When finance and trading professionals are drafting complex agreements, they often turn to legal counsel for help determining what is “market standard” for the type of contract they are compiling. 

Traditionally, in-house legal teams or their outside counsel would then spend hours manually poring through past deals to provide the requested information.

However, leaders of the fintech company Claira told Legal Dive their software quickly analyzes complex financial documents, allowing legal teams to provide much speedier responses to their colleagues.

“Instead of spending all the time sifting through the last six months or three years of deals and reading and finding the clauses, Claira does all that work for you,” said Eric Chang, a Claira co-founder.

“Now as an internal legal team, I actually have that information available to me and it's much more about the high value of providing the opinion and guidance that the business team needs.”

Different kind of AI

Many AI-powered technology solutions that analyze documents utilize natural language processing (NLP) technology to provide pattern matches based on examples.

Chang highlighted that legal language poses challenges for these NLP models because it is much different than more general writing.

Claira, on the other hand, is powered by proprietary natural language understanding (NLU) technology that company leaders said can understand legalese and logic in complex, bespoke financial agreements to provide useful insights about them.

This could include the software analyzing information about optionality clauses or fee schedules in past commercial real estate agreements to inform the creation of new ones, Chang said. 

Claira was incubated within Exos Financial, a B2B institutional finance platform that has seen firsthand the power of Claira’s NLU technology.

Joseph Squeri, the CTO/COO of Exos, said Claira has helped Exos save 90% of the time and costs associated with the company’s LIBOR remediation work.

“And the insights that we were able to get enabled us to spend more time working with clients on what the transactions would be migrating towards then actually doing the prep work to have those meaningful dialogues,” he said.

Aiding legal teams

Chang said Claira’s technology can save legal teams hundreds or thousands of hours they previously would have needed to spend reviewing contracts for basic information.

This technology-enabled efficiency can also reduce the need for financial professionals and in-house legal teams to tap outside counsel to assist with poring through documents.

“From our perspective, that's not really why you should be using outside counsel,” said Squeri, a Claira technical advisor. “You should be using them for expertise that you don't have, as opposed to doing rote functions that you don't necessarily have the bandwidth to do.”

He echoed Chang’s point that the time legal teams gain back from Claira can help them prioritize offering specialized advice.

One way they can do that in Claira is by making comments directly in financial documents that point collaborators to the clauses or covenants that may need tweaking.

“We use the features of Claira for collaborating across the front, middle and back offices,” Squeri said of Exos Financial.

Citi investment

Claira, which was also co-founded by Alex Schumacher, is gaining traction in the finance sector. 

The company recently announced it has received a “strategic investment” from Citi Spread Products Investment Technologies (SPRINT), which is the investing arm of Citi’s Global Spread Products division. This investment comes as Citi’s technology spend is on the rise. 

Claira will start by assisting Citi with its handling of municipal bond prospectuses and collateralized loan obligations (CLO).

CLO professionals typically spend more than 20 minutes analyzing a single structured credit document, according to Vitaliy Kozak, global co-Head of Secondary CLO, ABS and CDO Trading at Citi.

“Through Claira’s technology, the document analysis process is vastly reduced, cutting to mere minutes the time it takes to extract relevant sections, perform initial analysis, and interpret results to deliver actionable insights on pricing,” Kozak said.

“Their use of specialized AI and pre-trained models greatly surpasses legacy Natural Language Processing solutions, making Claira a game changer that’s poised to transform our market,” said Patrick Brett, managing director, head of Municipal Debt Capital Markets & Capital Solutions at Citi.

Chang and Squeri said they are thrilled about the investment from Citi, which will support Claira’s product development and go-to-market strategy.

“The benefit Claira has by being incubated from a financial services firm and having a partnership with a really innovative major global bank like Citi is that we're on the forefront of financial service evolution,” Squeri said.