Capital markets

Capital markets

Michael Hossack

Allen & Overy LLP

University: University of East Anglia
Degree: Modern history

‘Capital markets’ is the term used for financial markets where debt or equity securities are traded. Capital markets lawyers work primarily with transactions involving the issue of debt or equity securities either to the public or to a group of investors. Capital markets practice is closely connected to derivatives and financial regulation.  Capital markets lawyers conduct due diligence review on the issuer of the securities, draft the prospectus and other disclosure documents describing the issuer and its securities to the potential investors, negotiate agreements between the issuer and its advisers and navigate the transaction through regulatory hurdles. London's pivotal position in the global debt and equity markets makes this a significant element of the City's legal activity.


The idea of a career in law began to take shape for Michael Hossack when he was still a history student; while the cut and thrust of the commercial world ultimately drew him to the solicitors’ side of the profession. “I was attracted to the corporate sphere by the opportunity to apply my legal knowledge in a commercially practical and constructive way,” he explains. “It interested me far more than the narrower, arguably more academic focus that working as a barrister seemed to entail.”

Michael began training at Allen & Overy (A&O) in 2013 and qualified in March 2015. “I had a very positive training contract,” he recalls. “The trainees were given a lot of freedom to pursue areas of law that interested them – the training principal and graduate recruitment team always listened to what trainees wanted and were flexible in trying to accommodate them, which I appreciated.”

It was during his training contract that Michael’s interest in capital markets emerged. “I spent my second seat in our debt capital markets team, which at A&O is called the general securities group,” he explains. “The area focuses on standalone bond issues and medium-term note programme updates and drawdowns, as well as liability management. I really enjoyed my time in the department, but another attraction of joining the capital markets practice was that A&O tops the league tables in this area. Our partners are leading experts and some, such as Geoff Fuller, have literally written the books on capital markets law and practice that are used as reference guides across the City – I wanted to work with and learn from the best.”

Early responsibility

Capital markets involves the issuing and trading of instruments such as shares and bonds. It is a particularly rich environment for trainees and junior lawyers, because many smaller transactions can be managed solo. “As a junior associate, I am often given full responsibility for drafting all the documents for a transaction, as well as reviewing in cases where the documentation is being put together by another firm,” explains Michael. “On a typical bond issue, these would include the subscription agreement, the trust deed, the agency agreement and the prospectus, as well as smaller documents such as legal opinions, board minutes and authorisations. The negotiation stage follows that, where those documents are reviewed and negotiated with the client and the other side. This may be down to A&O and how the department is organised here, but it is great to work in an area which enables so much responsibility for junior lawyers. Being trusted to manage deals gives me a great sense of achievement and purpose in my work.”

“We essentially had to figure out what the impact would be on the transaction and how to manage the situation, which had gone from being a purely financial matter to a political issue as well”

From markets to politics

The time-sensitive nature of many deals can mean late nights in the office. However, having to burn the midnight oil is usually a result of something really important – and exciting – happening, such as finding yourself caught up in Eastern European politics. “One deal that I remember particularly well concerned a standalone bond issued by the government of an Eastern European country, our client,” recalls Michael. “We were dealing with the finance ministry of that country, which was interesting in itself, especially for me as a junior lawyer. As we were planning the execution phase of the transaction one Friday evening, we received a message from the client requesting an immediate conference call, which is quite unusual for 6:00pm on a Friday, even in my line of work. We ended up holding the conference call with the country’s minister of finance and all his team at around 9:00pm, when we were informed that there had been a political crisis in the government and that there had been a significant reshuffle, with members of the opposition coming into the government. We essentially had to figure out what the impact would be on the transaction and how to manage the situation, which had gone from being a purely financial matter to a political issue as well. Such things have happened on other deals that I have worked on, too – as the name suggests, the transactions we work on in capital markets are market driven, so whatever is going on in the world at the time can affect what we are working on. It is definitely interesting to read in the press what could come up in your own work later in the day.”

Its direct influence on the wider world is a key appeal of the practice area for Michael: “I enjoy working in an area where I can really see the effects of the work that we do. Our work actually has an impact on the outside world and you can see that in the press every day.”

Shadow banking

A trend to be aware of in capital markets and the finance sector generally is the rise of so-called ‘shadow banking’, as Michael explains: “It is linked to general banking, but it also has relevance for capital markets. Shadow banking is different from the traditional banking modeled by big banks, in that borrowers bypass those banks to go directly to investors such as pension funds and hedge funds, which you wouldn’t typically think of as lenders. The normal model in debt capital markets is that companies look to raise money by issuing debt securities, which are bought by banks and then sold on to investors. What is happening now is the development of a market where companies can issue debt securities directly to investors, cutting out the banks – this is known as private placements. There is an established private placement market in the United States, but it is yet to really take off in Europe and the partner with whom I work most frequently is taking the lead in driving this forward.”

Business skills are just as important as legal knowledge in order to succeed as a capital markets lawyer. “The ability to project manage is essential, although it is not something that gets mentioned often in advice for aspiring lawyers,” explains Michael. “We are usually working on a number of deals at the same time, most of which will be cross-jurisdictional, involving various teams working in different time zones. We in the London office are usually the people coordinating the transaction between the A&O teams in other offices around the world, as well as between the client and lawyers at other firms who might be involved. The law is quite clear and settled in this area, so interpretation or clarification is rarely a material issue – often a transaction is a case of organisation, structuring and negotiation.”

Michael’s advice to anyone hoping to enter the world of commercial law is to gain as much legal work experience as possible: “Almost all law firms run vacation schemes, which are an excellent way to experience what life as a trainee is like and get your foot in the door. However, places on these schemes are very difficult to secure. I found it hard to gain experience myself, so I went out in my hometown and knocked on the doors of the local solicitors firms to ask if I might do a little work experience or shadowing. Most of them were friendly and were happy to have me around. It was a world away from what Allen & Overy does, but it was still valuable experience which really supported my future applications.”

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