Mutual-fund work keeps law firms hopping
Todd Mason. Knight Ridder Tribune Business News. Washington: Jun 13, 2005. pg. 1
http://proquest.umi.com/pqdweb?did=853181831&sid=1&Fmt=3&clientId=68814&RQT=
309&VName=PQD
Abstract (Document Summary)
The pace is likely to slow with a forthcoming change atop the SEC, although the local
lawyers expect the agency's sweeping governance changes to stick. Chairman William
Donaldson has announced his resignation, effective June 30, and President Bush has
nominated U.S. Rep. Christopher Cox, a California Republican, to replace him. Cox is
expected to be more receptive than Donaldson to the fund industry's concerns.
The crush of work was already slowing the SEC's reform efforts before Donaldson said
he would step down. The industry needs time to adjust to the new rules already on the
books, said [Bruce G. Leto], the Stradley Ronon partner.
[John N. Ake], the Ballard Spahr partner, said the SEC was certain to put its rule-making
on hold because of Donaldson's resignation and those of enforcement chief Stephen
Cutler and investment management chief Paul Roye.
Full Text (678 words)
Copyright 2005, The Philadelphia Inquirer Distributed by KnightRidder/Tribune Business
News. For information on republishing this content, contact us at (800) 661-2511 (U.S.),
(213) 237-4914(worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.
To see more of The Philadelphia Inquirer, or to subscribe to the newspaper, go to
http://www.philly.com. Copyright
Jun. 13--Philadelphia law firms may finally get a chance to catch up on a crush of work
helping mutual funds comply with stricter regulation.
The local firms are still hiring lawyers and drafting associates to help funds implement
rules adopted by the Securities and Exchange Commission after New York Attorney
General Eliot Spitzer exposed an industry scandal in 2003.
The pace is likely to slow with a forthcoming change atop the SEC, although the local
lawyers expect the agency's sweeping governance changes to stick. Chairman William
Donaldson has announced his resignation, effective June 30, and President Bush has
nominated U.S. Rep. Christopher Cox, a California Republican, to replace him. Cox is
expected to be more receptive than Donaldson to the fund industry's concerns.
Philadelphia law firms have figured prominently in the mutual- fund work because of the
industry's deep roots here.
"It's been crazy for the last year and a half," said John McGuire, a partner in Washington
for Morgan Lewis & Bockius L.L.P., of Philadelphia.
Spitzer jolted investors in September 2003 with charges that four fund companies
allowed favored clients to make illegal after-hours trades and granted trading access to
them in ways that harmed ordinary shareholders.
The law firms have helped fund families implement a flood of rules tightening fund
governance and addressing conflicts of interest. Their billings have jumped 20 percent to
30 percent.
They are also helping their clients respond to frequent "sweep letters" issued by the
SEC's enforcement division. These blanket requests, a regulatory version of highway
checkpoints, ask fund companies to answer questions and produce records on such
potential problem areas as fee calculations and undisclosed side deals with sales
intermediaries.
The letters are a way for SEC lawyers "to get their arms around issues that could
become problems," rather than to react afterward, said Robert Helm, a partner in
Washington for Dechert L.L.P., of Philadelphia.
Four local firms - Morgan Lewis; Stradley Ronon Stevens & Young L.L.P.; Dechert; and
Drinker Biddle & Reath L.L.P. - are among the top 10 investment-management law
practices, ranked by assets of the funds they advise, according to the fund-tracking firm
Lipper.
A fifth, Ballard Spahr Andrews & Ingersoll L.L.P., ranks among Lipper's top 10 on firms
advising fund families on new issues. Morgan Lewis led that list with 61 new funds last
year.
These law practices started in Philadelphia for the most part, but have spread across the
country. Stradley Ronon helped establish the Wellington Fund in 1928. The fund's
adviser, Wellington Management Co. L.L.P., was the genesis of fund giant Vanguard
Group Inc.
At Ballard Spahr, where billings are up 30 percent in the last two years, "people who
were devoting a third of their time to mutual funds are now devoting 100 percent," said
John N. Ake, a partner.
Stradley Ronon has hired four lawyers for what will be an investment-company practice
of 32.
Hiring is difficult, said Bruce G. Leto, a Stradley Ronon partner. "The market for
investment-management attorneys is very tight. Everyone needs to beef up."
Drinker Biddle put together an accelerated training program to bring new hires up to
speed in half the typical acclimatization period of six months, said Michael Malloy, a
Drinker Biddle partner.
Drinker Biddle's investment-management work is up 25 percent since the SEC
crackdown, Malloy said.
The crush of work was already slowing the SEC's reform efforts before Donaldson said
he would step down. The industry needs time to adjust to the new rules already on the
books, said Leto, the Stradley Ronon partner.
Ake, the Ballard Spahr partner, said the SEC was certain to put its rule-making on hold
because of Donaldson's resignation and those of enforcement chief Stephen Cutler and
investment management chief Paul Roye.
Still in question is "whether or not there will be any rollback" of existing rules, Ake said.
Leto said he doubted that the SEC would backtrack. "Everyone is digesting this stuff," he
said, "and it is going forward."
Credit: The Philadelphia Inquirer