Financial Markets and the Ethics of Legal Practice

Financial Markets and the Ethics of Legal Practice studies the opaque and poorly understood world of Big Law, and its impact on global financial markets. Lawyers at major corporate law firms wield immense influence on the contractual terms of multibillion dollar international financial market transactions. These terms govern the allocation and pricing of risk between market participants, and as such, ethical lapses by these lawyers have significant consequences for the legal profession and society at large. Relying on extensive interviews with senior lawyers working in major international law firms, this book sets out to explore what corporate lawyers do, why they do it, and the broader implications of their practice. Through detailed examples of lawyer-driven evolution of contractual terms transaction structures, this book investigates a significant field of international law firm practice, leveraged finance. Case studies include 'add backs' in financial covenants, and defects in typical intercreditor agreements such as the controversial 'trap door' and similar mechanisms first deployed in the restructuring of the US retailer, J Crew. Clark examines the adverse consequences of these findings from the lens of professional ethics standards, the allocation of risk in transaction structure and terms, the reduced range of restructuring options for lenders in the event of borrower financial distress, as well as potential wider economic effects. Written by a legal scholar, and former long-serving partner at a major international law firm, this book offers an empirically rich insider perspective into corporate law practice.