UK firms lack in-house legal resources

Of the top 30 private equity firms headquartered in the UK, only 16 have legal professionals on their payroll, revealed The Lawyer in its 2013 “Private Equity Report”. 

A single lawyer working alongside a junior compliance officer or second-in-command is a typical setup for firms that reported having an in-house legal team.   

“The same trend emerges in the London offices of some of the leading US-buyout houses including the likes of Blackstone Group, which have followed their UK counterparts by hiring their first ever in-house lawyer,” the report said. 

Private equity firms’ US offices do not typically feature an in-house lawyer (or general counsel) as well, said Charles Lerner, a compliance consultant with Fiduciary Compliance Associates. “They heavily rely on outside counsel.”

However, chief compliance officer is a more common title in the US offices of private equity firms, he added.

Firms managing more than $150 million in assets with US operations must register with the Securities and Exchange Commission and formally designate a person to fulfill the chief compliance officer role. Often the title is placed on a firm’s chief financial officer, but Lerner said more private equity firms are now hiring stand-alone compliance officers.  

A lack of in-house legal and compliance talent at UK firms may surprise some in light of recent regulatory developments. The Alternative Investment Fund Managers directive due to take effect July 22 has fundamentally reshaped the UK’s private funds regulatory and marketing framework. The directive subjects GPs operating in Europe to new reporting requirements, pay rules and risk mitigation obligations, to name a few of the regulations. 

Other recent regulatory developments raising compliance concerns include the UK government’s plan to reduce carbon emissions under the CRC Energy Efficiency Scheme; revisions to the takeover code and tougher enforcement of anti-corruption legislation under the UK Bribery Act.