open banking APIs published by the major UK banks become ever more sophisticated and reliable; growth of this area in other jurisdictions is further behind, often due to lack of standardised API specifications.

There has also been a rationalisation of the market in cryptocurrencies and blockchain, as the ICO investment boom has narrowed and focused on projects with genuine utility, and more traditional structures around cryptocurrency start to bed in.

What are the three biggest challenges to practising fintech in the UK at the moment?

The first is that while technology law and regulation have traditionally been separate disciplines or areas of legal practice, fintech amalgamates the two, hence there is the practical challenge of making sure lawyers practising in fintech are sufficiently versed in both technology law and financial regulation.

The second is sorting the wheat from the chaff, especially in the cryptocurrency space where there has been a lot of excitement and investment but less in the way of quality sustainable offerings.

The third is uncertainty over Brexit, and not knowing even at this late stage what kind of deal may be reached to enable fintechs to conduct business internationally, or what the rules governing such conduct might entail.

How does fintech fit into the firm as a whole? Is it easy to collaborate with other teams?

It sits across all the practices. It is led from the core commercial technology team, which incorporates the financial regulatory team and the data protection team; but it spans across corporate/investment, IP and disputes, employment, and tax.

We are all sat in open plan and meet regularly to discuss what’s going on in the industry and what we’re involved in; the nature of the work also means that we are frequently working together on matters, combining our own various areas of expertise in the same way that much of fintech is combining previously disparate skill sets.

What advice would you give to the next generation of fintech lawyers?

Be adventurous in what you set out to learn, get to know the industry at all levels, and be prepared to read a lot of regulation and make a call on how existing laws apply to new pieces of technology and business structures that legislators never even thought of.

What are your predictions for fintech in the UK over the next five years?

We predict that the adoption of fintech solutions will become more widespread, through a mixture of distribution via the trusted brands of incumbent financial institutions, and roots-up usage by young adults as their first encounters with financial services.

More financial institutions will partner with fintechs in cobranded services, and it will be easier to get these deals over the line as the institutions continue to learn to deal with start-ups in different ways from how they have previously dealt with major IT suppliers.

Brexit fears are overstated in this area, so long as immigration rules allow the attraction and retention of the many types of talent needed in the industry.

More services will be developed and operated outside London. More fintechs will have become incumbents in their own right. Consumers and businesses alike will benefit from an increased range of services and level of convenience that will be greatly beneficial to the whole economy.