Hello again, and Merry Christmas
As everyone starts winding down for The Most Wonderful Time of the Year, we take a quick look at the main headlines from the legal risk and compliance world, and what the regulators are doing to keep us all on our toes…
Have a fabulous break,
Jon and the team.
MUST READ – Competition and Market Authority report
Last week, the CMA issued it’s long-awaited final report on legal services, which could have a huge impact on the future practise of law. “Transparency” was the main theme, with the key recommendation that regulators should provide minimum requirements on disclosure on price and service.
Among the other recommendations, a “transparency mark” is also proposed. This logo would be for firms (regulated or not) that meet the new transparency standards. The CMA has no concerns about the legitimisation of unregulated law firms (“.. any scheme that encourages unauthorised providers to commit to transparency is likely to be strongly in consumers’ interests…”).
Why is it important?
The CMA’s findings should not come as a shock – they have been signalling these messages for months. Whilst the report’s recommendations are not binding, regulators have already been queuing up to endorse the report (particularly where it reinforces their own agenda). Make no mistake, we are likely to see most of the key recommendations implemented. We will all be expected to take steps to be more transparent about pricing and service levels.
The Law Society is at the moment a lone voice of dissent, with Robert Bourns urging caution in prioritising market considerations above client protections. It’s not often that we find ourselves agreeing with Chancery Lane, but on this point we think he is spot on.
Imagine this scenario. This time next year, you could walk into a high street law firm and instruct a practising solicitor, only to find (if something goes wrong) that the firm is not regulated by anyone. You did not understand there were different levels of regulation for solicitors, but are now told that you don’t get the benefit of legal professional privilege, minimum terms PII, the compensation fund, or a professional Code of Conduct. You are left without any statutory protection. How is that a step forwards?
SRA’s obsession with innovation continues…in a good way
Now for an example of what we feel is a sensible approach to innovation and removing regulatory barriers. Following the launch of “SRA Innovate” earlier in the year, the SRA is now looking to reform its waiver process. A consultation is now open and closes on 8 March 2017. In essence the proposal is to simplify how the SRA waives its own rules in order to “help-forward-thinking firms to thrive, as well as provide real public benefit from new services and greater competition.”
Regulator-speak for we’ll get out of your way, guys.
Why is it important?
Waivers can be a powerful tool. The SRA has always been able to waive any of its own rules, so long as those rules are not a statutory requirement. The hurdle until now has been the requirement to demonstrate “exceptional circumstances” before the SRA would consider it. Over time, this has been relaxed, to the point that before the old Separate Business rules were amended last year, ABS applications were being routinely granted with some form of waiver.
Equally importantly, we are going to see the SRA piloting a regulatory “sandbox”. This will be a safe space for innovators to try new and potentially high risk services, that could otherwise fall foul of professional rules. It would be closely supervised by a specialist team, and the innovator could even receive “no enforcement” guarantees. This will mirror similar schemes run by the FCA and Civil Aviation Authority.
These are exciting times for entrepreneurial lawyers and new entrants to the market. As we often find ourselves saying, so long as you can demonstrate that your proposal meets the regulatory objectives in the Legal Services Act, and is in the public interest, almost anything is possible.
Solicitor struck off after faking invoices to cover mistakes
The SDT recently struck off a solicitor who hid a wasted costs order against his firm and faked a fee invoice in order to pay for it. Luke Welsh, who qualified in 2010, used a fake invoice to create a surplus on one matter to pay a £1500 wasted costs order on another. He also attempted to withdraw money for counsel’s fees to a “N Jones”, a local barrister but also the name of a friend of Mr Welsh’s. His actions were discovered as the firm’s policy required all cheques to be made out to the recipient’s full name. On receipt of the cheque request the firm made further enquiries and discovered that this was not a first offence.
Why is it important?
It is interesting to note the importance of having systems and procedures in place (such as full names on all cheques), and sticking to them. This helps identify out-of-the-ordinary transactions. The firm in this case was praised for its vigilance and swift action.
Also note what a hard line the SDT continues to take on dishonesty offences – Mr Welsh was struck off despite the SDT acknowledging that he had not gained financially from his misconduct and that no client had suffered.
Show me where I can complain…
The Legal Ombudsman (LeO) has indicated that, despite an obligation on lawyers to signpost clients to the LeO scheme, some clients are still not made aware of their right to complain. According to their research, less than a quarter of clients remembered hearing about the LeO scheme from their solicitors.
Why it’s important
It’s tempting to dismiss this as self-serving research. There is always going to be a proportion of clients who either don’t read the engagement documents properly, or do not recall the the finer points some time down the line. However, complaints and service issues are important – particularly in this new age of “transparency” that is unfolding. You must ensure that your retainer clearly refers to the LeO scheme. See their updated signposting pack to help you meet the requirements.
Law Society – practice note updates
- Modern Slavery Act and Section 54
- Insolvency of a participating Insurer
- Protecting your firm if you fall victim to a scam