COLP Insider - 5th May 2017

2017, May 2017

5th May 2017

The big news this month is that the SRA has announced the new route to qualification, the SQE, will come in from late 2020.

What are your thoughts on this? Our biggest concern is that those of us that have done an LPC or training contract will be seen as ‘old school’ in a few years time! On a serious note, this will be a dramatic overhaul of the training process and no doubt there will be many discussions about it before it is introduced in three years’ time.

In this newsletter we also bring you update on the Money Laundering Regulations 2017 and some top tips on dealing with conflicts. As always we would love to hear your thoughts on the content or on any other compliance news you would like us to include in any future editions.

Introduction of Solicitors Qualifying Examination

Following an 18 month consultation period, the SRA announced on the 25th April 2017 that it was introducing the Solicitors Qualifying Examination (SQE). It states that it ‘is designed to assure high standards of practice through an assessment which is rigorous, fair, transparent and consistent’. The changes are set to come in from late 2020 and in order to qualify you will need to:

pass stages 1 and 2 of the SQE – the first focuses on legal knowledge and the second on practical legal skills
have a degree (in any subject) or equivalent qualification
have a substantial period of work experience
pass the character and suitability requirements

Why is it important?

This is a drastic and radical overhaul of the training process and some are of the opinion that the SRA has gone too far, too quickly. The biggest problem with the current system is that students are paying up to £15,000 for the LPC with no guarantee of finding a training contract or qualifying as a solicitor. Julie Brannan, the SRA’s Director of Education and Training, states that the new system takes away this ‘risk’. However, there is a lot of uncertainty about the new process, with no details on costs, or the assessment itself yet provided. Many are not convinced it is going to be any cheaper than the current route to qualification and are concerned that those from less privileged backgrounds will not take the risk of the assessment.

LSB demand price transparency

On the 19th April, the LSB published its response to the CMA’s legal market study, and has given its regulators until the 30th June 2017 to detail how they plan to ensure that consumers have more information about their legal services provider. Legal Services Board Chief Executive, Neil Buckley, said ‘The LSB has long been clear that there is a need to increase competition in the market and a major part of achieving this will be to ensure there is better information available for consumers in relation to price, quality, redress and regulation’. The LSB will use 4 high-level outcomes to monitor the regulators’ plans:

Action to deliver a step change in standards of transparency to help consumers (i) to understand the price and service they will receive, what redress is available and the regulatory status of their providers and (ii) compare providers.
Promotion of the use of independent feedback platforms to help consumers to understand the quality of service offered by competing providers.
Facilitation of the development of a dynamic intermediary market through making data more accessible to comparison tools and other intermediaries.
Making better information available to assist consumers when they are identifying their legal needs and the types of legal services providers (both regulated and unregulated ) who can help them.

Why is it important?

Is this all about price transparency, or is it more do to with driving down prices? We already have a professional duty to give clients the best information about costs. Most firms have moved into fixed fees wherever possible (in conveyancing or probate for example) to give cost certainty. The nature of legal work is that the complexity and difficulty of the case is often not known at the outset as it will depend on a number of outside factors. ‘Independent feedback platforms’ have been around for a while, and our concern is that consumers may end up depending on statistics without any context, which could put businesses at risk and force firms to concentrate on metrics that do not necessarily deliver the best results for clients.

Money Laundering Regulations 2017

The Money Laundering Regulations 2017 are set to come into force on the 26th June 2017 (although this is clearly an ambitious timetable). The Law Society has described the new regulations as placing ‘disproportionate and unnecessary’ burdens on law firms, including:

Appointing a director (or equivalent) to ensure compliance with the regulations (this is in addition to the existing roles of MLRO and COLP).
Training obligations now extend to ‘agents’ in addition to employees.
Keeping a written risk assessment of the firm and all the steps taken to identify and assess the risk of money laundering, made available to the Law Society on request.
If someone is relying on your due diligence information, you have to keep this for 5 years and make it available within two working days.
The definition of a Politically Exposed Person is wider and includes UK-based PEPs.

Why it’s important?

Whilst everyone wants to reduce the risk of money laundering and terrorist financing, we do think that the proposals are time consuming and onerous, and do little to actually address the ‘risks’. We fail to see any benefit in appointing a further officer in charge of compliance which can only serve to muddy the waters as who is ultimately responsible for what! The HM Treasury is currently analysing feedback and we will update you once we know more.

Local Authority ABS

Reigate and Banstead Borough Council (RBBC) is looking into the possibility of setting up an ABS. RBBC has found that recruitment and retention of good quality qualified staff is difficult, especially given its proximity to London. An ABS model would give RBBC an opportunity to trade and generate additional income, something that it believes will help attract and retain staff. The acting Head of Legal at RBBC, Gavin Handford, has been given permission to put together a proposal for a commercial vehicle

Why is it important?

Buckinghamshire Law Plus, closely followed by HP Public Law, were the first local authority enterprises to be granted ABS licences by the SRA back in August 2014. Whilst local authority ABSs’ are certainly not a new thing, since the first licences were granted to local authorities nearly 3 years ago we have not seen a surge of interest. Whilst having a commercial vehicle, and being able to give advice outside the ‘in-house’ perimeters have been seen as benefits in the past, it is interesting that RBBC sees the recruitment and retention of staff to be one of the main benefits.

Notable disciplinary decisions

David Barr was struck off in an agreed outcome with the SDT, for using more than £500,000 from the estates of deceased clients to play the property market and repay debts.
In another agreed outcome, Ryszard Pietrowski was struck off following a conviction of distributing and making indecent photographs of a child.
The suspension of a solicitor’s practising certificate following bankruptcy was terminated with a condition placed that he was not to act as a manager or owner of any authorised body.

Top tips to deal with conflicts

Have a clear, easy to use system to flag up conflicts. Use your case management or accounts system where possible.
Give regular training to your staff on your systems and controls.
Check whether conflict searches are done as part of your file reviews.
Keep and maintain a register of your own interests .
If you have reviewed a matter because of a possible conflict, note the file with your decision and any guidance given to the fee earner/other staff.
Remember that a conflict can arise when your ongoing duty of confidentiality O (4.1) collides with your duty to disclose all material information to a client O (4.2).
Consider professional embarrassment – do you feel inhibited in doing your best for the new client because of a past relationship with a client?
If one of the exceptions of O (3.6) or O (3.7) apply, remember that you need all clients informed consent in writing and that this should be clearly seen on your file.
Things can change! You will need to keep any possible conflict under constant review during a case, particularly where you have decided one of the exceptions apply.
Keep a conflict register, this will help you to monitor what sort of conflicts arise.
The conflict search is not always the whole answer, you may need to look beyond this especially with issues of professional embarrassment or confidentiality.
Monitor your procedures and your conflicts register at least annually to check that your systems and controls to identify and assess conflicts are effective in accordance with O (3.1).