Cashing In On New Regulatory Environments

By Tina Peng

Law360, New York (September 18, 2009) -- As the Obama administration works toward overhauling regulation of the financial and health care sectors, law firms looking to cash in need to position themselves as experts in the fields and make sure they're staffed to handle their clients' changing needs, experts say.

Firms that practice in “any area that was previously subject to any sort of federal regulation” are keeping up with developments and anticipating changes by gearing up on the regulatory side, training existing lawyers and bringing in new ones laterally, said Nancy Newkirk, a managing director in recruiting search firm Major Lindsey & Africa's Washington partner practice group.

“A firm that doesn't have a certain aspect of a practice would be looking both to recruit from other firms who do, as well as some of the key people who are in government now drafting these regulations,” she said. “Those are the people who are most intimately familiar with what the law will require.”

Pepper Hamilton LLP's financial services practice group recently hired a new partner who was a senior official at the Federal Deposit Insurance Corp., expanded the number of lawyers dealing with regulatory issues, and broadened partner-level assistance to respond to questions and growth in the area, according to partner Rick Eckman, who also is the group's chair.

“The bank regulatory agencies are very active, the SEC is very active, we're seeing more investigations and a tougher regulatory attitude, if you will, in terms of dealing with issues that the regulators are focusing on,” he said. “There's a lot more regulatory scrutiny to bank activity these days, and that's resulted in a lot more attorney focus and need of outside counsel to help our clients work through it.”

Pepper Hamilton is broadening the focus of its practice area, and it's getting younger lawyers involved in becoming up to speed on the new laws and regulations, Eckman said. In addition to its in-house training efforts, the firm has its lawyers write alerts on various developments, he said.

And if it continues to expand the practice group, the firm likely will look for mid-level associates or partner-level hires, ideally from Capitol Hill or some of the agencies most involved in the reforms, he said. Most of Pepper Hamilton's bank regulatory practice, and almost all its senior lawyers, have had Hill, bank regulatory or in-house counsel experience, he said.

“They've been involved in the industry in various ways that are not with a private law firm,” he said. “That's been very valuable experience to us.”

Until legislation is passed and regulations are adopted, the best thing firms can do is to sift through and keep up with pending measures, according to Oxford Legal Associates President Ronalyn Sisson — and after that, they have to be in a position to quickly understand the changes and “give the most appropriate or thoughtful advice to their clients,” she said.

Pepper Hamilton has held a Webinar on the Consumer Financial Protection Agency Act of 2009 and puts out alerts on various congressional proposals. It aims to get its clients thinking about what the potential changes' implications will be, even as it consults with them on a more private basis about what their needs will be, Eckman said.

In the health care arena, law firms are fielding “a lot of phone calls” as to how different reform components will affect clients and interact with existing regulations, said Kevin Cornish, a managing director with Navigant Consulting who leads the firm's health care dispute, compliance and investigation practice.

Currently, the law firms with the most market traction are those with a more direct link to and “contemporary understanding of what's happening in Congress than others,” or those with experience in similarly significant health care regulatory change, who can help clients understand the likely progression and timing of events, Cornish said.

Other firms can better gain a foothold by “putting themselves in front of the clients in very consistent ways,” he said. Webcasts, internal town hall meetings and other forms of outreach can help firms situate themselves as educators and distillers of information, and if a firm's regulatory experts become the go-to authority on understanding the “sound bite of the day,” clients will be more likely to reach out to them for other services when reform does come to fruition, he said.

Smaller firms should look to cornering their local markets and understanding how federal regulations will affect Medicare and other more regional entities, he said.

“The national health care laws affect everybody, for the most part, the same,” he said. “However, different communities are going to be affected differently.”

Cornish pointed out that reform and its corresponding new regulations are so far off that most firms and clients have made few major changes just yet.

“Most people in health care, except from whatever venues they have to affect the health care debate, are just generally asking questions to be informed about the general direction of things and how that general direction may impact their business,” he said.

But he cautioned against trying to grow a new specialty just to capitalize on the upcoming reforms.

“Firms that have very strong health care reputations, be it nationally, regionally or locally, are doing all that they can to bolster that capability as well as that market understanding,” Cornish said.

“They're not necessarily moving into areas they don't already have the capability or reputation in,” he said. “By the time you actually developed that reputation, the current opportunity would be gone, more or less.”

Still, other areas of reform conceivably could create the opportunity for new practices, Major Lindsey & Africa's Newkirk said.

So far, only a few firms work with U.S. Food and Drug Administration food regulatory issues, she said. But as discussion continues over how to track the food chain, from point of origin to labeling and sales, some of the firms Newkirk works with are thinking about growing in the field, although, given the economy and the fact that the requirements are far from going into effect, “it's really quite a speculative venture,” she said.

And in the wake of the U.S. Consumer Product Safety Commission's receiving broad new legislative authority in 2008, Newkirk helped one client bring in a senior-level hire from the CPSC to expand its practice there.

“The new requirements for inspection and testing, and what safety standards a product has to meet in order to be sold, are creating a whole new area of practice,” she said. “There have always been people in the CPSC practice, but this is a whole new avenue.”