What Does a Structured Finance Attorney Do? | BCGSearch.com

What Does a Structured Finance Attorney Do?


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The structured finance attorney is involved in negotiating and facilitating structured finance instruments in this billion-dollar industry.

What is Structured Finance?

Structured finance is a complex financial instrument available to large companies with financing requirements that you cannot meet with conventional financial products. Traditional lenders do not offer these instruments. Instead, investors provide this financing.

Unlike most loans, structured financial products are not transferable. There are several types.

Collateralized Debt Obligations

A collateralized debt obligation (CDO) is a complicated finance product. Loans and other assets back it. Then it is sold to institutional investors. As implied by its name, a CDO’s value is derived from its underlying assets. If the loan defaults, these assets become the collateral.

Creating a CDO involves an investment bank collecting cash flow-generating assets like bonds, mortgages, and other debts and restructuring them into discrete classes according to the amount of risk an investor assumes. These discrete classes are called tranches.

Tranches of securities are transformed into final investment products, which are like bonds or similar instruments. One example is mortgage-backed securities (MBS), which comprises a bundle of residential home loans purchased from the institutions that issued them. Those who invest in MBS get periodic payments like bond coupon payments. MBS is asset-backed security and is only as good as the mortgages underlying them.

MBS works by converting the bank into an intermediary between the home purchaser and the investment industry. A bank extends mortgages to prospective home buyers and then sells them at a reduced rate to be included in an MBS. The bank’s balance sheet reflects the sales as a plus, and it doesn’t lose anything if the mortgagee later defaults on the loan.

In other words, an investor purchasing an MBS is, in reality, lending money to home buyers. MBS are often bought and sold through a broker.

Collateralized Bond Obligations

A collateralized bond obligation (CBO) is a bond backed by a group of junk bonds. Although junk bonds generally are not investment-grade, they are because the group comprises many kinds of credit-quality bonds from several issuers.

The bonds in a CBO contain both low-risk and high-grade bonds classified into tiers called tranches. Each tranche has a specific level of risk that controls the interest paid to investors. The highest tranche of a CBO has high-quality and low-risk bonds. The middle tier has higher risk bonds but pays a better interest rate than the top tranche. The lowest tier comprises lesser quality bonds but provides a higher yield.

Synthetic Financial Instruments

This is a mixture of investments that can result in a profit when used in conjunction. One example is an option spread, where the investor takes multiple positions in option contracts to profit from their differing prices.

Syndicated Loans

Also known as a syndicated bank facility, a pool of lenders is offered called a syndicate. They work together to issue funds to a specific borrower, such as a corporation or government. The loan can consist of a credit line, a set quantity of funds, or both.

The need for syndicated loans occurs when a project needs too large of a loan for a single lender to accomplish. By syndicating the loan, lenders can distribute the risk and participate in opportunities that otherwise would be too much for their individual capital base.

The Role of the Structured Finance Attorney

Structured finance law comprises various legal disciplines. For structured finance transactions, the lawyer needs to know:
The structured finance attorney has much interaction with clients. They respond to client questions and balance up to ten projects at a time. Some days are spent mainly on the phone while others are spent on the computer.

Day-to-day work consists of:
  • Drafting memos about securities regulations and how they may impact clients;
  • Drafting closing documents to finalize transaction execution; and
  • Performing research related to updated securities laws and regulations for both internal use and clients.

Overall, the structured finance lawyer in private practice must master a broad range of laws and constantly keep up to date on securities-related laws and regulations.

Regulation of Structured Finance Instruments

The Securities and Exchange Commission (SEC or Commission) regulates structured finance instruments. The Commission has sweeping investigatory and enforcement powers.

Typical Violations

The SEC often observes misconduct like:
  • Misrepresentation of material facts about securities involved in structured finance instruments;
  • Manipulation of the market prices of securities involved in structured finance instruments;
  • Theft of funds; and
  • Accounting fraud.

Any of these can trigger an SEC investigation.

Commission’s Investigation Procedures

The SEC does not have unlimited resources. When confronted with possible wrongdoing, it prioritizes its investigations based on:
  • Whether the matter involves egregious conduct.
  • Whether it provides an opportunity to send a message and deter similar conduct by others.
  • Does the matter involve misconduct by parties with significant authority or who are fiduciaries?
  • Does the wrongdoing involve conduct that only recently has been prohibited?
  • Is there a substantial number of people affected by the malfeasance?
  • Is there another government agency, federal or state, that is better positioned to perform the investigation?

If the Commission decides to investigate, it begins by getting a target company’s voluntary cooperation. The SEC asks to interview witnesses and review documents.

Not all target companies cooperate. In this case, the SEC uses its powerful subpoena powers to compel the company to make witnesses available and produce documents. After this occurs, and the Commission has had time to review the collected information, it may offer to engage in settlement discussions with the target company. These discussions are often fruitful and lead to a resolution without further action by the SEC.

Enforcement Mechanisms

In those cases where settlement is not possible, the SEC acts in four separate ways:
  • It dismisses the case.
  • It pursues sanctions in administrative court adjudicated by an administrative law judge. This official will review the evidence and can issue sanctions. These include fines, disgorgement, and cease and desist orders.
  • It files a complaint in a U.S. District Court. The federal judge can consider similar sanctions, as well as declaratory relief.
  • It refers the matter to the U.S. Attorney’s Office for criminal prosecution.

Opportunities for the Structured Finance Attorney at the SEC

The SEC has many lawyers to carry out its mission. They conduct investigations and file administrative or civil complaints against target companies. If a criminal prosecution is appropriate, they coordinate with the U.S. Attorney’s Office.

After years of experience performing these duties, a structured finance attorney with the SEC could become an administrative law judge with the Commission.


Opportunities for the Structured Finance Lawyer in Defense

Many companies become the target of an SEC investigation or enforcement action. Attorneys specializing in structured finance are needed to defend these businesses.

The civil defense attorney keeps themselves occupied defending clients against the SEC in administrative court and civil actions in federal court. The criminal defense attorney defends clients against criminal prosecutions brought by the U.S. Attorney’s Office.

Law School Professor

After many years of practicing structured finance law day-to-day, and with stellar grades in law school and preferably experience clerking for a judge, the structured finance lawyer can become a law school professor.

Many law schools offer LLMs in securities-related law. Examples include Georgetown’s LLM in Securities and Financial Regulation and Boston University’s LLM in Banking and Financial Law.

How Do I Become a Structured Finance Attorney?

These are competitive positions for highly motivated professionals. While a law degree and bar membership are basic requirements, interested individuals can improve their chances by accomplishing extra goals.

First, a bachelor’s degree in business, finance, or accounting is helpful. Second, an LLM in securities law is also beneficial. This education and experience in the securities industry go a long way towards a successful career in structured finance.

Who Makes a Good Structured Finance Attorney?

Efficient transaction execution is just one part of effective structured finance representation. Structured finance attorneys must understand how each transaction fits into the client's overall business goals.

The skills of an attorney specializing in structured finance range from creating complex financial covenants to drafting security over every asset class imaginable with the same legal and financial knowledge. Additionally, they should assess whether large industrial facilities will be able to generate enough revenue to service their debt obligations over decades. Learning how to get to the heart of the matter while also applying sound legal principles is a challenging endeavor. The documentation to be considered includes not just the usual realm of financing and security documents, but also several commercial contracts, permits, and licenses that define how the underlying project will operate.

See also:

About Harrison Barnes

Harrison Barnes is a prominent figure in the legal placement industry, known for his expertise in attorney placements and his extensive knowledge of the legal profession.

With over 25 years of experience, he has established himself as a leading voice in the field and has helped thousands of lawyers and law students find their ideal career paths.

Barnes is a former federal law clerk and associate at Quinn Emanuel and a graduate of the University of Chicago College and the University of Virginia Law School. He was a Rhodes Scholar Finalist at the University of Chicago and a member of the University of Virginia Law Review. Early in his legal career, he enrolled in Stanford Business School but dropped out because he missed legal recruiting too much.

Barnes' approach to the legal industry is rooted in his commitment to helping lawyers achieve their full potential. He believes that the key to success in the legal profession is to be proactive, persistent, and disciplined in one's approach to work and life. He encourages lawyers to take ownership of their careers and to focus on developing their skills and expertise in a way that aligns with their passions and interests.

One of how Barnes provides support to lawyers is through his writing. On his blog, HarrisonBarnes.com, and BCGSearch.com, he regularly shares his insights and advice on a range of topics related to the legal profession. Through his writing, he aims to empower lawyers to control their careers and make informed decisions about their professional development.

One of Barnes's fundamental philosophies in his writing is the importance of networking. He believes that networking is a critical component of career success and that it is essential for lawyers to establish relationships with others in their field. He encourages lawyers to attend events, join organizations, and connect with others in the legal community to build their professional networks.

Another central theme in Barnes' writing is the importance of personal and professional development. He believes that lawyers should continuously strive to improve themselves and develop their skills to succeed in their careers. He encourages lawyers to pursue ongoing education and training actively, read widely, and seek new opportunities for growth and development.

In addition to his work in the legal industry, Barnes is also a fitness and lifestyle enthusiast. He sees fitness and wellness as integral to his personal and professional development and encourages others to adopt a similar mindset. He starts his day at 4:00 am and dedicates several daily hours to running, weightlifting, and pursuing spiritual disciplines.

Finally, Barnes is a strong advocate for community service and giving back. He volunteers for the University of Chicago, where he is the former area chair of Los Angeles for the University of Chicago Admissions Office. He also serves as the President of the Young Presidents Organization's Century City Los Angeles Chapter, where he works to support and connect young business leaders.

In conclusion, Harrison Barnes is a visionary legal industry leader committed to helping lawyers achieve their full potential. Through his work at BCG Attorney Search, writing, and community involvement, he empowers lawyers to take control of their careers, develop their skills continuously, and lead fulfilling and successful lives. His philosophy of being proactive, persistent, and disciplined, combined with his focus on personal and professional development, makes him a valuable resource for anyone looking to succeed in the legal profession.

About BCG Attorney Search

BCG Attorney Search matches attorneys and law firms with unparalleled expertise and drive, while achieving results. Known globally for its success in locating and placing attorneys in law firms of all sizes, BCG Attorney Search has placed thousands of attorneys in law firms in thousands of different law firms around the country. Unlike other legal placement firms, BCG Attorney Search brings massive resources of over 150 employees to its placement efforts locating positions and opportunities its competitors simply cannot. Every legal recruiter at BCG Attorney Search is a former successful attorney who attended a top law school, worked in top law firms and brought massive drive and commitment to their work. BCG Attorney Search legal recruiters take your legal career seriously and understand attorneys. For more information, please visit www.BCGSearch.com.

Harrison Barnes does a weekly free webinar with live Q&A for attorneys and law students each Wednesday at 10:00 am PST. You can attend anonymously and ask questions about your career, this article, or any other legal career-related topics. You can sign up for the weekly webinar here: Register on Zoom

Harrison also does a weekly free webinar with live Q&A for law firms, companies, and others who hire attorneys each Wednesday at 10:00 am PST. You can sign up for the weekly webinar here: Register on Zoom

You can browse a list of past webinars here: Webinar Replays

You can also listen to Harrison Barnes Podcasts here: Attorney Career Advice Podcasts

You can also read Harrison Barnes' articles and books here: Harrison's Perspectives

Harrison Barnes is the legal profession's mentor and may be the only person in your legal career who will tell you why you are not reaching your full potential and what you really need to do to grow as an attorney--regardless of how much it hurts. If you prefer truth to stagnation, growth to comfort, and actionable ideas instead of fluffy concepts, you and Harrison will get along just fine. If, however, you want to stay where you are, talk about your past successes, and feel comfortable, Harrison is not for you.

Truly great mentors are like parents, doctors, therapists, spiritual figures, and others because in order to help you they need to expose you to pain and expose your weaknesses. But suppose you act on the advice and pain created by a mentor. In that case, you will become better: a better attorney, better employees, a better boss, know where you are going, and appreciate where you have been--you will hopefully also become a happier and better person. As you learn from Harrison, he hopes he will become your mentor.

To read more career and life advice articles visit Harrison's personal blog.

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