The Financial Services Compensation Scheme (FSCS) has placed eight firms, including Slaughter and May, Herbert Smith Freehills and King & Wood Mallesons, on its newly created legal panel as it seeks a more structured approach to recouping investor losses.
The FSCS, the UK’s statutory compensation scheme for customers of authorised financial services firms, has created a four-tier system covering core legal services, Scottish legal services, employment law and low value dispute resolution after launching a review of its legal processes late last year. The panel started in January 2015 with contracts running for three years plus a potential one year extension.
The full list of firms to have won places on the core FSCS legal services panel comprises: Bevan Brittan, Burges Salmon, Dentons, Slaughter and May, Herbert Smith Freehills, King & Wood Mallesons and Trowers & Hamlins.
The body has been criticised for the £30m in legal fees paid to Herbert Smith Freehills as it sought £75m in compensation from financial advisers that sold Keydata bonds, now known as death bonds, after more than 21,000 small investors lost their money when Keydata Investment Services entered administration in 2009. Financial Escape, which advised investors on Keydata, secured a 99% settlement discount with the FSCS and paid just £400 to resolve legal issues.
Funded by the Prudential Regulation Authority and the Financial Conduct Authority, the FSCS has a bumper budget of £287m in 2015/16 as it seeks compensation for misleading pensions advice and is estimating a £12m legal spend for the three-year panel.
Bevan Brittan and Burges Salmon have also been selected as the go-to law firms for low value dispute resolution services. Scottish legal services will be provided by Burness Paull and Bevan Brittan, the big winner of the FSCS panel formation, has been selected to provide employment law and ancillary legal services.
Mark Neale, FSCS chief executive, said: ‘The main criteria for choosing the successful firms were technical expertise, quality of service and value for money, and I am confident the firms we have chosen will help us to achieve all three.’
Both Akin Gump Strauss Hauer & Feld, with its newly acquired restructuring team from Bingham McCutchen having previously handled FSCS work, and Quinn Emanuel Urquhart & Sullivan which has been used in the past, missed out on the panel.
The panel process was run by procurement manager Peter Quinn, with involvement from head of legal James Darbyshire.
Darbyshire said: ‘In putting in place this panel, we are confident that we have the right firms to support FSCS in discharging its statutory functions efficiently and cost effectively in this ever-challenging regulatory landscape.’