Growing Together.

Welcome to Watson Brady. We are a boutique firm offering bespoke legal services to clients in the funds industry. Our focus is on developing valuable and open relationships with clients; adding value to their business is central to our firm’s proposition.

Everything we do is catered to the funds industry. The key expertise we offer in funds, corporate and operational matters has seen us recognised by Legal 500, 2017 for our work in the hedge funds area and by Best Lawyers, 2017 for our work in the private equity field.

News

  • Legal 500 Read more…
  • Changes to the definition of financial advice Read more…
  • House of Lords EU Financial Affairs Sub-Committee has commenced an inquiry into Brexit and UK financial services Read more…
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About Us

Watson Brady was established to cater to the demands of businesses in and around the funds industry. Our clients include hedge fund managers, PE fund managers, property fund managers, sovereign and institutional investors and proprietary traders. Clients are based in the US, UK, Switzerland, Australia, Russia and various parts of the Middle East. They also include law firms looking to import funds expertise for specific projects.

We advise on fund establishment and restructuring, fund operations, financial regulation, investment due diligence and custody and trading documentation.

A core part of our work is advising the client in respect of corporate, commercial and partnership matters. This includes set piece projects – such as joint ventures, mergers and start-up business arrangements – and day-to-day work around constitutional issues, commercial relationships, contract review and negotiation and corporate governance.

We are a specialist, tight-knit team, which offers maximum flexibility and is augmented by lawyers from other specialist law firms, all of whom are highly rated in their fields of expertise. We cherry pick the best and use our relationships to secure competitive terms in return for excellent and collaborative service.

We have the right breadth and depth of market experience to understand what drives a client’s requirements and to provide practical advice in relation to fund establishment and operations. We have experienced first-hand the challenges that growing businesses face. As such, our interests and experience are aligned with those of our clients.

Every instruction we take on starts with a briefing to identify our client’s real needs and how we might help in achieving them. From then on we are practical, economical, timely and straightforward.

Our Team

  • mark-brady
    mark-brady

    Mark Brady

    Partner

    Mark Brady has been specialising in investment funds work for the last sixteen years, having spent the previous decade working as a corporate lawyer in London and south-east Asia.  In that time he has represented some of the foremost fund management businesses in the UK and internationally. He is one of London’s most experienced “buy-side” funds lawyers.

    Mark’s full-time move into the funds area started when he joined Dechert in 1999 and included his latest role as a partner specialising in alternative investment funds at Eversheds. Commercial experience includes a 6 months stint as acting-General Counsel of Threadneedle, while also holding down a day job as a law firm partner.

    Mark is featured in Legal 500, 2017 as a recommended hedge fund lawyer and in Best Lawyers, 2017 as a leading private equity lawyer.

    Mark Brady is quick but meticulous, has come across most problems before and knows the way to get the best commercial outcome. Legal 500, 2014

    Excellent service with quick response times.  - Legal 500, 2017

    Mark Brady impresses with depth of industry knowledge and experience - his input speeds up projects. - Legal 500, 2017

    t: +44 207 099 5937e: markbrady@watsonbrady.com

    Mark Brady

  • mark-brady
    mark-brady

    Jonathan Crawford

    Consultant

    Jonathan is a corporate and commercial lawyer with over 17 years’ experience of executing projects and transactions both as a law firm partner and as a consultant to financial services firms, such as Invesco and Citibank. He is a specialist in domestic and cross-border mergers, acquisitions, joint ventures, restructurings and other strategic projects. An agile and efficient negotiator and co-ordinator of internal, cross-department input and other external advisers, Jonathan’s experienced, sensible and enthusiastic approach supports the delivery of successful outcomes for his clients.

    t: +44 207 099 5937e: jcrawford@watsonbrady.com

    Jonathan Crawford

Our Expertise

While we often act on discreet transactional and advisory projects, the mainstay of our work is characterised by ongoing and collaborative relationships with our clients which sees us handling an array of day-to-day issues. This allows us to gain an understanding of our client's business, ambitions and challenges, which in turn allows us to focus intensely on finding tailored solutions in an efficient way.

  • Fund establishment

    Fund establishment

    Fund establishment

    We generally take the role of lead lawyers in setting up and restructuring funds....

    Read more…

    Fund establishment

    We generally take the role of lead lawyers in setting up and restructuring funds. This will usually entail scoping the project, preparing or amending the offering memorandum and related constitutional documents and material contracts, liaising with other professionals and overseeing closings.

    We will meet with a client at the outset to scope a project and agree on an allocation of responsibilities, desired timetable, chronology of events and fees involved. At this stage, we will normally touch on issues of marketing, regulatory questions, fund domicile, liquidity terms, fees and tax advice required.

  • Fund operations

    Fund operations

    Fund operations

    Fund managers and others have the same broad legal considerations as most other b...

    Read more…

    Fund operations

    Fund managers and others have the same broad legal considerations as most other businesses. They also have specific industry issues and we advise on a range of these considerations and issues, such as:

    • custody and trading documentation;
    • commercial contracts;
    • employment and consultancy arrangements;
    • arrangements with service providers; for example, administrators, prime brokers and depositories;
    • restructuring and business expansion; and
    • investment due diligence.
  • Regulation

    Regulation

    Regulation

    The issue of law and regulation in the funds area did not stop with the implementation of AIMFD, Dodd-Frank a...

    Read more…

    Regulation

    The issue of law and regulation in the funds area did not stop with the implementation of AIMFD, Dodd-Frank and EMIR. We are continuously seeing more regulation being implemented, including MIFIR, CRD IV and MIFID II, as well as a more assertive approach from the financial services regulators.  We can advise on these matters as well as advise on FCA compliance, approved persons and authorisation.

  • Corporate / partnership matters

    Corporate / partnership matters

    Corporate / partnership matters

    The funds industry has its fair share of corporate and partnership issues to deal...

    Read more…

    Corporate / partnership matters

    The funds industry has its fair share of corporate and partnership issues to deal with.  Our corporate/partnership deals experience and our funds specialisation leave us well positioned to meet that demand.

    Our work includes advising on set-piece projects – such as fundraisings, joint ventures, mergers, and start-up business arrangements – and day-to-day work around shareholders’ agreements, LLP Agreements, articles of association, partnership matters, contract review and negotiation and corporate governance.

Testimonials

“I would say that Watson Brady is first class when it comes to hedge fund and private equity work – both establishment work and ongoing regulatory and advisory support. However, I do not restrict t...

COO, hedge fund management business
COO

“Tyler Capital has enjoyed a five-year relationship with Watson Brady. It has been of such success, such depth and precision, and of such tremendous value that our Tyler Leadership team consider Ma...

Michael Bushore
CEO, Tyler Capital

“As an entrepreneur and financier, I have been using Watson Brady’s services since the beginning of this year. The Watson Brady team have been extremely helpful in setting up all the needed legal a...

Fabio Agosta
CEO, Trinity Investment Partners Limited

“Watson Brady represented us in the sale of our business, 2CG Senhouse Investments to Waverton Investment Management. The transaction spanned a number of jurisdictions and was not straightforward. ...

Charles Scott Plummer
Head of Funds,Waverton Investment Management Ltd

“Having used Watson Brady for assistance in the negotiation of ISDA Documentation, EMIR Agreements and Custody Documentation, I have no hesitation in recommending them. Their pragmatic and straight...

Treasurer of a large development finance group
Treasurer

News

11th October 2017

Legal 500

We have been included again in our industry's "best of" directory, the Legal 500.  When researchers spoke to our clients, they highlighted our expe...

10th March 2017

Changes to the definition of financial advice

Recently, HM Treasury published its response to its consultation on amending the definition of “advising on investments” under section 53 of the FS...

15th September 2016

House of Lords EU Financial Affairs Sub-Committee has commenced an inquiry into Brexit and UK financial services

The House of Lords’ EU Financial Affairs Sub-Committee has commenced an inquiry into Brexit and financial services in the UK.

The EU Financial Aff...

21st June 2016

Overseas Territories and Crown Dependencies to establish registers/databases of beneficial ownership

Eight Overseas Territories and Crown Dependencies (Jersey, the Isle of Man, Anguilla, Bermuda, Gibraltar, the British Virgin Islands, the Cayman Is...

15th June 2016

MiFID II Delayed until January 2018

The European Parliament has adopted the European Commission’s proposal to delay the implementation date of MiFID II and MiFIR, by one year, to 3 Ja...

14th June 2016

Introduction of the Private Fund Limited Partnership

The UK government has recently confirmed that it will go ahead with the introduction of a designation of Limited Partnerships (LP), namely, the Pri...

2nd June 2016

Court of Appeal considers the effectiveness of variation clauses

In the recent case of Globe Motors, Inc & Ors v TRW Lucas Varity Electric Steering Ltd & Anor [2016] EWCA Civ 396 (Globe Motors), the Court of Appe...

27th May 2016

ESMA issues draft RTS on indirect clearing under MiFIR/EMIR

The European Market Infrastructure Regulation (EMIR) introduced an obligation on certain counterparties to clear over-the-counter derivatives.  The...

16th March 2016

ILPA releases new Fee Reporting Template

The Institutional Limited Partners Association (ILPA) released a new Fee Reporting Template (Template) and related guidance on January 29, 2016. Th...

19th January 2016

ESMA has published a letter from the EC regarding AIFMD passport

The European Commission (EC) has asked European Securities and Markets Authority (ESMA), in a letter published by ESMA today, to complete its asses...

12th November 2015

Supreme Court reviews rules on penalties

On 4 November 2015, the Supreme Court gave its judgement on two cases which relate to the doctrine of penalty clauses.

Traditionally, the enforcea...

14th October 2015

ESMA to consider extending AIFMD passport

The European Securities and Market Authority (ESMA) are already assessing whether they should extend the Alternative Investment Fund Managers Direc...

6th October 2015

Legal 500

We are delighted that our work in the hedge funds space has been recognised again by Legal 500, especially so as Laura Anderson is listed this year...

4th October 2015

Ban on corporate directors delayed

The government has recently announced that the ban on corporate directors, originally due to come in effect in October 2015, under the Small Busine...

17th August 2015

SEC concern over hidden fees in private equity funds

On 29 June, 2015, the Securities and Exchange Commission (SEC)  announced that KKR & Co LP had agreed to pay approximately $30 million (including a...

18th February 2015

CIS case goes to appeal

A court ruling that a so-called “land banking” scheme involved the establishment of a series of collective investment schemes (CIS) is up for revie...

18th February 2015

Simplifying the rules on company names

From 31 January, 2015, new regulations came into force which seek to consolidate and amend the existing rules to reduce the restrictions faced by c...

Vacancies
Associate

We are looking for a corporate lawyer with 2+ pqe.  The work is broad but consists mainly of corporate work for financial services clients and involves supporting clients in everything that they do.

You will be UK qualified and will have a strong grounding in corporate/commercial work.  Experience of financial services regulatory issues, fund formation and fund management operations would be a bonus, although by joining our team you would soon gain this.  Crucially, you will be capable of rising to the challenge of delivering technically excellent and commercially rational advice to a demanding and inspiring group of clients.

You will want to join a small team to undertake a real variety of quality work for clients who will treat you as a close adviser.  You will be excited to work within an ethos that values hard work above politics and flexibility above routine.

The successful candidate will become a highly visible member of the team and will help to define its direction.

If you would like to chat before submitting an application, call Mark Brady on 020 7099 5936.

Apply via email here

Office Administrator

We are looking for help from an experienced secretary/administrator.  This will be a highly organised person with excellent IT skills, fast and accurate typing proficiency, experience of working on the creation and amendment of long and sometimes complex legal documents and all the experience required to manage our small office.

The chosen candidate will have primary responsibility for ensuring that our office works as efficiently as possible and this will extend to organising our VAT returns, procuring PI cover and dealing with clients and various agents and suppliers on our behalf.  A willingness to “muck in” is a must as is a positive and bright outlook!

Part-time applicants are welcome.

Apply via email here

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Legal 500

We have been included again in our industry's "best of" directory, the Legal 500.  When researchers spoke to our clients, they highlighted our experience and technical knowledge.  Just as importantly, they spoke of our high service levels and our quick response times.  One even suggested that our involvement helped to speed up projects. 


It is great to know that our clients think well of us.  They are an inspiring group of people and we love working with them so the feeling is entirely mutual.  

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Changes to the definition of financial advice

Recently, HM Treasury published its response to its consultation on amending the definition of “advising on investments” under section 53 of the FSMA (Regulated Activities) Order 2001 (RAO) so that it aligned with the definition of “investment advice” under MiFID.


The RAO is the UK legislation which sets out the regulated activities relating to financial services.  MiFID is the equivalent EU directive.  Although the UK is compliant with MiFID, the activity of providing financial advice under RAO is wider than the equivalent activity under MiFID.


Currently, under RAO, the regulated activity of “advising on investments” is the activity of advising on the merits of the investor, or potential investor:



  1. buying, selling, subscribing for or underwriting a specified investment; or

  2. exercising any right conferred by such an investment to buy, sell, subscribe for or underwrite such an investment.


Under MiFID, the activity of providing “investment advice” is the provision of “personal recommendations” to a client, either upon the client’s request or at the adviser’s initiative, in respect of one or more transactions relating to MiFID financial instruments.


HM Treasury released a consultation on 20 September, 2016, which asked whether the activity of advising on investments under RAO should be amended to mirror the activity of providing investment advice under MiFID.  On 27 February, 2017, HM Treasury concluded that it will lay before Parliament regulations to amend the definition of “advising on investments” under RAO so that:



This means that unregulated firms will be in breach of RAO if they advise on the merits of an investment, irrespective as to whether or not a personal recommendation has been made, unless an exemption applies. Regulated firms will be exempt from requiring specific authorisation to advise on investments, except where they are making a personal recommendation.


The purpose of this change is to reduce the risk of a regulated firm, which does not hold authorisation to advise on investments, from straying into that activity.  This followed evidence which showed that regulated firms were not sure at what point guidance became advice and so those firms gave limited guidance to their clients.  The government were concerned that this cautious approach created a risk that consumers would make potentially poor investment decisions due to a lack of guidance.


The text of HM Treasury response to its consultation can be found here.

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House of Lords EU Financial Affairs Sub-Committee has commenced an inquiry into Brexit and UK financial services

The House of Lords’ EU Financial Affairs Sub-Committee has commenced an inquiry into Brexit and financial services in the UK.


The EU Financial Affairs Sub-Committee is investigating the implications of Brexit for the UK financial services industry and, in particular, the risks and opportunities presented by various types of future relationship between the UK and the EU.


This includes considering the value of the financial passport for the financial services industry and assessing alternative options.


The Sub-Committee began its inquiry with two evidence sessions on 7 September, 2016, and asked questions on the following areas:



The next evidence session will be held on 12 October, 2016.

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Overseas Territories and Crown Dependencies to establish registers/databases of beneficial ownership

Eight Overseas Territories and Crown Dependencies (Jersey, the Isle of Man, Anguilla, Bermuda, Gibraltar, the British Virgin Islands, the Cayman Islands and the Turks and the Caicos Islands) will be maintaining registers or databases which record the beneficial ownership of corporates and legal entities in their respective jurisdiction.  These will be similar to the central register of persons with significant control (PSC) maintained by Companies House in the UK.


These Overseas Territories and Crown Dependencies have each agreed with the UK Government that they will share the information in its respective register/database with the UK Government and the UK Government has agreed that it will share PSC information with each Overseas Territory and Crown Dependency.


The definition of “beneficial owner” used in the Exchange of Notes between the UK Government and each of the eight Overseas Territories and Crown Dependencies, derives from Article 3(6) of the EU’s Fourth Anti-Money Laundering Directive.  This definition is similar to the definition of PSC in the UK.


The arrangements are to come into effect no later than 30 June, 2017.


The UK and Guernsey are still in discussion regarding the sharing and exchange of such information and the establishment of a register or database of beneficial ownership in Guernsey.  Guernsey’s Chief Minister has confirmed that Guernsey will not be introducing a publicly available register of beneficial ownership due to a concern that the information will not be secure.


Further information and the Exchange of Notes between the UK Government and the Overseas Territories and Crown Dependencies can be found here.

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MiFID II Delayed until January 2018

The European Parliament has adopted the European Commission’s proposal to delay the implementation date of MiFID II and MiFIR, by one year, to 3 January 2018.


Markus Ferber (EPP), rapporteur for the legislation, blamed ESMA and the European Commission for the delay stating “It is clearly ESMA and especially the Commission who are to blame for this delay as they have been wasting a lot of time when preparing the MiFID II implementing legislation. Due to this dawdling, we are almost a year behind schedule now…”.


A copy of the European Parliament’s press release in the matter can be found here.

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Introduction of the Private Fund Limited Partnership

The UK government has recently confirmed that it will go ahead with the introduction of a designation of Limited Partnerships (LP), namely, the Private Fund Limited Partnership (PFLP).  The government expects that the proposed PFLP regime will be operational within one year.


The purpose of introducing the PFLP is to remove unnecessary legal complexity and administrative burdens on LPs in order to ensure that the UK LP remains attractive to the private equity and venture capital funds industry.


Designation as a PFLP


A PFLP is an LP which is collective investment scheme as defined under section 235 of the Financial Markets and Services Act 2000 (FSMA).  This includes LPs that would be collective investments schemes had it not been for an exception pursuant to section 235(5) FSMA.  Upon registration (or redesignation from an LP to a PFLP) the general partner will need to confirm that the LP fulfils the requirements to qualify as a PFLP.


White List


Currently, a limited partner of an LP retains limited liability so long as it does not participate in the management of the LP’s business.  If a limited partner loses limited liability, it will be liable for all the debts and obligations of the LP incurred as though it were a general partner.  There is little guidance as to what constitutes participation in the management of an LP.  Although an investor is generally passive, it may be involved in monitoring and assessing the performance of the fund itself and its investments by a having a seat on an advisory board.


The government proposes to amend the Limited Partnership Act 1907 to include a list of actions that a Limited Partner in a PFLP can take without losing limited liability.  Currently, it is proposed that the list of actions will include, the following:



  1. taking part in a decision about whether to allow:

    •    a type of investment or a particular investment by the LP;

    •    the participation by the limited partner in a particular investment by the LP;

    •    the incurring, extension or discharge of debt by the LP; and

    •    the creation, extension or discharge of any other obligation owed by the LP;



  2. taking part in a decision about whether the general nature of the LP’s business should change;

  3. taking part in a decision about whether to dispose of the partnership business or to acquire another business;

  4. discussing the prospects of the LP’s business;

  5. consulting or advising a general partner, or the general partners, or any person appointed to manage the LP, about the affairs of the LP or about its accounts;

  6. appointing or nominating a person to represent the limited partner on a committee or revoking such an appointment or nomination;

  7. taking part in a decision regarding changes in the persons responsible for the day to-day management of the LP; and

  8. taking part in a decision authorising an action that the general partner proposes to take.



Capital Contributions


It will not be a requirement for limited partners in a PFLP to make a capital contribution but they will have the option to do so. Furthermore, capital which is contributed to a PFLP will be withdrawable without the limited partner being liable for the amount withdrawn and there will be no requirement to declare capital contributions to the registrar.


However, the government has decided that the proposals regarding capital contribution will not apply to LPs which were established prior to the draft legislation coming into force and subsequently convert into PFLPs.


Winding up


Where the general partner has been removed and the limited partners wish to wind-up the LP, they will no longer need to apply for a court order to do so and can, instead, appoint a third party to wind up the LP.


Gazette Notice


A PFLP will not be required to advertise in the Gazette when there is a transfer of a limited partner’s interest.  The requirement to advertise in the Gazette where the General Partner becomes a limited partner will remain.


Exemption from duties


Under current legislation, a limited partner is subject to certain duties which apply to partners generally.  The government considers that some of these are inconsistent with the position of a largely passive investor who may have investments in a number of funds, some of which may fund competing businesses.


Therefore, it is proposed that limited partners in a PFLP will be exempt from the duties in section 28 of the Partnership Act 1890 (duty to render accounts and information to other partners) and section 30 of that Act (duty to account for profits made in competing businesses).


The draft legislation can be found here.


The government’s consultation and responses can be found here and here

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Court of Appeal considers the effectiveness of variation clauses

In the recent case of Globe Motors, Inc & Ors v TRW Lucas Varity Electric Steering Ltd & Anor [2016] EWCA Civ 396 (Globe Motors), the Court of Appeal considered whether the following clause would prevent an oral variation to the contract:


“This Agreement … can only be amended by a written document which (i) specifically refers to the provision of this Agreement to be amended and (ii) is signed by both Parties”.


Clauses like the one above are typical “boilerplate” clauses often included in contracts.  Historically, the position on whether these clauses would prevent the parties agreeing to a variation by any other means, such as orally or by performance, is not clear as there is conflicting case law.


In Globe Motors, Lord Justice Beatson considered the principles behind the defendant’s argument that such a clause should be effective to prevent oral variation or variation by performance, namely that such clauses avoid false and frivolous claims of an oral variation and provide a high evidential standard.  They also avoid unintentional variations.


Ultimately, the court concluded in favour of the principle regarding the freedom of parties “to agree whatever terms they choose to undertake, and can do so in a document, by word of mouth or by conduct” (paragraph 100 of Globe Motors).  The consequence is that, even where the parties have agreed that variations may only be made in writing, the parties will not be prevented from later creating a new contract which varies the original contract by oral agreement or by performance.


As to whether oral variations could lead to false claims of a variation, Lord Justice Beatson referred to previous case law that indicated that the purpose of an ‘anti-oral variation clause’ is not to prevent the recognition of oral variations but only to prevent “casual and unfounded allegations” of variation (paragraph 108 of Globe Motors).  In addition, whether there has been an oral variation is a question of fact and strong evidence would be required to show that there had been a variation.  It will still need to be shown that both parties intended to vary their legal relations.


The Court of Appeal’s conclusion is not binding precedent on this issue as it is “obiter dictum”. “Obiter dictum” is an expression of opinion which is not essential to the judgment and is not binding on future courts.  However, Lord Justice Beaston decided to analyse the effectiveness of such clauses as there is conflicting case law on the matter and a full argument was before the court.  The two other judges agreed with the analysis.  Although not binding, obiter dictum tends to be persuasive on future courts.


A copy of the judgment can be found here.

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ESMA issues draft RTS on indirect clearing under MiFIR/EMIR

The European Market Infrastructure Regulation (EMIR) introduced an obligation on certain counterparties to clear over-the-counter derivatives.  The Markets in Financial Instruments Regulation (MiFIR) extended the scope of the clearing obligation to all derivative transactions transacted on a regulated market.  Counterparties which are subject to the clearing obligation will clear their derivatives transactions by becoming a clearing member of a Central Counter Party, by becoming a client of a clearing member or by establishing an indirect clearing arrangement with a clearing member.


On 26 May, 2016, the European Securities and Markets Authority (ESMA) issued two regulatory technical standards (RTS)on indirect cleaning under EMIR and MiFIR.


ESMA has sent the draft RTS for endorsement to the European Commission which has three months to accept or reject them. This is followed by a non-objection period by the European Parliament and Council.

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ILPA releases new Fee Reporting Template

The Institutional Limited Partners Association (ILPA) released a new Fee Reporting Template (Template) and related guidance on January 29, 2016. The Template is one part of the ILPA’s Fee Transparency Initiative, which aims to create improved uniform standards for fee reporting and compliance among investors, fund managers and their advisers. It was developed through a process of consultation with more than 120 individuals and organisations, including nearly 50 Limited Partner and 25 General Partner entities.


The Template expands upon the ILPA Capital Account Statement, and seeks to provide Limited Partners additional detail on fees, expenses, and incentive allocations for General Partners in relation any given fund. According to ILPA, the Template is intended to benefit LPs by providing enhanced ability to monitor and analyse the costs of involvement in a particular fund to aid internal decision-making, and to benefit GPs by reducing the compliance burden by using a standardised template format for reporting.


In practice, the ILPA recommends that where the Template is adopted it should form part of a Fund’s standard financial disclosures and ideally on a quarterly basis. The two standardised levels of reporting are designed to be tailored according to the context of a particular fund and the LP organisation’s preferred level of detail, while offering clarity by establishing common definitions. The ILPA guidance outlines in detail several considerations for LPs and GPs to determine how they can utilise the Template most effectively for their context.


To date, over 45 entities have publicly endorsed the Template, including: 36 LP organisations, two GP organisations, and eight Fund of Funds, Consultants and other organisations.

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ESMA has published a letter from the EC regarding AIFMD passport

The European Commission (EC) has asked European Securities and Markets Authority (ESMA), in a letter published by ESMA today, to complete its assessment on whether the Alternative Investment Fund Managers Directive (AIFMD) passport should apply to non-EU Alternative Investment Fund Managers (AIFMs) and Alternative Investment Funds (AIFs) in the regimes of the USA, Hong Kong, Singapore, Japan, Canada, Isle of Man, Cayman Islands, Bermuda and Australia by 30 June, 2016.


AIFMD created an EU-wide passport for EU AIFMs to market and manage EU AIFs across all Member States. Currently, non-EU AIFMs can market AIFs to EU investors only where permitted by applicable National Private Placement Regimes (NPPRs) and subject to compliance with certain AIFMD disclosure and transparency obligations.


The EC agrees with ESMA’s suggestion that it produce another opinion on the functioning of the AIFMD passport and NPPRs once the AIFMD has been fully transposed in all the EU.

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Supreme Court reviews rules on penalties

On 4 November 2015, the Supreme Court gave its judgement on two cases which relate to the doctrine of penalty clauses.


Traditionally, the enforceability of such clauses was determined on whether the clause reflected the innocent party’s genuine pre-estimate of loss likely to be suffered in the event of a breach of contract. If the pre-estimate was not genuine, in the case of it being either extravagant or for the purpose to deter the other party from breaching a contract, it would be considered penal. Consequently, in accordance with a long established English common law rule, as a penalty, it would ultimately be unenforceable.


However, the Supreme Court recognised that it was time for the doctrine of penalties to be reconsidered in the context of the modern world and did so in the appeals for Cavendish Square Holding BV v Talal El Makdessi and ParkingEye Ltd v Beavis.


In respect to the first appeal, Cavendish Square Holding BV v Talal El Makdessi, the issue was considered in respect of a contract between two businesses. Makdessi agreed to sell Cavendish a controlling stake in the holding company of the largest Middle-Eastern advertising and marketing communications group. However, the agreement contained a restrictive covenant in favour of Cavendish that, if breached, Cavendish did not have to pay the final two remaining installments of the purchase price and Cavendish could also require Makdessi to sell his remaining shares at a lower price based on net asset value.


Makdessi, having admitted to breaching the covenant, argued that the contractual right for Cavendish to withhold installments and acquire shares was a penalty and unenforceable.


Nevertheless, the Supreme Court concluded that neither were unenforceable penalty clauses. The clauses in question were in fact a price adjustment clause, rather than a penalty clause, and Cavendish had a legitimate interest in Makdessi upholding the restrictive covenants (being to safeguard and protect the goodwill of the business).  Additionally, the Supreme Court found logic in the reduced price that Cavendish would pay for the acquisition of the rest of the shares due to the risk that the goodwill of the business may be lost.


The second appeal, ParkingEye Ltd v Beavis, raises the issue of the penalty doctrine on a consumer level. Beavis’ overstay at a carpark managed by ParkingEye resulted in a fine of £85. The parking limit enforced by ParkingEye was a maximum of two hours, with no cost. In response, Mr Beavis argued that the parking charge was a penalty and thus unenforceable, particularly as ParkingEye was not liable to suffer a financial loss as a result of overstaying motorists.


The Supreme Court’s conclusion was that the charge was not a penalty as there was a legitimate interest for charging overstaying motorists which extended beyond merely a recovery of loss, such as for the efficient management of customer parking, and due to the charge being neither extravagant nor unconscionable.


To conclude, the UK Supreme Court has decided that the rule that a penalty is unenforceable will not be abolished in England and Wales. The penal character of a clause now depends on its purpose, taking in account the innocent party’s legitimate interest, extending beyond the desire to recover loss, and its extravagance.  Therefore, there is no longer be a sole focus on whether the provision is a genuine pre-estimate of loss but a focus on whether the provision is seeking to protect legitimate commercial interests considering the wider commercial context of the contract (provided that the amount is not extravagant or unconscionable).

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ESMA to consider extending AIFMD passport

The European Securities and Market Authority (ESMA) are already assessing whether they should extend the Alternative Investment Fund Managers Directive (AIFMD) marketing passport to Hong Kong, Singapore and the US. On 13 October, 2015, ESMA announced that it will start to assess whether the AIFMD marketing passport should be extended to Australia, Canada, Japan, the Cayman Islands, the Isle of Man and Bermuda. They have not given any indication as to when they expect to come to a conclusion on these assessments.

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Legal 500

We are delighted that our work in the hedge funds space has been recognised again by Legal 500, especially so as Laura Anderson is listed this year for the first time.  Congratulations, Laura! Thanks to our clients and friends for their amazing support.

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Ban on corporate directors delayed

The government has recently announced that the ban on corporate directors, originally due to come in effect in October 2015, under the Small Business, Enterprise and Employment Act 2015 (SBEEA) has been delayed. They expect to implement this measure in October 2016.


The purpose of the SBEEA is to increase transparency of the management and control of a company.  It will no longer be possible to use one company as a director of another company unless an exception applies. These exceptions will also be subject to separate regulation. The SBEEA will offer a one year transitional period for companies with existing corporate directors. From there after, any remaining corporate directors will cease to be directors.


Other measures introduced by the SBEEA are as follows:


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SEC concern over hidden fees in private equity funds

On 29 June, 2015, the Securities and Exchange Commission (SEC)  announced that KKR & Co LP had agreed to pay approximately $30 million (including a $10 million penalty) to settle charges that it had breached its fiduciary duty to the limited partners of its flagship private equity fund by misallocating over $17 million in “broken deal” expenses to them.  This was the first enforcement action by the SEC of its kind and follows an announcement by the SEC in May, 2015, that it will be imposing more fines and enforcement actions against the private equity industry for overcharging investors for fees and expenses.


The SEC’s concern is that the investors in private equity funds are not being properly informed about the fees and expenses that are being charged as well as private equity funds over-charging their investors.  In their announcement in May, 2015, the SEC said that one of the most common and often cited practices is where expenses are shifted “away from parallel funds created for insiders, friends, family, and preferred investors to the main co-mingled, flagship vehicles”.


This concern is shared by 11 state treasurers, the New York state and New York City comptrollers who, collectively on 21 July, 2015, sent a letter to the SEC asking for greater transparency and more frequent disclosures by private equity funds.


A copy of the letter can be found here.

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CIS case goes to appeal

A court ruling that a so-called “land banking” scheme involved the establishment of a series of collective investment schemes (CIS) is up for review after the UK Supreme Court granted leave to appeal from the Court of Appeal’s decision in Asset Land Investment plc v Financial Conduct Authority (FCA) [2014] EWCA Civ 435.


Asset Land had been making cold-calls to potential investors (most of whom were unsophisticated) during which they were offered plots of land. The investors were informed that planning permission would be sought for the sites, which would then be sold off to developers at a profit. After payment of the purchase price, investors were sent the contract of sale, which contained terms to the effect that: (1) the investors confirmed that there had been no representations made by the seller, and (2) the seller was not obliged to apply for planning permission for the site of which the plot formed a part.


A claim was brought by the Financial Conduct Authority, formerly the Financial Services Authority (FCA). The FCA alleged that the so-called “land banking” schemes established and operated by Asset Land were unauthorised CIS within the meaning of section 235 of the Financial Services and Markets Act 2000 (FSMA).


A CIS is defined in section 235 of FSMA as an arrangement that enables a number of individuals to pool their assets with a view to the investors sharing in the profits or income from the purchase, holding, management or disposal of the assets or sums paid out of such profits or income. To be a CIS, investors in the arrangement must not have day to day control over the management of the assets.


The Court of Appeal’s decision was particularly interesting due to its focus on the meaning of “arrangements” and “management” under section 235 of FSMA.


As regards “Arrangements“:



As regards “Management“:



The case highlights that parties wishing to avoid establishing a CIS must ensure that their statements cannot be construed as indicating the establishment of arrangements as described in section 235 of FSMA. Parties should also note that where legal agreements provide for investors to have day-to-day control of the management, in order to avoid being a CIS, those overseeing the arrangements will have to see that the investors also exercise such control in practice.

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Simplifying the rules on company names

From 31 January, 2015, new regulations came into force which seek to consolidate and amend the existing rules to reduce the restrictions faced by companies when choosing a name. The new regulations reduce the list of sensitive words and expressions that require prior approval. The words “National”, “European”, “Group”, “Holding”, “International” and “United Kingdom” are no longer sensitive words. This amendment also applies to business names – i.e. “trading as” names.

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“I would say that Watson Brady is first class when it comes to hedge fund and private equity work – both establishment work and ongoing regulatory and advisory support. However, I do not restrict that to the fund work itself, since I think one of the ways that Watson Brady adds value is in the advice to the manager about the structuring and arrangements for the manager. Most larger law firms are not proficient at this work since they often struggle with the emotional intelligence required to find outcomes that work for the personalities involved in running these businesses. So this would be a USP of Watson Brady.


Mark is excellent in this field and it is partly because he has got great experience, but it’s also because he is a hands-on partner and is able to help find good outcomes. That personal touch and EQ beyond lawyering is missing at many larger firms. 


I would highly recommend Watson Brady for anyone running an investment management business. My experience is that we always receive very practical advice and support, often with suggestions for solutions that we hadn’t considered, and the firm is good value for money.”

COO, hedge fund management business
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“Tyler Capital has enjoyed a five-year relationship with Watson Brady. It has been of such success, such depth and precision, and of such tremendous value that our Tyler Leadership team consider Mark Brady as our ‘synthetic’ general counsel. Mark’s dedication to value creation is manifest in not just providing an effective suite of legal solutions to our varied corporate needs – ranging from corporate structuring, a variety of vendor/personal/and corporate contracts, partnership deeds, to name a few – but also working with our organisation to understand our strategic aspirations so that he can create value in its pursuit. This dedication to value is complemented by a first-class mind, a man of admirable integrity and a capacity to solve complex problems, fast.


Under Mark’s leadership, Watson Brady has flourished. 


In effect, Watson Brady is the first call we make when (i) thinking out loud, and in need of legal perspective, (ii) considering any legal action of any sort, whether they provide the service or source it on our behalf, and (iii) any contract or corporate work is required by our firm, to optimise our performance.


Their domain expertise in the trading and hedge fund world positions them to understand our needs and expectations and they possess the required intellectual discipline to offer strategic service to a cognitively capable team of high performing individuals.”

Michael Bushore
CEO, Tyler Capital

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“As an entrepreneur and financier, I have been using Watson Brady’s services since the beginning of this year. The Watson Brady team have been extremely helpful in setting up all the needed legal and regulatory framework for my ventures to take off. They are very professional, with an impeccable attitude and client focus, efficient, and timely responsive. The impression they give is that they consider clients as partners, rather than just clients. The right legal partner to have.”

Fabio Agosta
CEO, Trinity Investment Partners Limited

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“Watson Brady represented us in the sale of our business, 2CG Senhouse Investments to Waverton Investment Management. The transaction spanned a number of jurisdictions and was not straightforward. As a team they were accessible, proactive and always commercial in their dealings. I cannot recommend the firm highly enough.”

Charles Scott Plummer
Head of Funds,Waverton Investment Management Ltd

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“Having used Watson Brady for assistance in the negotiation of ISDA Documentation, EMIR Agreements and Custody Documentation, I have no hesitation in recommending them. Their pragmatic and straight forward approach is refreshing.


The knowledge within the team of the rapidly changing legal and regulatory landscape, as it applies to the corporate treasury and banking environment, is invaluable. They are our first port of call when it comes to ensuring we are complying with the current regulations.”

Treasurer of a large development finance group
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