Clifford Chance breaks circle over FSA

Clifford Chance last week broke away from a group of top City law firms which decided to hold firm against regulation by the Financial Services Authority.The move followed a special meeting of around 15 firms at the offices of Freshfields Bruckhaus Deringer, just before the deadline for opting in for FSA regulation through the easier 'grandfathering' method.But although magic circle firms Freshfields and Slaughter and May have decided not to opt in, Clifford Chance decided to do so, dashing chances that the group would give a fully united front in the face of the Financial Promotions Order.The order, created under the Financial Services and Markets Act 2000, regulates inducements and invitations to enter financial agreements.

Solicitors argue that the current wording might catch much of their corporate activity and there were fears that - to be safe - they may need to obtain precautionary regulation from the FSA.Other firms which decided not to opt in include Lovells, Denton Wilde Sapte, Rowe & Maw and Ashurst Morris Crisp.Fears were voiced last week that a move by the majority of firms to opt in with the FSA would create panic among smaller firms, who might also seek to be regulated (see [2001] Gazette, 1 November, 6).Other firms not at the Freshfields meeting who have decided to opt in include Wragge & Co and Addleshaw Booth & Co.Asked if he thought the move might create uncertainty among smaller firms as to whether they should obtain regulation, Tim Herrington, head of financial services at Clifford Chance said: 'We are not a bunch of sheep.

Each firm must make a decision for itself on the basis of best practice management.'He said the order was very unhelpful, and that Clifford Chance took the view that any transaction that was not a complete takeover could involve activities - such as simply contacting individuals related to the deal - which could trigger the need for regulation.All firms, together with the Law Society, are still resolved to lobby the Treasury and the FSA to obtain a favourable amendment of the order.

The Society's view is that, while recognising that the exemptions in order are problematic, it is a matter of judgement for individual firms as to whether they can safely operate within them.Jeremy Fleming