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Regulatory update - July 2018

Read Michelle Garlick's latest Regulatory Affairs Committee update for the Manchester Law Society Messenger.

So the World Cup is now in full flow and I’m pretty sure my team in the sweep (Costa Rica) will have been knocked out by the time this issue is published! Hopefully England will still be battling on?! And speaking of battling on, the SRA has just announced that it has now submitted its reform plans to the LSB for approval. If it is all approved, we will be working to a new (shorter) Handbook as from April 2019, whilst those of you working in certain practice areas including (but not exclusively) conveyancing, employment tribunal and probate will need to be complying with the SRA’s new Transparency rules on pricing and service descriptions by December 2018. More details are below. The Law Society has issued a last gasp plea to the LSB to halt the reforms relating to solicitors practising in unregulated business but I’d be very surprised if there are any significant changes made. There will be more to follow over the next few months on what firms will need to do to start planning for the changes and my Compli team will be providing training and assistance so watch this space.

This month’s update is going to focus on the MLS Regulatory Conference held at the Hilton Hotel on 5 June. This was the fifth annual conference covering regulatory issues for lawyers and having chaired all of them, I think this was one of the best ones yet.

Chairing the meeting, it fell upon me to begin the day with a summary of regulatory issues over the past year. The SRA has of course given us all lots to talk about (and action) over the past year including the Looking to the Future consultations (changes to the Code of conduct and Handbook generally), better information on pricing requirements and warning notices on a variety of subjects including high risk personal injury claims and investment schemes. We had of course also seen the introduction of new AML regulations and GDPR. Many of these topics were to be covered in more detail during the day.

The first talk of the day (which I presented) was titled “There but for the Grace of God, go I – disciplinary themes and lessons to learn”. The Compli team has acted for a number of firms/individual solicitors in SRA investigations and disciplinary proceedings and very often it is difficult to predict the outcomes, not only because of inconsistencies in approach by the prosecutor but also because there hasn’t historically been any obvious trends. However, a number of themes have become apparent over the past year or so including:

  1. Use of client account as a banking facility and/or being involved in dubious investment schemes (relevant cases discussed included Clyde and Co -a great case study for lessons to learn not only re breach of Rule 14.5 SARs but also AML/client take on procedures and residual client account balances);
  2. Backdating/fabricating documents/misleading clients or third parties in litigation (the Sovani James case was considered and in particular the reputational damage caused by the criticism by the SDT of the culture of the firm she worked in, McMillan Williams, which the SDT described as “toxic”)
  3. Solicitor misconduct outside of the workplace including inappropriate email and social media comments (see Majid Mahmood and Mark Small for examples) and discrimination/harassment and the Christmas Party scenarios.

The fourth theme “You couldn’t make it up” included Philip Saunders, the 69 year old solicitor lost the plot and who headbutted a litigant in person and the case of Chopra who was struck off not one but twice!

Plenty of lessons to learn come out of all of these cases and I will continue to provide updates in this column of important disciplinary decisions.

Next up was Jane Malcolm, Executive Director, External Affairs at the SRA , who gave us an insight into all the activity going on at the Cube. The changes to the Code of Conduct and the new Handbook were discussed and Jane confirmed that whilst it was first thought that the new Handbook would come in to effect towards the end of this year, it is looking more like April 2019 (assuming that the LSB approve the changes). Since the conference, and as mentioned at the start of this column, the SRA has now announced that its reforms have been passed to the LSB for approval. It includes the proposals for solicitors to practise in unregulated businesses, freelance solicitors, 2 separate codes of conduct for firms and individuals, a new set of accounts rules, and greater pricing transparency for many providing services to members of the public and small businesses. The good news is that those who remain regulated will get a digital badge to display on your website (I can hear you all cheering at that one!) which will promote the protections afforded to clients by being a regulated firm and the SRA has backed down so that firms will not have to publish details of their first tier complaints.

The next section of the conference covered financial issues with Sara Hutton of Sara Hutton Consulting providing some really useful practical insight into the importance of relevant and regular financial reporting, cashflow and having appropriate funding in place. Andrew Baker of RSM followed Sara with an update from a reporting accountant’s perspective on issues which give rise to a qualified accountant’s report. He also gave examples (some not so obvious) of breach of rule 14.5 SARs (use of client account as a banking facility) and client account shortfalls. Andrew also pointed out that as the SRA are now much quicker when dealing with applications for change of legal entity, forward planning is needed e.g. it can take considerable time to open a new bank account and an extension of the cease to hold date may be required.

After a well earned break for lunch, we went a bit “outside of the box” with two afternoon sessions covering Client Journey Mapping and improving performance and productivity through workplace wellbeing and mental resilience. Both topics, whilst not obviously regulatory in nature, are key to providing (in the first instance) excellent client service (and thus maintaining a successful business) and, in the second, maintaining a happy workforce (and thus avoiding the type of criticism that was meted out to McMillan Williams in the Sovani James case mentioned earlier). Chris Lowe of Shoppers Anonymous facilitated an interactive discussion on the importance of client journey mapping and how to go about it – do you know where your clients’ “pain points” are during their journey with you/your firm? If not, Chris can help you identify them and implement solutions that will help to improve your clients’ experience and thus hopefully become ambassadors for your firm.

Alexandra Elmywood of the Growth Company really got us all thinking about what workplace wellbeing means and the roles that everyone in the firm can play to improve workplace wellbeing and resilience. It isn’t just about providing a bowl of fruit or gym membership you know!

Our final speakers of the day were Beth Sayle and Bill Jones of Riliance Training who covered updates on GDPR and AML. The importance of risk assessments, ensuring policies refer to the most uptodate Legal Sector guidance and having an independent AML audit function (outsourced if necessary) were key messages from Bill’s AML talk, and ongoing evidencing of the steps you take, risks and issues; how you are processing and why; being proactive in relation to the data you hold, including knowing where your data is hosted and not keeping data just because you think you may need it in the future, were key messages from Beth. She also confirmed that this was an evolving area and there would be changes due to interpretation of the regulation and case law.

And that was it – the end of a really interesting day full of thought-provoking tips and points to take back to the office to action! Hope to see you there next year but remember, we do also hold a COLP and COFA Forum every couple of months and if you are interested in coming along, you will be more than welcome!

This article first appeared in the Manchester Law Society Messenger.

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