In-house lawyers could quit financial institutions if proposals to make them accountable to the City watchdog become reality, lawyers have warned.
The Financial Conduct Authority is to consult on whether individuals in charge of a firm’s legal function in banks, building societies and credit unions need approval under its senior managers regime, which comes into force on 7 March.
Chris Webber, a partner in the London office of international firm Squire Patton Boggs, said a general counsel’s role in a regulated firm was already ‘pretty complex and demanding’.
Webber said the financial regulator should be ‘very careful’ to consider all the implications of potentially imposing personal accountability on GCs.
If that were to happen, ‘we would over time see a brain drain from financial institutions’ legal functions, as high-calibre lawyers start to decide the personal risks attached to regulated sector GC roles are not worth taking’, Webber said.
Marian Bloodworth, employment partner at technology and digital media firm Kemp Little, said legal privilege would be the ‘most significant’ casualty should senior in-house lawyers be included in the regime.
Bloodworth said regulators would want to know what actions were taken by senior managers to deal with or foresee the circumstances leading to any breach. The ability for senior lawyers to prove they took reasonable steps is much more limited than for other managers, he added.