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Roger McCormick, LEGAL RISK IN THE FINANCIAL MARKETS Oxford: Oxford University Press (www.oup.com), 2nd edn, 2010. xxxvii + 491 pp. ISBN 9780199575916. £175.

Document Cited authorities 1 Cited in Related
Vincent
Date01 January 2012
AuthorMatteo Solinas
Pages139-140
DOI10.3366/elr.2012.0096
Published date01 January 2012

As the author states in the preface to the second edition, this book considers legal risk against the backdrop of the global financial crisis between 2007 and 2009. The principal theme has not changed since the first edition: the analysis of the nature of legal risk in wholesale financial markets and the ways in which it can be managed. The novelty in this second edition lies in the test case that addresses the relationship between legal risk and regulatory reform.

The book is stimulating and informative. There is reference to almost every conceivable aspect of the recent financial crisis, from its origins to the legal and regulatory responses in the UK and elsewhere. The implications for the nature and relevance of legal risk are tackled in chapter 10 where it is suggested that legal uncertainties arising from defective documentation and faulty representations have been a frequent source of litigation. In that context, it is also argued that the growth in the number of claims caused an alarming new “reputational risk” that could only be curbed by out-of-court settlement.

Following the inquiry into the rise of legal risk awareness in the City, with the judgment of the House of Lords in Hazell v Hammersmith and Fulham London Borough Council [1992] 2 AC 1, and the subsequent formation by the Bank of England of the Legal Risk Review Committee, McCormick clarifies the economic implications of the issues at stake by focusing on certain examples of legal recharacterisation with significant adverse economic outcomes for market participants. This analysis serves as an introduction to the discussion on the definitions and on the sources of legal risk, offering de facto a manifesto of the work of the Financial Markets Law Committee (FMLC). The last part of the book looks at the management of legal risk, emphasizing the importance of legal analysis for the assessment and monitoring of risk in financial transactions.

The greatest value of the book...

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