Regulatory update - November 2018
I hope those of you who have been able to get away over the half-term break have had a good time? So far this year, flights to/from my three holiday…
I hope those of you who have been able to get away over the half-term break have had a good time? So far this year, flights to/from my three holiday destinations have been either cancelled, re-routed or delayed for so long as to enable us to claim compensation (over 8 hours on our recent trip to Seville) so we haven’t had the best of luck! It got me thinking though about the customer service. I can accept that occasionally there may be technical problems which mean that the plane can’t fly or a replacement plane needs to be found which causes delay. What influences me about whether I will use the airline again is how they deal with those situations – do they inform the customers as soon as they are able to or do they leave you to guess that something might not be quite right when you arrive at the gate to board and there is no plane? Do they keep the customers up to date with information? Do they provide details about how to claim and deal with the claim promptly and fairly?
The same applies to how law firms deal with issues – no firm is perfect and problems will arise but its how you deal with them that will determine whether the client will feel able to use your services again. In a world of growing competition, this is fundamental to a firm’s success.
Anyway, rant over. Here is an update on developments over the past month or so.
Transparency Guidance issued by SRA
Ahead of the new price transparency rules coming into effect in December, the SRA has issued guidance regarding price and service information to be made available on firms’ websites. The guidance provides templates and best practice tips on publishing user friendly price and service information. As reported in previous updates, under the new rules, all regulated law firms carrying out certain work types will be required to proactively publish information on prices they charge and what these include. In addition, firms must also provide typical timescales for all quoted services and staff credentials. All of this information must be in an easily identifiable location on the firm’s website.
Interestingly, and unhelpfully, nowhere in the guidance does it state the date that these rules come into effect but having made enquiries at the SRA, we have been informed that this will be on 2 December * so there is not much time left to get your house (and websites!) in order.
Standard of Proof in SDT Proceedings
The proposed adoption of the civil standard of proof in SDT proceedings has enjoyed strong support from the SRA and Legal Services Board with significant pushback from the Law Society. The Law Society has freshly stated their opposition in response to the SDT’s consultation. In support of their position, they cited the SRA’s prosecution rate, stating that the SRA enjoys the “highest prosecution success rate of any regulator we have found” citing the 96% conviction rate in 2016 as case in point. They stated that by virtue of the “draconian nature” of the SDT’s powers, it is only proper that it is “sure of the facts in all cases” before striking off or indefinitely suspending a solicitor. They also bolstered their opposition to the proposal by discussing the very real consequences (both personally and financially) of being prosecuted by the SDT. In contrast, the SRA called for panels of a lay majority when sitting on SDT proceedings with the aim of supporting public confidence and removing the perception of a structural bias in favour of solicitors. They also repeated their support for the move away from the criminal burden of proof. My thanks go to those members of the COLP and COFA Forum who attended the meeting to discuss the issue.
Insurance Distribution Directive
The SRA has published rules and accompanying guidance for dealing with the new Insurance Distribution Directive (“IDD”) which came into effect on 1 October. The new set of rules will require firms engaging in insurance distribution to change the way that they work. The IDD replaces the Insurance Mediation Directive and those most affected are firms working in personal injury, conveyancing or probate. With the genesis of this regulation comes a new compliance role, the Insurance Distribution Officer, responsible for ensuring the firm's compliance with the IDD. If you need help in complying with these new rules, please do not hesitate to get in touch.
Calls for Compliance Officer Protection
The Law Society has urged the SRA to provide specific protection for compliance officers who report their solicitors to the regulator. In responding to the SRA’s consultation on the clarity of the reporting threshold, Chancery Lane asked the SRA to reinstate a requirement from a previous incarnation of the Code of Conduct which stated: "you must not victimise a person for reporting your conduct to the SRA". Whilst perhaps most obviously addressing workplace harassment this would also prevent solicitors reported to the SRA from seeking legal redress if the allegations were in actuality unfounded.
Indemnity Insurance Renewal Date Sparks Rush of Mergers
The 1 October renewal date for indemnity insurance has sparked a rush of mergers and acquisitions being announced. I hope those of you who have a 1 October renewal date managed to secure a favourable premium but if you would have liked it to be better, then now is the time to think about what you can do to improve your risk profile. If you need any help in identifying the gaps, managing the risks and/or implementing improvements, do get in touch.
SRA loses Leigh day appeal
The most expensive and longest running ever disciplinary case between the SRA and Leigh Day solicitors has again been in the news with the SRA’s appeal of the decision acquitting the respondents being dismissed.
Solicitor struck off following conviction for Income Tax fraud
Dianna Lee who was handed a two year prison sentence in 2016 and was told she was “wholly unsuitable to be a solicitor” has now been struck off.
Ms Lee was found to have falsified information on her 2009 and 2010 income tax returns to over-claim tax repayments totalling £37,000. She did this by, amongst other fraudulent activities, fabricating invoices, letters and an employment contract to support her claims.
Even though it was found that Ms Lee had been suffering gravely from mental health issues for upwards of 20 years and one of the psychiatrists suggested Ms Lee was close to requiring compulsory detention for treatment concluded that it had to strike off Ms Lee. They stated that “Allowing (her) name to remain on the roll would have a significantly detrimental effect on the public confidence in the reputation of the legal profession.”
"Dishonest as it could get" solicitor struck off
A solicitor whose conduct described by the SDT as “about as dishonest as it could get” has been struck off.
The tribunal found that Neil Adrian Aiston was in urgent need of funds as he was facing an intervention into his firm. He persuaded a longstanding vulnerable client to make an unsecured loan of £175,000 to another client. In fact, this money, unbeknownst to the vulnerable client, was to go back to the solicitor to fill a hole in his own client account. The £175,000 was never repaid and a claim by the second client is now with the Solicitors Compensation Fund.
Solicitor fined for ignoring money laundering duties
A solicitor who recklessly exposed his firm to the risk of money laundering has been fined £12,500 and costs of £9,100 by the SDT.
The tribunal heard that Amit Kumar Manibhai Patel only became aware that his firm had received seven payments from a third party, worth over £300,000 after he was contacted by the police. Mr Patel admitted failing to make the relevant enquiries about the source of funds and the identity of the payer, whom he did not know. He also admitted failing to have sufficient regard to his duties under the MLR and the SRA’s warning notices on money laundering.
The tribunal found that Mr Patel’s culpability was high, as he was “directly responsible for ensuring money laundering compliance” as the sole principle COLP and COFA for the firm and that his conduct risked his firm’s client account “being abused for money laundering purposes”.
That’s all for this month – by the time the next edition comes round, we should know the LSB’s decision ** on the SRA’s proposed new Handbook so watch this space!
* Now confirmed to be 6 December
** LSB approved the SRA's application in full on 6 November 2018