Legal and Conduct Risk in the Financial Markets

This is the third edition of the only work to focus on the topic of legal risk, expanded in this edition to include much new material specifically on conduct risk. The book has been updated to take into account developments in the law and professional standards concerning such risks and associated values in the context of the financial markets.

Significant (and in some cases, endemic) conduct-related scandals, such as the widespread mis-selling of financial products and LIBOR manipulation, exposed (even precipitated) by the Financial Crisis, have resulted in legal and regulatory change in equal measure (and profound effect) to that of the prudential and financial stability concerns captured in the second edition. Consequently this new edition fully examines the current approach to trust, ethics and conduct within the broader framework of reputational and legal risk. In doing so, it clarifies what constitutes legal risk in contemporary financial markets and how to manage it, drawing on examples and case studies.

Other developments in areas such as the resolution/insolvency of banks, the revision of the UK regulatory structure from the FSA to the FCA and PRA, and the recently made new crime of reckless management of a bank are all considered in full. There is also discussion of trends in areas ripe for development such as fiduciary duty amongst financial markets participants.

Combining practical emphasis with theoretical depth, this is an approachable and engaging reference guide to this important and evolving area of law.

List of contents

• Introduction


• Part I: The General Context


• 1: Why Legal and Conduct Risk are Important: a Short History


• 2: Risk And Capital


• 3: Legal and Conduct Risk in the London Market


• 4: The Global Context


• 5: The Lawmaker, the Regulator, and Current Preoccupations


• Part II: The Financial Crisis of 2007-2009


• 6: Market and Regulatory Failure


• 7: The Initial Impact of the Financial Crisis on Financial Markets


• 8: The Initial Legal and Regulatory Responses to the Financial Crisis in the UK


• 9: The Initial Response to the Financial Crisis by the EU and Elsewhere


• Part III: The Conduct Crisis


• 10: The Impact of the LIBOR Scandal: Concerns about Misconduct and Findings of the Conduct Costs Project


• 11: Sustainability, Responsibility, Public Trust, Ethical Drift and the 'Social Licence' Concept


• 12: Ethics and Banking Standards


• Part IV: Early Perceptions of Legal Risk


• 13: Financial Services Act 2012: Changes to Regulatory Architecture


• 14: Financial Services (Banking Reform) Act 2013


• 15: Individual Accountability


• 16: General Legal and Conduct Risk Implications of the Crises and Regulator-led Redress


• Part V: Legal and Conduct Risk In Interconnected Financial Markets


• 17: Legal and Conduct Risk in a Globalizing Financial Market


• 18: The Role of International Institutions in Financial Law Reform


• 19: Brexit


• Part VI: Early Perceptions of Legal Risk


• 20: A Landmark Case and its Aftermath


• 21: A Case of Conceptual Impossibility


• 22: Settling Differences


• Part VII: Characteristics of Legal Risk


• 23: Definition


• 24: Sources of Legal Risk


• 25: Causation


• Part VIII: Examples of Legal Risk


• 26: Property Interests in Indirectly Held Investment Securities


• 27: Vague Laws


• 28: Recharacterization


• Part IX: Legal and Conduct Risk Management


• 29: The Essentials of Legal and Conduct Risk Management


• 30: Lawyers' Responsibility for the Management of Legal and Conduct Risk


• 31: Metrics in Conduct Risk and Reputational Management: Predictions and Perception


• 32: Managing the "Grey Areas"; Standards, Scenario Analysis and Case Studies


• Part X: Conclusions


• 33: A Convergence of Agendas


• Appendices

About the author

Roger McCormick is a past Director of the Sustainable Finance Project at London School of Economics and Political Science, and a past Visiting Professor at LSE. He is now the Managing Director of CCP Research Foundation .He retired from full-time private legal practice in 2004, having practised law in the City of London for nearly thirty years.

Chris Stears is a solicitor, a fellow of the Chartered Institute for Securities & Investment, Research Director at CCP Research Foundation, and principal and general counsel at Medius Consulting.

Summary

This is the third edition of the only work to focus on the topic of legal risk, expanded in this edition to include much new material specifically on conduct risk. The book has been updated to take into account developments in the law and professional standards concerning such risks and associated values in the context of the financial markets.

Significant (and in some cases, endemic) conduct-related scandals, such as the widespread mis-selling of financial products and LIBOR manipulation, exposed (even precipitated) by the Financial Crisis, have resulted in legal and regulatory change in equal measure (and profound effect) to that of the prudential and financial stability concerns captured in the second edition. Consequently this new edition fully examines the current approach to trust, ethics and conduct within the broader framework of reputational and legal risk. In doing so, it clarifies what constitutes legal risk in contemporary financial markets and how to manage it, drawing on examples and case studies.

Other developments in areas such as the resolution/insolvency of banks, the revision of the UK regulatory structure from the FSA to the FCA and PRA, and the recently made new crime of reckless management of a bank are all considered in full. There is also discussion of trends in areas ripe for development such as fiduciary duty amongst financial markets participants.

Combining practical emphasis with theoretical depth, this is an approachable and engaging reference guide to this important and evolving area of law.

Additional text

This financial crisis highlights the importance of the work by McCormick, daring because not even the financial markets understand the legal risks involved, and few lawyers, if any, would really understand the complexity of all the financial products. The book is therefore useful to policymakers, lawyers, and finanacial actors, besides academics.

Report

Review from previous edition The first to wrestle legal risk to the floor, McCormick speaks in an eminently reassuring voice. Solicitors are problem solvers, and McCormick has engaged a (considerable) problem, observed its characteristics, mapped its watering holes, and made very sensible suggestions for keeping the beast at bay. Joanna Benjamin, Journal of International Banking Law and Regulation (JIBLR), 2007, issue 2

Product details

• Authors: Roger McCormick, Roger (Managing Director Mccormick, McCormick Roger, Chris Stears
• Publisher: Oxford University Press
• Languages: English
• Product format: Hardback
• Released: 22.03.2018
• EAN: 9780198749271
• ISBN: 978-0-19-874927-1
• No. of pages: 704
• Subjects: Social sciences, law, business > Law > International law, foreign law; England, Wales, LAW / Banking, Financial services industry, Hospitality and service industries, Financial services law and regulation, Banking law, Financial services law & regulation