London Fintech Podcast

LFP033 – A Deep Dive into Legal Risks in Fintech with Jon Segal Partner at Fox Williams


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In a world where Fintechs are on a rapid startup-scaleup-mature company growth curve how does legal risk look? In a totally new scene how can we know how well legal structures may, or may not survive events that have never happened?
I am delighted to be able to be joined today to discuss these issues and more by one of the City's most prominent Fintech lawyers Jon Segal Partner who heads the Fintech practice at City law firm Fox Williams.
“Tech debt” is a well-known phenomenon in the startup/VC world. In essence you start your business with a spreadsheet, then need to upgrade to an access database, then SQL etc etc. The main point being that unless you are careful you are always in tech-catch-up mode.
In a recent article for AltFi I extended the concept to “Risk Debt” … you do what you have to do but in the exponential growth phase from startup to scaleup to mature company you are once again always playing catch-up.
One of the categories of Risk Debt that is so important it deserves a show in its own right is Legal Debt. Once again you start with some simple dos you downloaded from the net and carry on. Once again you are playing catch-up. Once again you are playing with fire hoping that you don’t fall through the tech/risk/legal holes.
An additional important angle is that in a new sector (a rarity in itself) one never knows how good a legal structure or document is until it is tested in court. Before then its just a bunch of words and some fees.
So for example how well will platforms hand over their agency responsibilities in a case of platform failure?
How can we have solid risk and legal controls without stifling innovation?
The advantages of having experience in both existing FS as well as the new Fintech world.
What can #newFS learn from #oldFS in this context?
What can #oldFS learn from #newFS?
Which types of startups run most legal risk and which types least?  How does the background of the founders tend to affect this?
What is regulatory debt?
Is regulation light-touch after all? Can we rely on regulators to spot tomorrow's problems?
The challenge of getting innovative structures through regulations designed around "the new square peg".
How regulation distracts attention from managing the actual full waterfront of all risks.
Are provision funds funds? How are they structured? The lack of independent assessment of the size of a provision fund.
At a governance level the lack of independent non-executive risk directors and risk committees of the Board.
Will it be left to a workout crew from the Big 4 to plough through a pile of legal agreements, undocumented passwords etc desperately trying to de-anonymise contracts between the p and the p in p2p?
Will it be a tangle of spaghetti like Shearson which was so stressful that regulation was introduced to ensure all derivatives are centrally cleared thereafter?
There are many many such untested cases – these are the sharp end of legal debt.
Anyway find out all these things and much much more on the show ... as Jon's twitter handle - @FintechGuru implies - he knows a lot about Fintech as well as the legal side.
Enjoy! :-)
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London Fintech PodcastBy Tony Clark

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