Explain capital markets to me? Forum

[DougEvans789]

Randomly curious about this: I’m in litigation and think I sort of get M&A. But I have basically no conception of what a capital markets associate does day in and day out. Is it like some company wants to issue some security on such and such date and you pull together the paperwork?

[LittleRedCorvette]

Is it like some company wants to issue some security on such and such date and you pull together the paperwork?

Yes

[NoLongerALurker]

Randomly curious about this: I’m in litigation and think I sort of get M&A. But I have basically no conception of what a capital markets associate does day in and day out. Is it like some company wants to issue some security on such and such date and you pull together the paperwork?

Yes.

In theory there's also a bunch of regulations that you need to make sure ducks are properly in a row. But in reality someone did that ten years ago so the precedent you're using already solves for it, so you just need to update the dates/names and be an obedient little hyper-responsive pet to the bankers or in-house treasury team for three weeks and then move on to the next one.

[objctnyrhnr]

Is this something people want to do? Or do people kind of get forced into it?

-a litigator with next to no idea as to what’s entailed day to day/deliverable to deliverable in transactional practice groups

[DougEvans789]

Randomly curious about this: I’m in litigation and think I sort of get M&A. But I have basically no conception of what a capital markets associate does day in and day out. Is it like some company wants to issue some security on such and such date and you pull together the paperwork?

Yes.

In theory there's also a bunch of regulations that you need to make sure ducks are properly in a row. But in reality someone did that ten years ago so the precedent you're using already solves for it, so you just need to update the dates/names and be an obedient little hyper-responsive pet to the bankers or in-house treasury team for three weeks and then move on to the next one.

If it’s that straightforward, is there a reason companies don’t or can’t do this in house?

[Wubbles]

Randomly curious about this: I’m in litigation and think I sort of get M&A. But I have basically no conception of what a capital markets associate does day in and day out. Is it like some company wants to issue some security on such and such date and you pull together the paperwork?

Yes.

In theory there's also a bunch of regulations that you need to make sure ducks are properly in a row. But in reality someone did that ten years ago so the precedent you're using already solves for it, so you just need to update the dates/names and be an obedient little hyper-responsive pet to the bankers or in-house treasury team for three weeks and then move on to the next one.

If it’s that straightforward, is there a reason companies don’t or can’t do this in house?

Lots of reasons. I think a primary one is variable volumes are more easily handled by firms. There's peace of mind in having multiple attorneys at your disposal instead of 1 or 2 who at many issuers would either be overworked or underworked at various points in time. But there are in house cap markets attorneys at places that can keep people busy, and then they send overflow to law firms

[boxie]

Randomly curious about this: I’m in litigation and think I sort of get M&A. But I have basically no conception of what a capital markets associate does day in and day out. Is it like some company wants to issue some security on such and such date and you pull together the paperwork?

Yes.

In theory there's also a bunch of regulations that you need to make sure ducks are properly in a row. But in reality someone did that ten years ago so the precedent you're using already solves for it, so you just need to update the dates/names and be an obedient little hyper-responsive pet to the bankers or in-house treasury team for three weeks and then move on to the next one.

If it’s that straightforward, is there a reason companies don’t or can’t do this in house?

Lots of reasons. I think a primary one is variable volumes are more easily handled by firms. There's peace of mind in having multiple attorneys at your disposal instead of 1 or 2 who at many issuers would either be overworked or underworked at various points in time. But there are in house cap markets attorneys at places that can keep people busy, and then they send overflow to law firms

There are in-house securities lawyers who handle '34 Act work on their own, but no underwriter or initial purchaser would ever offer a Company's securities without outside counsel opining on both the adequacy of the disclosure and compliance with securities laws. Even the world's largest companies retain outside counsel for their securities offerings. If you look at the "Legal Matters" section of any prospectus for Apple, Microsoft, Amazon, etc, there will always be outside counsel.

Capital markets law at its core is doing a deep dive into the Company to discover anything and everything that could be material to an investment decision and ensuring that this is all disclosed to potential investors and that everything in the disclosure is true and accurate. It's equal parts diligence, disclosure drafting, contract law, securities law compliance and project management. For an underwriter to have an effective 10b-5 defense in the event of shareholder litigation, they need to be able to point to an independent, thorough investigation into the Company to discover any material facts. Law firm opinions (and the underlying diligence exercise law firms complete) are a huge part of that defense.

The '33 Act regulations are also extensive, and unless you are just churning blank check IPOs all your career, there is no way you can just rely on precedent without knowing the rules. That's a recipe for a massive f* up, so hopefully the above poster is either very junior or just exaggerating as a disillusioned cap markets lawyer after what has been a brutal year due to ridiculous demand.

[Anonymous User]

Is this something people want to do? Or do people kind of get forced into it?

-a litigator with next to no idea as to what’s entailed day to day/deliverable to deliverable in transactional practice groups

I am legitimately interested in the answer to this as well. Are CM attorneys often finance people who attend law school knowing they want to do legal finance stuff? I guess this question can be broadened to most corporate practices.

[NoLongerALurker]

Randomly curious about this: I’m in litigation and think I sort of get M&A. But I have basically no conception of what a capital markets associate does day in and day out. Is it like some company wants to issue some security on such and such date and you pull together the paperwork?

Yes.

In theory there's also a bunch of regulations that you need to make sure ducks are properly in a row. But in reality someone did that ten years ago so the precedent you're using already solves for it, so you just need to update the dates/names and be an obedient little hyper-responsive pet to the bankers or in-house treasury team for three weeks and then move on to the next one.

If it’s that straightforward, is there a reason companies don’t or can’t do this in house?

Lots of reasons. I think a primary one is variable volumes are more easily handled by firms. There's peace of mind in having multiple attorneys at your disposal instead of 1 or 2 who at many issuers would either be overworked or underworked at various points in time. But there are in house cap markets attorneys at places that can keep people busy, and then they send overflow to law firms

There are in-house securities lawyers who handle '34 Act work on their own, but no underwriter or initial purchaser would ever offer a Company's securities without outside counsel opining on both the adequacy of the disclosure and compliance with securities laws. Even the world's largest companies retain outside counsel for their securities offerings. If you look at the "Legal Matters" section of any prospectus for Apple, Microsoft, Amazon, etc, there will always be outside counsel.

Capital markets law at its core is doing a deep dive into the Company to discover anything and everything that could be material to an investment decision and ensuring that this is all disclosed to potential investors and that everything in the disclosure is true and accurate. It's equal parts diligence, disclosure drafting, contract law, securities law compliance and project management. For an underwriter to have an effective 10b-5 defense in the event of shareholder litigation, they need to be able to point to an independent, thorough investigation into the Company to discover any material facts. Law firm opinions (and the underlying diligence exercise law firms complete) are a huge part of that defense.

The '33 Act regulations are also extensive, and unless you are just churning blank check IPOs all your career, there is no way you can just rely on precedent without knowing the rules. That's a recipe for a massive f* up, so hopefully the above poster is either very junior or just exaggerating as a disillusioned cap markets lawyer after what has been a brutal year due to ridiculous demand.

I'll confess to the latter.

[Anonymous User]

Capital markets law at its core is doing a deep dive into the Company to discover anything and everything that could be material to an investment decision and ensuring that this is all disclosed to potential investors and that everything in the disclosure is true and accurate. It's equal parts diligence, disclosure drafting, contract law, securities law compliance and project management. For an underwriter to have an effective 10b-5 defense in the event of shareholder litigation, they need to be able to point to an independent, thorough investigation into the Company to discover any material facts. Law firm opinions (and the underlying diligence exercise law firms complete) are a huge part of that defense.

The '33 Act regulations are also extensive, and unless you are just churning blank check IPOs all your career, there is no way you can just rely on precedent without knowing the rules. That's a recipe for a massive f* up, so hopefully the above poster is either very junior or just exaggerating as a disillusioned cap markets lawyer after what has been a brutal year due to ridiculous demand.

Yup, all of this. Fom a risk perspective most underwriters will have policies requiring them to point to external legal advice in case any questions are raised about the offering. My understanding is that Arthur Dean of S&C wrote an opinion of counsel in as a requirement under the '33 Act - not sure Morgan Stanley or Jefferies' risk and compliance departments are ok with an in-house lawyer giving that opinion.

And this is apart from the often mind-numbing process elements that in-house lawyers normally left law firms to avoid (which you so politely call "project management") ...

[Anonymous User]

Capital markets law at its core is doing a deep dive into the Company to discover anything and everything that could be material to an investment decision and ensuring that this is all disclosed to potential investors and that everything in the disclosure is true and accurate. It's equal parts diligence, disclosure drafting, contract law, securities law compliance and project management. For an underwriter to have an effective 10b-5 defense in the event of shareholder litigation, they need to be able to point to an independent, thorough investigation into the Company to discover any material facts. Law firm opinions (and the underlying diligence exercise law firms complete) are a huge part of that defense.

The '33 Act regulations are also extensive, and unless you are just churning blank check IPOs all your career, there is no way you can just rely on precedent without knowing the rules. That's a recipe for a massive f* up, so hopefully the above poster is either very junior or just exaggerating as a disillusioned cap markets lawyer after what has been a brutal year due to ridiculous demand.

Yup, all of this. Fom a risk perspective most underwriters will have policies requiring them to point to external legal advice in case any questions are raised about the offering. My understanding is that Arthur Dean of S&C wrote an opinion of counsel in as a requirement under the '33 Act - not sure Morgan Stanley or Jefferies' risk and compliance departments are ok with an in-house lawyer giving that opinion.

And this is apart from the often mind-numbing process elements that in-house lawyers normally left law firms to avoid (which you so politely call "project management") ...

I have done a public company registered bond offering for a very old school issuer where we were underwriters counsel and the issuer was just represented by its in house lawyers. I think it’s super rare but companies do rep themselves occasionally. No underwriter would agree to not have counsel though.

[Kikero]

Is this something people want to do? Or do people kind of get forced into it?

-a litigator with next to no idea as to what’s entailed day to day/deliverable to deliverable in transactional practice groups

I am legitimately interested in the answer to this as well. Are CM attorneys often finance people who attend law school knowing they want to do legal finance stuff? I guess this question can be broadened to most corporate practices.

Some people probably get forced into it, especially juniors on SPAC deals over the last 18 months, but a lot of people want to do capital markets, particularly IPO work, in my experience. It’s one of the most collaborative practice areas since you’re not really spending any time negotiating against the other side (and when you are negotiating something like an underwriting agreement it’s not something that anyone really gets worked up over). Underwriters’ counsel and issuer’s counsel are mostly aligned and while you might have disagreements over certain things there’s not really any gamesmanship like you see in M&A (or I imagine in litigation). The exit options can also be quite good if you’re interested in going in house at a public company.

On the downside, it can be repetitive and the hours can be rough. I have pulled more all-nighters for capital markets than for M&A and I do both in mostly equal amounts (and also vc/startup work, but that never requires all-nighters). On the hours point, time zone is also very relevant. If you’re on the East Coast you’re going to have a lot of late nights and if you’re on the West Coast you’re going to have a lot of early mornings.

[Anonymous User]

Is this something people want to do? Or do people kind of get forced into it?

-a litigator with next to no idea as to what’s entailed day to day/deliverable to deliverable in transactional practice groups

I am legitimately interested in the answer to this as well. Are CM attorneys often finance people who attend law school knowing they want to do legal finance stuff? I guess this question can be broadened to most corporate practices.

Some people probably get forced into it, especially juniors on SPAC deals over the last 18 months, but a lot of people want to do capital markets, particularly IPO work, in my experience. It’s one of the most collaborative practice areas since you’re not really spending any time negotiating against the other side (and when you are negotiating something like an underwriting agreement it’s not something that anyone really gets worked up over). Underwriters’ counsel and issuer’s counsel are mostly aligned and while you might have disagreements over certain things there’s not really any gamesmanship like you see in M&A (or I imagine in litigation). The exit options can also be quite good if you’re interested in going in house at a public company.

On the downside, it can be repetitive and the hours can be rough. I have pulled more all-nighters for capital markets than for M&A and I do both in mostly equal amounts (and also vc/startup work, but that never requires all-nighters). On the hours point, time zone is also very relevant. If you’re on the East Coast you’re going to have a lot of late nights and if you’re on the West Coast you’re going to have a lot of early mornings.

OP you are responding to. Given that I have no idea what most of the stuff you said means (underwriters, issuers, etc.), I think it is a safe bet that CapM is not in my near future lol. Thanks for the perspective!