Magic circle law firm Clifford Chance has for the second time in four months deployed artificial intelligence (AI) in a standalone product aimed at assisting clients to comply with complex regulatory changes.
Hard on the heels of a ‘toolkit’ offering legal guidance on the derivatives market which it produced last November, this time it has devised an online tool to enable financial institutions to make sense of the second instalment of the Markets in Financial Instruments Directive (MiFID2) and its corresponding regulations.
The reforms will apply to all financial investment firms across the European Union and come into effect from January 2018. The firm has again teamed up with AI compliance software specialists Neota Logic to create the tool.
The law firm advertised the product by saying that for a fixed up-front fee, clients could “access complex legal advice at a fraction of the price of individual analysis”.
Clifford Chance financial regulatory partner, Monica Sah, said: “Given the vast scale of these reforms, a full analysis of the new regulations would be a serious undertaking, and a costly exercise for any financial institution.
“By embracing [AI], we’ve managed to develop a tool that gives our clients just what they need, right when they need it, at a much reduced cost.”
Senior associate Charles Morris, a solicitor in the firm’s banking and finance practice who specialises in cross-border financial services regulation and did most of the analysis behind the MiFID2 tool, told Legal Futures that it had “substantial value” and was “created by experienced lawyers”.
Clients would log in to the product online, fill in their parameters “such as what business they conduct, what the client base is, [and] what kind of requirements they want to hear about”. The interface would then deliver a report based on the “hard legal content”.
But he stressed it did not “interact with [clients’] systems” and was “primarily a filtering tool linking into old school but in-depth and high-quality legal analysis”.
Mr Morris anticipated clients might use the MiFID2 tool “to start their thought process, which would otherwise cost them a very substantial legal fee in order to do that thinking and produce that material for them on a bespoke basis”.
He continued: “Then they might want to use their own internal legal resources to complete the job.”
He said Clifford Chance – which has used AI systems from Neota and Kira Systems – had a “clear ambition to develop and use as much as possible in the future genuine AI in order to directly cut costs”.
However, “the technology is still at a very nascent stage” and machine learning technologies were only “beginning to be programmable in a way that does seem to… recognise types of clauses rather than pure word searches” he said.
He added that despite a limited range of applications for machine learning technology at present – primarily in areas such as due diligence and contract review – the firm was ready: “Of course, one day it will change and the key is to make sure [we are] always trying to push the boundaries so that when it does become something that can be rolled out on a wider basis, we can be at the forefront of that and deliver it.”