Final votes on the Volcker rule yesterday meant the work was just beginning for Satish Kini, co-chairman of the banking group at law firm Debevoise & Plimpton LLP in Washington.
“It’s going to be a late night, definitely,” said Kini, who planned to spend his evening in the office reviewing the more than 900-page rule and preamble with about 10 other lawyers. In preparation, Debevoise had staff assigned to print, bind and distribute the rule, schedule conference calls with bank clients and create internal e-mail lists to make brainstorming easier.
For Wall Street law firms including Debevoise, whose senior partners have billed clients more than $1,000 an hour in the past, as well as Sullivan & Cromwell LLP and Davis Polk & Wardwell LLP, the final Volcker rule offers an opportunity for new business and additional fees. Hundreds of lawyers will be needed to interpret the rule, establish models for compliance and find new strategies for securities firms with $44 billion at stake from market-making activities.
“The Volcker rule is going to keep a lot of people at this firm occupied for a long time,” said Joshua Sterling, a partner at Bingham McCutchen LLP, which held a Volcker rule “boot camp” for attorneys last week. Securities firms spinning off units and non-banking companies looking to enter the field as others are forced to exit will create significant opportunities for new business, he said.
Jones Day has 200 lawyers around the world reviewing the Volcker rule this week, said Lisa Ledbetter, a Washington-based partner at the law firm. Ledbetter, who now spends about 75 percent of her time on issues related to the 2010 Dodd-Frank Act, said clients have been calling with questions about how to distinguish proprietary trading from market-making and hedging.
“We’ll be working longer hours to make sure we have our arms around the content of the rule,” Ledbetter said. The firm will send a summary of the regulations to clients as soon as its lawyers digest the details, she said.
The Federal Reserve, the Federal Deposit Insurance Corp. and three other agencies issued a final ruling yesterday banning proprietary trading and outlining what kinds of market-making -- the business of using a firm’s capital to buy and sell securities with customers -- is allowed. Clients will be looking for quick analysis of key topics, including the scope of market-making exemptions, cross-border challenges and which metrics must be compiled and reported, according to Lanny Schwartz, a partner at Davis Polk.
“I don’t think anybody but Santa has enough elves to read that rule right when it comes out,” Guy Dempsey, a partner at Katten Muchin Rosenman LLP and a former general counsel at Barclays Plc, said before the rule was published.
The Volcker rule may create about 2.3 million hours of paperwork, pushing the total amount of compliance time for Dodd-Frank legislation to about 59 million hours, according to government estimates compiled by Sam Batkins, director of regulatory policy at the American Action Forum. That could cost banks at least $5.9 billion, said Batkins, whose organization advocates reducing the size of the government.
Wall Street lawyers will be kept busy for years trying to spot “exploitable loopholes” in the Volcker rule, said James Cox, a professor at Duke University School of Law in Durham, North Carolina.
“Dodd-Frank has just been terrific for the legal industry,” Cox said. “It’s a tremendous boomlet for law-firm revenues.”