It’s our last newsletter before the summer break, and there has certainly been plenty going on over the past fortnight.
Before you look at the news, have a quick read of our final guest blog by Legal Finance Professionals, in which Richard Lane looks closely at the importance of supervision requirements.
The new Insurance Distribution Directive comes into effect after the summer and has practical implications for all firms that put insurance in place for clients – think ATE and conveyancing to start.
There is also plenty going on elsewhere in legal regulation: an independent review into the framework of legal regulation; and the new ABS licensing powers granted to CILEx.
We hope you enjoy this edition and, more importantly, the rest of the summer.
Jon and the team
Guest blog: SRA Accounts Rules – Why proper supervision matters
This week’s blog is on the importance of supervision by the COFA and COLP with regard to the SRA Accounts Rules 2011 by Richard Lane of Legal Finance Professionals.
Does your COFA rely too heavily on accounts staff? Do they take more than a “passive interest” in Accounts Rules compliance?
Arguably under the new, less prescriptive Accounts Rules 2019, the COFA will need to be even more involved in accounts processes.
Firms need to review the new insurance directive
The Insurance Distribution Directive (IDD) will come into force in the UK on the 1st October 2018. The SRA’s new rules, which have now received approval from FCA and LSB, mean that “firms carrying on insurance distribution activities will need to change the way they work“.
The new rules build on the existing regime (currently SRA Scope Rules and Conduct of Business Rules), to strengthen client protection:
- appropriate knowledge and competence for staff who are involved in arranging insurance. This suggests identifying those relevant staff, training them, and assessing their competence
- full transparency and information requirements about the relationship with insurers
- enhanced ‘Demands and Needs’ requirements, which suggest that there needs to be a proper understanding of clients’ circumstances and how insurance products meet those needs. An end to template Demands and Needs statements?
The changes will affect any firm carrying out insurance-related services such as advising on or putting in place ATE or defective title insurance.
Why it matters
The recommendation by the SRA is that all firms should “assess their own individual practices and make sure they are up to date and able to comply with the revised rules.” From past experience, rules around insurance mediation has historically been a blind spot for the profession. It is not uncommon for firms to be unaware of the current rules.
It would be consistent with current SRA practice to undertake a “thematic review” (spot check) of firms to see how well the profession is adhering to the changes.
Now would therefore be a sensible opportunity to revisit your compliance with insurance rules.
- Which departments touch on insurance products with clients? Litigation, property, family and private client are all regularly affected.
- What insurance products are put in place?
- Which staff members are involved and need training?
- Does the firm have relevant policies?
- Are there template demands and needs letters?
- How do we ensure that insurance products are in the client’s best interests?
- In insurance work covered in terms of business?
- How is insurance work supervised?
- Are there any commissions earned or other benefits to the firm?
Review of legal regulation
An independent review of legal regulation is to be held by the Centre for Ethics & Laws at UCL, led by Professor Stephen Mayson, a leading academic and expert in professional regulation.
The review, which follows the CMA’s 2016 report into the legal profession, will look at matters including how the regulatory framework can best protect and promote consumers’ interests and promote public interest in the rule of law, together with maintaining law of England and Wales as an attractive option to lead the world with better regulation principles. Professor Mayson said:
The review should be completed by the end of 2019.
Why it matters
The CMA’s 2016 report was a watershed moment for the legal profession. Its final report carries huge weight with the LSB, and the front line regulators. We are already seeing calls for improved access and transparency being implemented by the SRA and CLC.
The report also re-opened the door to simplifying the mess of legal professional regulation. Are proposals for a single regulator on the cards?
PI reforms delayed until April 2020
The MOJ has announced that the implementation of the whiplash reforms has been delayed until April 2020.
The announcement comes following the recommendations published in May by the Justice Select Committee.
The Committee concluded that implementation should be delayed to allow the MOJ sufficient time to develop a suitable online system, given that there will be an increase in litigants in person.
Why it matters
These reforms will undoubtedly have a massive effect on the personal injury sector, and it is important that any changes are correctly implemented rather than pushed through too quickly. Given the inevitable rise in litigants in persons it is vital that there is an accessible system for lay members of the public to use, otherwise the system will not be able to cope, and there will be the risk of huge numbers of under-compensated cases.
Lord Chancellor gives CILEx green light to licence ABS
You will recall recent reports that the LSB had given its approval for CILEx to licence ABSs.
On the 17th July the Lord Chancellor gave final approval to the order.
Why it matters
CiLex Fellows are of course already lawyers for the purposes of the Legal Services Act. This now puts CiLex Regulation on an equal footing with the SRA, BSB, and CLC as ABS licensing bodies.
It is exciting because it gives lawyers real choice of regulator. “Voting with your feet” and switching regulator has never been more of a realistic option.
New and updated Law Society Practice Notes
Disciplinary decisions
- A junior solicitor with 4 years PQE, Amanda Elizabeth Davies reached an agreed outcome to be struck off the roll. She admitted to creating 23 back dated documents over a nine-month period and to making untrue statements to the parent of a vulnerable client concerning the progress of litigation.
- Mark Antony Whittaker who transferred £64,500 from his firm’s client account to his personal account and £5000 to his girlfriend was struck off by the SDT. The SDT said that he had shown a ‘cavalier disregard to his professional obligations and had driven a coach and horses through the Solicitors Accounts Rules’.
- Vincent Gray appeared in front of the SDT following allegations by the SRA that he had caused or allowed proceedings to be issued and settled without instructions. The SDT dismissed all allegations.
- Surrey firm Hadfields Butt and Bowyer was rebuked for failing to comply with an undertaking it gave to another firm of solicitors within a reasonable period of time.
- Richard Gregorian was issued with a written rebuke following a finding that he had used derogatory and offensive language in describing a third party in text messages and emails sent to his client.
