Hello there!
Now that holiday season is over, the pace in the world of regulatory compliance is picking up again ……
SRA Risk Outlook 2016/17 has been released
The SRA have published their Risk Outlook 2016/17, and whilst there are many recurring key topics that remain high on the agenda, namely cyber security, money laundering, diversity, independence, and the like, the new document includes a new key focus this year – ‘access to legal services’.
Check out our blog for our basic rundown on each Risk.
Why is it important?
Of particular interest is the new ‘Access to Legal Services’ Risk, with less that 25% of the public thinking that the justice system is currently ‘fair and transparent’, with over 80% finding it ‘intimidating’, there is clearly a lot of work to do to redress this balance. The SRA are keen to highlight that it is the duty of the legal profession to ensure that this does not become ‘the norm’ and are looking at ways to cut regulation in order to meet the needs of the public and make justice more accessible for all.
You can find more information here
Finally – some news on the implication of Brexit
There has undoubtedly been uncertainty following the EU referendum result. On one hand the Law Society are stating it is a reason for the SRA not to pursue its current reform agenda, however the SRA chief executive, Paul Phillip does not agree, ‘The uncertainty that has followed the EU referendum result should not slow down reform. Changes to open up the market, enabling innovation and increasing competition, will help the sector to grow, to support the wider UK business sector and to attract inward investment. That is, if anything, more important than ever before.’
In addition, as reported in the Gazette, the number of solicitors applying to practice in Ireland has more than doubled since the EU referendum.
Why is it important?
The implications for the profession of the proposed SRA Handbook changes could be far reaching …..
The Law Society has made claims that if the proposals for the revised SRA Handbook go through, then it could lead to less protection for the public and a possible ‘two-tier solicitor profession’.
The proposed changes involve allowing solicitors to work for unregulated entities which then has a knock on effect for the protection of consumers. The Law Society has concerns about consumers not fully understanding the difference between such services and the protection offered, including that of legal privilege, and whether the solicitor would have professional indemnity insurance.
Why it’s important
The SRA consultations are now closed and we have to wait and see whether they have taken on board any of the concerns raised by the profession. We suspect that the accounts rules reform will be scaled back, the initial proposals seem at odds with protecting client money (one of the key risks in the risk outlook).
Whether the SRA listens to the law society about a two tier profession is another matter. We have not heard the last of this, either way.
You can read more about this here
The issue of confidentiality – from both perspectives
A survey of more than 5,400 people by the SRA has lead to quite a significant finding, notably how legal practitioners and members of the public view information security. There would appear to be a huge disparity – solicitors seem to show much more sympathy with those fellow colleagues found guilty of breaking client confidentiality through, for example, losing a client file. The public viewed this as a much more serious incident than solicitors, as they also did when it came to a solicitor’s competence.
Why is it important?
SRA chief executive, Paul Philip has used these findings to strengthen his argument for complete separation from the Law Society, deeming it the only way to rebuild and ensure public confidence in the legal sector.
You can read more here
SRA warns law firms on investment schemes
On the 21st September the SRA issued a warning notice on investment schemes and client accounts, which was an update to its 2013 notice and a notice issued last year on allowing client accounts to be used as bank accounts. The SRA’s concerns centre around two key areas – firstly that the involvement of a law firm or a solicitor can give the impression of credibility to an investment scheme, and secondly that client accounts can be used as a banking service to launder money.
There are consumer losses amounting to millions of pounds arising out of the schemes and the involvement of a law firm or solicitor will clearly have an impact on the trust in the profession.
Why is it important?
The SRA will have regard to this warning notice when exercising its regulatory functions. Many solicitors have been disciplined in the past and the SRA has made it clear it will deal ‘quickly and decisively with any solicitor who becomes involved in (investment schemes)’
You can read the full warning notice here
COFA sanctioned for breaches of use of client account
A COFA (also the Practice Manager) of a law firm has been reprimanded and fined by the SRA for allowing his client account to be used as a banking facility. He allowed withdrawals and bank transfers from the account, as well as effectively providing a banking facility for two clients (also long standing friends of the COFA) for over five years through the account. Despite recording and client ledgers not tallying, the COFA said that although he could see why it may look like the firm was effectively providing a banking facility, he ‘never saw it as such’. Then COFA claimed he was ‘unclear of the rules’ pertaining to this.
Why is it important?
With protecting client money being high on the agenda of the 2016/17 Risk Outlook, it is unsurprising this story has hit the headlines. The Accounts Rules are clear on this matter and this story seeks to highlight the importance of regular training and reminding of all staff to ensure all are vigilant of such behaviours happening.
Interestingly, some criticisms of the re-draft of the Handbook have been that of ‘less prescriptive’ rules. With people breaking such clear rules the way the Handbook is at the moment, does such a story as this add fuel to their fire? Will less prescription mean more breaches? I guess only time will tell …….
You can read more about this story here
Faking documents could cost you dearly
Two stories have made the legal headlines over the last few weeks where lawyers have been rebuked for faking documents. The first relates to a conveyancing clerk who created two emails and claimed they were from a client. He was banned from working in the legal profession without the regulator’s permission and was fined £7500, the biggest fine the SRA has slapped on a non qualified individual thanks to his former employer’s alternative business structure status. The second matter relates to a solicitor who backdated letters on six occasions over a three-year period to conceal errors he had made. He was struck off and ordered to pay £5,500 prosecution costs.
Why is it important?
Integrity is a core professional duty Mistakes happen, the above stories just demonstrate again how matters are made much worse if such mistakes are covered up.
Accountancy firms to expand further into legal market
Before the summer break, an application was submitted by the Institute of Chartered Accountants in England and Wales (ICAEW) seeking to become an approved regulator and licensing authority. The application seeks approval of five reserved legal activities and it follows then becoming an approved regulator and licensing authority for probate in 2014. This would greatly expand their presence within legal services and provide much more competition for those law firms who already provide tax advice. If the application is successful, the ICAEW could well be authorising firms and ABSs within one year.
Why is it important?
The Legal Services Act sought to widen consumers’ opportunities and choices in legal services – well, this is certainly one way of doing it! If the application is successful, then there will be another regulated entity providing more of a choice of legal activities for consumers.
But the real question is whether there is any real appeitite from the accounting sector? Or is this further reform being pushed by the regulators in the name of competition? Lets not forget that MDPs (one stop shops envisioned by the Legal Services Act) have not exactly taken off.
You can read more here
Law Society – practice note updates
5 September 2016 – Client care information
25 July 2016 – Reorganising your business: Employment law implications
21 July 2016 – Execution of a document using an electronic signature
18 July 2016 – Professional indemnity insurance
14 July 2016 – Estate administration: banking protocols
