To be a great funds lawyer, you need to grasp complicated and innovative investment concepts quickly
The growing need for wealth management in the region, coupled with tightening regulation and cross-border business, makes funds lawyers crucial to modern market mechanisms. Eva Chan, partner in the financial markets group of the Hong Kong office of Simmons & Simmons, talks about life in this in-demand role.
How has the landscape for investment funds changed globally in the last few years? What are the main factors driving the market in Hong Kong?
At a global level, investment markets are becoming increasingly interlinked. At the same time, China is opening up its markets. This has important implications for Hong Kong. The best demonstration of this is the Mutual Recognition of Funds (MRF) initiative rolled out in 2015. It allows Hong Kong-domiciled and registered funds to be offered in mainland China, and vice versa. Many fund managers are interested in accessing Chinese investors through the MRF. This has generated plenty of work for law firms like us who have a very strong focus on key sectors, in particular asset management and investment funds.
How are law firms responding to these changes in terms of the recruitment of lawyers? Are lawyers in this area any more or less in demand than other areas?
Funds lawyers have always been in high demand as there is not a big pool of talent. Our team is comprised of excellent lawyers, many of whom joined us as trainees. Attracting strong candidates as trainees is the ideal way to ensure that in the future we will have a supply of good funds lawyers – and other kinds of lawyers too. That reminds me of how important my role as one of the recruitment partners is.
How does your work as a specialist in investment funds differ from lawyers specialising in other financial areas of financial markets? What are the key challenges you face and how do you stay on top of them?
What differentiates me as a funds lawyer from other financial markets lawyers (who might specialise in banking, debt capital markets or structured products) is my frequent dealing with regulators, such as the Securities and Futures Commission (SFC) in Hong Kong. Because registered funds are offered to retail investors, the SFC is very attentive to their risk profile, and we work with both the clients and the SFC to ensure the SFC’s concerns are adequately addressed.
I need to understand the investment strategies that underlie the products, which are often complicated, and I also need to understand where the SFC is coming from when it suggests changes to products. The biggest challenge is to balance the needs of both the client and regulator, and to negotiate a solution that works for both. It’s not good enough to just tell the client “the regulator says no”.
The best way to meet the challenge is to thoroughly understand the needs of clients, the salient features of the funds and the concerns of the regulators, and stay on top of the latest trends in registered funds. Utilising my experience, I also try anticipating what the regulator’s next question will be – which sounds a bit like chess-playing – so that I’m always ready to respond.
I also keep myself up-to-date with the funds and financial market, using our in-house news service, meeting with clients and staying in touch with developments in other markets. As a member of a much broader partner team in an international firm, I am lucky to have access to comprehensive support services to keep clients up-to-date.
What career paths and opportunities are open to lawyers working in financial markets? Are lawyers in this area any more or less likely to make partner or managing partner?
Financial markets lawyers, including funds lawyers, can move from private practice to “in-house” as counsel of banks and funds houses. For funds lawyers who aspire to become partner, there’s a promising career given the lucrative nature of funds work. After all, you need to have a strong business case before you can move up. Hong Kong’s registered funds market is continuing to grow compared to other markets, so there is plenty of opportunity.
What separates a great person in your field from an average one? What skills are needed as a funds lawyer? What are the most important qualifications that hirers in this area look for?
To be a great funds lawyer, you need to grasp complicated and innovative investment concepts quickly. It can be a steep learning curve at first, as most lawyers have a background in arts subjects rather than business. Unlike many areas of the law, there’s no textbook on investment funds – you need to learn on the job and learn by experience.
You should also have solid legal and analytical skills, the ability to think problems through carefully, and good drafting skills so that you can translate complex investment concepts into layman’s terms.
Negotiation skills can be crucial, because you need to deal with many different stakeholders – the fund manager, the trustee, not to mention the regulator, and resolve conflicts all the time.
The best preparation for success is to have a good foundation during the first couple years of training. When we are recruiting, we look for people who have the potential to excel on all the above skills. We primarily look for people with first-class training from other quality firms. Having funds experience helps, but strong legal ability has to be there.
How easy is it for a lawyer specialising in another area to switch to financial markets/investment the funds practice? If it is not possible, how early do you have to make the decision to specialise in this area?
Switching to funds practice is tough, especially for senior lawyers, because it is quite different from general corporate work. While some of the skills are transferable, the funds practice involves a mixture of industry knowledge, complicated concepts and unwritten practices that are unique. However with dedication and ambition a switch is certainly possible.
If you are thinking about moving into funds-related work, I would recommend doing it before you reach four years post-qualified experience (PQE). At that stage, you’re still receptive to change and more able to adapt to the funds lawyers’ mode of thinking.
I was lucky – I was born to be a funds lawyer!
This article appeared in the Classified Post print edition as Conquering complexity.