Following its recruitment of Marc Berger, a former prosecutor in the Southern District of New York who handled high-profile white-collar criminal prosecutions, as a partner in New York in April, Ropes & Gray continues to expand its ability to represent clients in contentious regulatory matters.
Robert Skinner, a former Ropes attorney who left the firm early this year to work as chief corporate counsel at asset manager Affiliated Managers Group, has returned to the firm as a partner in its business and securities litigation practice in Boston. Skinner has broad experience in the representation of investment advisors and financial institutions in business disputes.
In a discussion with IFLR1000, Skinner commented on a few trends he has observed in securities litigation, particularly with respect to changing perceptions on the part of financial companies, asset managers, and their counsel.
"With the industry very much in the crosshairs of regulators and the plaintiffs' bar in the wake of the global financial crisis, I think that clients are no longer thinking about plaintiffs' actions and regulatory enforcement matters as 'lightning strikes' that they should wait around for and respond to, but as pretty inevitable. The task is to make them less dramatic and disruptive when they do arrive," Skinner said.
Skinner noted that he has observed a wave of excessive fee litigation directed against mutual fund advisors by the plaintiffs' bar. He mentioned studies conducted by academics pondering why one firm gets sued but not another. The short answer, Skinner said, is that the size of the advisor, and therefore the size of the plaintiffs' lawyer's fee that can be generated, determines whether or not someone will be the target of a lawsuit.
"Advisors are waking up and realizing, 'It's not just a matter of charging a reasonable fee, the plaintiffs' bar will be looking for a way to sue me anyway,'" he said.
Another trend has to do with regulators attempting to regulate via enforcement action rather than rulemaking. Instead of providing helpful guidance to a mutual fund about the proper valuation of difficult-to-measure assets, the regulators will bring an action against someone they think has gotten it wrong, Skinner commented.
Eva Carman, co-head of the firm's securities enforcement group, offered some further observations.
"One challenge is that often the settlement orders don't reflect a case's mitigating factors. Regulators use the orders to send a message to the industry about the nature of violative conduct, but without the full picture, including the mitigating factors, the message is not always clear," Carman told IFLR1000.
"As a result, in the absence of mitigating factors, advisers are left with the impression that the case was more egregious than it was, causing them to discount the import of the order. They see the conduct as something they would never do, but if they knew the mitigating facts as well, they might see the conduct as something much closer to their practices and adjust their policies accordingly," Carman said.