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2012 vision: Increased regulatory exposure looms

Wednesday 25 January 2012 – by Lista M Cannon and Chris Warren-Smith

Financial sector firms expect increased regulatory scrutiny and exposure to litigation in 2012, according to Lista M Cannon and Chris Warren-Smith of Fulbright & Jaworski International LLP.

Many look forward to 2012 with excitement as the Olympic Games approach. In contrast, the eighth annual Litigation Trends Survey from international law firm Fulbright & Jaworski International LLP has identified that firms in the financial sector anticipate a year of increased exposure to legal disputes and regulatory proceedings in 2012.

Twenty-nine per cent of businesses in the financial services sector responding to the survey expect to be involved in more disputes in the next 12 months, a marked increase on 2010’s figures when around one in five expressed a similar expectation.

More than one-third of financial firms involved in disputes last year cited contractual matters among their most numerous types of case, followed closely by shareholder litigation. Just over one-fifth stated that they were most commonly involved in disputes concerning regulatory and employment matters.

Around 20 per cent of UK respondents across all sectors expect to experience an increase in the number of legal disputes. One fifth of all UK respondents expect their legal disputes to increase as a result of heightened regulatory scrutiny and enforcement, a sharp rise since 2010 when 7 per cent of UK respondents raised concerns about stricter regulation leading to legal disputes. This statistic will be particularly important for firms in the financial services sector.

The economy shows little sign of significant recovery in 2012, but the expected impact of the poor economic climate on legal disputes has declined. The survey records that one fifth of all UK respondents considered the state of the economy as a reason for an increase in the legal disputes they may face, compared to almost half of UK respondents in 2011.

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Exposure to regulatory proceedings remains a key issue for UK businesses. While in the last year thirty-six per cent of all UK companies faced at least one regulatory proceeding, an increase from 32 per cent in 2010, one fifth of respondents in the financial services sector expect that in the next twelve months they will face enhanced exposure to government or regulatory investigations.

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