Accurate Document Searches Are Crucial in M&A and Compliance
In securities practice, especially mergers and acquisitions (M&A), the stakes involved in document searches are exceedingly high. Attorneys regularly comb through extensive disclosure filings and transactional precedents to ensure compliance with stringent regulatory frameworks like those set by the SEC in the U.S. or CSA in Canada, as well as when evaluating deal terms. The challenge is clear: ensuring that every piece of critical information is available, and that this information is easy to navigate and find with high precision and accuracy.
Missing even one key document or precedent can materially compromise a transaction. Errors stemming from incomplete searches might result in weak or unenforceable contract provisions, exposing clients to potential liability and/or causing deal negotiations to falter. Additionally, overlooked disclosure nuances can trigger unwanted scrutiny from regulators, potentially leading to legal challenges or sanctions.
The fallout from such issues arising out of inaccurate or imprecise document searches can affect firms in several significant ways, including legal/regulatory consequences, costs (for both the firm and its clients), as well as the firm’s, lawyers’, and their clients’ reputations.
Oversights in compliance can prompt costly investigations and fines from bodies like the SEC or OSC, requiring significant firm resources to rectify.
Persistent inaccuracies necessitate repeated manual checks, driving up costs and causing delays. Time-sensitive deals could be stalled, or worse, lost entirely.
Repeated search-related errors erode a firm's credibility. Clients begin questioning the firm's diligence, potentially leading to diminished trust, fewer referrals, and damage to the firm's market position.
On the other hand, when document searches are precise and exhaustive, legal teams can confidently deliver compliance assurance, facilitating smooth, efficient transaction execution. This scenario supports the firm's credibility, market reputation, and client satisfaction. Most legal research tasks today are performed via traditional keyword search (also known as Boolean Text Search), and are considered a manual method of research. The benefit of this method over AI based approaches is that there can be no hallucinations, even though it can be costly and time-consuming. However, traditional keyword searches often fail legal professionals in other ways, such as frequently returning too many irrelevant results or missing critical information entirely. These searches do not effectively capture synonyms or conceptual similarities, and often require extensive manual filtering. Consequently, crucial insights can remain hidden in the noise, substantially increasing the risk of costly oversights.
The impact of this risk is material: overlooking essential precedents or compliance obligations can trigger regulatory actions which may result in penalties, loss of client confidence, damaged reputation, and substantial financial impacts—potentially damaging long-term viability. In recent years, AI tools have cropped up to try and automate the costly manual research, but they continue to have difficulty with both hallucinations as well as failing to surface key precedents that are known to exist. This inadequacy requires law professionals to spend even more time double checking that the results are both real and relevant, and often also having to find additional key information themselves.
As the adoption of AI tools increases, including among law professionals, we expect to see an increase in misuses or over reliance on tools that are (at least up to this date in 2025) unreliable, and require double checking, such as in the instance of a Vancouver lawyer who was very publicly caught using AI to generate hallucinated (fake) precedents.
The Advantage of Semantic Search
Semantic search technology significantly improves upon traditional methods by identifying concepts and contextual meaning rather than relying solely on keywords. This advanced approach ensures higher accuracy, reduces manual review time dramatically, and allows professionals to deliver more reliable compliance outcomes.
To benefit fully from semantic search, firms should:
Critically assess their current search processes to identify specific inefficiencies.
Explore specialized semantic search tools designed specifically for disclosure and regulatory documents.
Regularly train legal and compliance teams on using these advanced tools effectively.
Create an ongoing evaluation system for continual improvement and optimization of search processes.
Adopting semantic search technology that can offer 100% precision and recall is a strategic move that significantly enhances a firm's risk management and operational efficiency. Ensuring comprehensive and accurate document searches not only safeguards compliance but also reinforces the firm's reputation and competitive edge in a demanding marketplace.
