Even with a big in-house team, you can’t expect to pivot from dealmaking to compliance to litigation to corporate work if you don’t have reliable external advisors, veteran financial services general counsel Vin Thomas says in a Troutman Pepper webcast.
“Having effective outside counsel is critical for a general counsel,” said Thomas, a Troutman Pepper attorney who worked with subprime consumer lenders for 15 years before joining the firm.
Because deals call fall apart quickly, especially as market conditions change, general counsel are under the gun to understand deal terms and risk areas without setting aside other responsibilities. That makes it imperative you have the right mix of expertise, in-house and externally, to manage competing priorities.
“Time kills deals,” said Thomas, referring to changing macroeconomic factors that neither your company nor the other party have control over. “Because of this, the documents must move quickly.”
You want your outside counsel to share your sense of urgency, he said.
“This entails … effectively managing the company's external deal counsel to keep these documents a priority,” said Thomas, who previously served as chief legal officer at CURO Financial Technologies.
Depending on the size of the business and the extent to which it’s operating in a regulated industry, the general counsel’s portfolio can be huge.
Thomas’ specialty area, consumer subprime lending, is highly regulated, so when he was at companies doing business in the space, he and his legal team were constantly working with regulators on compliance matters.
“I've had … to work through civil investigative demands and multi-month supervisory exams by the Consumer Financial Protection Bureau, Federal Trade Commission post consent orders and monitoring, state attorney general investigations and litigations, and state audits and examinations,” Thomas said. “In fact, there are certain local municipalities that also conduct branch audits and examinations.”
Given the risk of non-compliance, these regulatory responsibilities can’t be put on the back-burner when general counsel need to turn their attention to other matters.
“The GC has the pressure point of bringing in the right individuals to help navigate through all of those matters,” he said. That includes basic corporate work.
“Whether you're a private company or a public company, you have a board of directors,” he said, “and the general counsel typically serves as the corporate secretary. So, drafting bylaws or articles of incorporation for a new entity that would be transacting business in a new state or a new jurisdiction or offering a new product in an existing state or jurisdiction – these are things that are managed by the GC.”
The elephant in the room for general counsel, though, is litigation, especially for companies that operate in a highly regulated space like consumer subprime lending.
To keep the risk manageable, Thomas said, he made sure the company’s consumer disclosures are best in class and kept updated.
“It's incumbent on the general counsel and legal department at regular intervals to ensure documents and disclosures are up-to-date and in compliance with the ever-changing legal environment and regulatory environment,” he said. “Whether this means completing an internal audit, bringing in external compliance and legal counsel to perform the audit or some regular combination of both, it's a key part of mitigating litigation.”
Thomas also relied on robust consumer arbitration and class action waivers in the company’s loan applications and contracts.
“The legal validity of these provisions can oftentimes hang on just a few words,” he said. “So, it's important to have external review of these periodically by a highly specialized and competent law firm that has expertise with these provisions.”
Relying on outside counsel to maintain an aggressive review schedule isn’t cheap, but it’s a good investment, Thomas said.
“In my experience and opinion, it’s well worth it compared to the ongoing and ultimate cost of protracted consumer litigation,” he said.
In sum, even when you have a sizable in-house team, given the fast action needed during dealmaking and the simultaneous compliance and corporate responsibilities general counsel face while also trying to mitigate litigation risk, maintaining strong ties to outside expertise is key to managing it all.
“A close advisor or close advisors that can help the GC wade through these difficult decisions and judgment calls is very critical,” he said.