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The Circle Bastiat

You can't invest in law firms... yet

It is currently against the law to invest in law firms, but it's not out of the question. Law firms in the UK may go public in 2011.

By Douglas FrenchGuest blogger / May 6, 2010

Pedestrian pass the offices of Goldman Sachs in London. Should law firms be allowed to go public like other firms? It is currently illegal, but may be coming in the future.

Toby Melville/Reuters

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After reading in the New York Times about how well law firms are making out in the bad times, the thought of taking the plunge on some law firm shares came to mind.

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But there don’t appear to be any publicly-traded law firms because

It’s against the rules, for one. Ethical rules i.e., the American Bar Association Model Rule 5.4 prohibit firms from selling equity shares in law firms to non-lawyers. Specifically, it says that a lawyer shall not share legal fees with a non-lawyer. The problem legal ethics types wrestle with is that as a public company, a law firm would have a potential conflict between its duty of loyalty to its clients and its duty of loyalty to its shareholders. Another reason: Lawyers also vigilantly protect the attorney-client privilege, and many fear that by being a public company, a law firm could risk divulging client confidences.

Ok, but at least one lawyer thinks it’s possible. “I would be surprised if in my lifetime we didn’t see a law firm go public,” says Greenberg Traurig’s Leslie Corwin, who advises law firms on business issues. “And I hope I’m around to do the deal.”

“But consider, Goldman Sachs, a ridiculously successful partnership-turned-public company that is very much in the business of servicing clients and protecting their confidences,” wrote Peter Lattman in his “Law Blog” on WSJ, dated March 30, 2007.

Great Britain’s law firms may go public in 2011 and, “[e]ventually, this is a trend that will make its way across the pond to the United States, home of some of the world’s largest and most successful law firms.”

Down Under, the first publicly-traded law firm of Slater & Gordon Limited is trading on the Australian Securities Exchange.

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