BSB to amend Standard of Proof for misconduct

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Watchdog to lower standard of proof in barrister misconduct hearings
Prosecutors of barristers accused of breaching professional rules will no longer have to meet the criminal standard of proof, the watchdog for the profession has announced.

The Bar Standards Board said that it would amend the standard of proof applied when barristers face disciplinary proceedings for professional misconduct.

It had held a public consultation on the proposal, which still needs to be approved by the Legal Services Board, the overarching regulator of all lawyers in England and Wales.

If the proposal is approved, the standard of proof will change from the criminal definition, beyond reasonable doubt, to the civil standard of on the balance of probabilities.

Board officials said that the move “will bring the Bar’s disciplinary arrangements in line with most other professions”.

It will also provide a boost to the Solicitors Regulation Authority, the watchdog with direct responsibility for the largest branch of the legal profession. The authority has for some time been battling with the Law Society, the body that represents 130,000 solicitors in England and Wales, over its aim to make the same change.

The Law Society has argued that because solicitor disciplinary tribunals can strike off lawyers and effectively bring an end to their careers, the highest standard of proof should remain in place.

The Bar Standards Board said that the revised approach would require “a period of preparation” at the Bar Tribunals and Adjudication Service. Therefore, it anticipated that the reform would not come into effect until the end of March 2019. “The revised standard will complement other changes that we have made recently to improve our rules and processes,” Sara Jagger, a BSB director, said.

Law Society ruling by ASA for CQS advertising

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Subject: ASA ruling on CQS

Background

This Ruling replaces that published on 14 June 2017. The decision has been reversed, making the complaint upheld.

Ad description

A web page on the Law Society website www.lawsociety.org.uk, seen in November 2016, describing the Conveyancing Quality Scheme (CQS) accreditation, stated “All Law Society Conveyancing Quality Scheme firms go through rigorous examination and testing to demonstrate that they have a high level of knowledge, skills, experience and practice”.

Issue

The complainant, a solicitor, who understood that the requirements to join the scheme did not involve any assessment of applicants’ expertise or quality of service, challenged whether the claim was misleading and could be substantiated.

Response

The Law Society of England and Wales (The Law Society) said that the purpose of the CQS was to provide a trusted community of solicitors within the residential conveyancing market that helped to deter fraud and improve “best practice” standards across the sector. The CQS accreditation mark acted as a recognised quality standard for residential conveyancing practices.

The Law Society stated that all practices applying for CQS accreditation were assessed by their Technical Assessment Team to ensure that they met the requirements. They provided a copy of the application form and details of the information that firms were required to submit about their staff, structure and operations, as well as how the Law Society assessed that information. They said that all accredited practices were re-assessed on an annual basis to ensure that they continued to meet the requirements. Accredited practices were also subject to further checks outside of the normal assessment timetable in instances where there was reason to believe that a firm was not compliant with the scheme rules or CQS protocol. All relevant staff within the practice were also required to carry out mandatory training modules covering key issues relevant to conveyancing solicitors. Each module was accompanied by an assessment that they were required to pass. In addition, CQS accredited firms were required to conduct conveyancing work in line with the CQS Conveyancing Protocol, and manage their practice in line with the Core Practice Management Standards and Client Services Charter.

The Law Society believed that the requirements for joining and maintaining membership of the CQS ensured that all accredited firms had a high level of knowledge, skills, expertise and practice, and that the ad was therefore not misleading.

Assessment

Upheld

The ad stated “All Law Society Conveyancing Quality Scheme firms go through rigorous examination and testing to demonstrate that they have a high level of knowledge, skills, experience and practice”. The ASA considered that consumers would understand that to mean that The Law Society had conducted an in-depth assessment of each firm that applied for the scheme, and verified that, as a whole, the firm had a high level of knowledge, skills and experience related to residential conveyancing, and that their conduct was of a high standard. We considered that consumers would understand that any conveyancing firm should meet basic minimum requirements in terms of the qualifications and licensing of its staff, and its compliance record. Therefore, given the reference to “rigorous examination and testing” and a “high level of knowledge, skills, experience and practice”, we considered that they would understand members of the CQS had met a standard above and beyond basic requirements.

We noted that applicants were required to provide detailed information relating to a comprehensive range of aspects of their operations. Some of this information was cross-checked with data held by third parties, including the Solicitors Regulation Authority, the Chartered Institute of Legal Executives, and the Council for Licensed Conveyancers, the Land Registry, credit agencies, the Legal Ombudsman, and banks; or verified through the submission of original documents, or public domain searches. Information independently verified in this manner included the professional qualifications of the Head of Conveyancing, Senior Responsible Officer, Managers and Qualified Conveyancers; whether the same had held a fitness to practice certificate at all times; details of any training undertaken with the Law Society; the history of complaints against a firm and any action taken in light of these; purchase and sale transaction volumes; merger history; and professional indemnity cover. In addition, the Law Society carried out criminal records and identity checks on all relevant members of staff, and a credit check on the firm. We considered that these checks were sufficient to demonstrate that listed staff members held the appropriate qualifications to undertake their work, and to identify any causes for concern in relation to the conduct and ethics of the firm or its staff. We noted that qualifications were independently verified, and this would form part the consumer understanding of “knowledge”, however we considered that consumers would assume that any conveyancing solicitor held the appropriate qualifications to allow them to carry out residential conveyancing, and so a “high level of knowledge” was likely to be understood as implying a level of knowledge that went beyond this basic requirement. The assessment team also independently verified records of training courses that had been administered by The Law Society, though we noted that this would not cover all training an individual might have undertaken.

The form also included questions about the experience and management ability of the Head of Conveyancing to run a residential conveyancing department; adherence of the practice to Core Practice Management Requirements; and the supervision of conveyancing staff. We considered that consumers would likely understand that a firm with a “high level of knowledge, skills [and] experience” would have independently proven to the assessment team that it reached a high standard in these areas.

The sum total of information provided in the form was assessed by the Technical Assessment team and individual elements were assimilated onto a scorecard to determine the suitability of the practice and the individuals within it to obtain CQS accreditation. We noted that between 2014 and 2016, 291 out of 293 applications had been approved.

We also noted that relevant members of staff were required to undertake training and pass multiple-choice assessments, demonstrating their knowledge of key areas of conveyancing practice, within six months of accreditation being granted. This meant that firms could be accepted into the scheme before any relevant members of staff had been trained and assessed. We noted that the training contributed toward demonstrating that staff had knowledge of a range of subjects relevant to residential conveyancing, however we considered that readers of the ad would expect that all criteria would have been met prior to accreditation being granted.

The continuing suitability of accredited firms to retain membership was re-assessed on an annual basis using the same process described above. We understood that the Law Society had the capacity to undertake more detailed investigations into complaints it received about CQS-accredited firms, including on-site visits. These would consist of physical file reviews, interviews with staff, and observation of day to day processes and procedures. In the event they considered that a firm no longer met the required criteria, they could and did revoke membership. However, we understood that independent observation of these factors was only carried out, if considered necessary, following receipt of information calling into question a firm’s adherence to CQS rules and protocols; or where concerns were identified by the assessment team at re-accreditation stage. We understood that on-site visits were not conducted prior to initial accreditation. According to figures provided by The Law Society, no more than twelve firms had been visited, and two firms had had their membership revoked, between 2012 and 2016. In the majority of years, no on-site visits had been undertaken.

While we acknowledged that firms were granted CQS accreditation on the basis of independently-verified information attesting that they met an adequate standard in terms of their competency, conduct and ability to carry out conveyancing transactions, we considered that this amounted to the minimum level of “knowledge, skills, experience and practice” that consumers would expect from a firm that was licensed to undertake a major legal transaction on their behalf. In that context, and in the absence of any routine, independent checks to assess the relative degree of “knowledge, skills [and] experience” that the firm possessed prior to membership being granted, we considered that the ad exaggerated the level of knowledge, skills and experience possessed by a CQS-accredited firm and its staff, and the extent of the checks that a firm had to undergo to receive its accreditation. We concluded that the claim “All Law Society Conveyancing Quality Scheme firms go through rigorous examination and testing to demonstrate that they have a high level of knowledge, skills, experience and practice”, as consumers were likely to understand it, had not been substantiated and was therefore misleading.

The ad breached CAP Code (Edition 12) rules 3.1 (Misleading advertising) and 3.7 (Substantiation).

Action

The ad must not appear again in the form complained about. We told the Law Society to ensure that their advertising did not describe CQS-accredited firms in a manner that misleadingly exaggerated the membership requirements of the CQS.

CAP Code (Edition 12)

3.1 3.7

 

Law Firm Growth and Compliance Seminar

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 New AML EU 4th Money Laundering Directive now in force

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The Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 implement the EU 4th Money Laundering Directive. The final version includes changes from a draft published earlier in the year.

Amy Bell, who runs Amy Bell Compliance and chairs the Law Society’s money laundering task force, said the new regulations repeal and replace the 2007 version and are 118 pages long.

“Whilst much of the 2007 regulations remain intact, there are some considerable amendments and additions which will take firms some time to consider and implement,” she said.

In a statement on Friday, the Treasury said the regulations would “improve the quality” of checks done on the source of money.

“They ensure that businesses can spot suspicious activity and report it, enabling the police to act swiftly and decisively to prevent corruption or terrorist attacks.”

Legal bodies have not yet published guidance on the new regulations, in light of the government’s decision that in future there can only be only one Treasury-approved piece of AML guidance per sector.

This means the sign-off process now requires the agreement of 11 legal sector regulatory and representative bodies across the UK.

The SRA said: “We expect law firms to comply with their legal obligations and are urging law firms to familiarise themselves with the new regulations as soon as possible, and take action to comply.”

In a statement, the Law Society said: “While we had hoped to have had the guidance approved and published ahead of the commencement of the new regulations, this has unfortunately not been possible…

“We recognise that many of the changes required under the new regulations will mean significant changes to firms’ systems and controls.”

It said the Legal Sector Affinity Group – a group representing the legal sector AML supervisory bodies to government, including the Law Society and SRA – has told the Treasury that “a sensible supervisory approach towards the new regulations would be to give firms and individuals a period of time to adjust to their new obligations.

“The group feels this is particularly important given the extremely short timeframe between when supervisors and those they supervise will see the final version of the MLRs and when those MLRs come into force.”

Ms Bell said a central theme of the regulations was firms needed to take a risk-based approach, meaning they need to complete a risk assessment of their practices and review their AML policies.

There were a number of practical changes firms were likely to need to make to their customer due diligence process, she said, such as expanding the list of information obtained on a corporate client to include information about its constitution, possible from review of the articles of association.

“This could add considerable time to the process,” Ms Bell said.

Another issue was a wider definition of beneficial owners, while the definition of a politically exposed person (PEP) now included domestic PEPs, and the definition has changed to include the governing bodies of political parties, and the boards of international organisations.

Law Society to pay Socrates up to £230,000 in costs

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Competition Appeal Tribunal ordered the Law Society to pay Socrates Training’s costs up to a maximum of the approved budget of £230,000.

Last month, the tribunal ruled that the Law Society abused its dominant position by requiring over 3,000 law firms to buy its own fraud training in order to maintain their Conveyancing Quality Scheme (CQS) accreditation.

The consequential order said that the Law Society “shall not oblige CQS accredited firms to purchase exclusively from the Law Society mandatory training in mortgage fraud, anti-money laundering and financial crime required for CQS accreditation”.

The society has withdrawn the financial crime module, the only one still live, as a result.

The proceedings have been stayed for two months to allow the parties to seek agreement on quantum. If this fails, Socrates has until 1 September to serve points of claim on quantum and the society then 28 days to respond.

Socrates quantified damages in the claim form at £112,500, on the basis that the society’s conduct lost it the custom of 75 law firm firms that would spend some £600 each for two and a half years.

On costs, the tribunal ordered Chancery Lane to pay Socrates’ costs of mediation, to be assessed if not agreed, up to £4,000 plus the company’s share of the mediator’s fees, and also its costs of the proceedings up to a maximum of £230,000, to be assessed on the standard basis if not agreed.

The society’s budget had been capped at £402,500, though it had originally sought £637,000.

 

Socrates v The Law Society at Competition Tribunal Ruling

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Conveyancing training revisited after competition tribunal ruling

26 May 2017

The Law Society of England and Wales today announced it will look again at the training elements of its Conveyancing Quality Scheme (CQS) in response to a ruling by the Competition Appeal Tribunal.

The tribunal found that for a short period  – from April 2015 – the Law Society should have permitted third party trainers to offer some of the modules for the scheme. CQS has been running since 2010.

Only one of the modules that concerned the tribunal was still provided  – the Financial Crime module – and that has now been withdrawn.

Law Society president Robert Bourns said: “For the vast bulk of the time CQS training has been available it has been compliant with competition rules. I am certain that in setting CQS up, the Law Society acted in good faith and in the public interest.

“The purpose of CQS – and its effect – was to ensure greater consumer choice in terms of practitioners available to undertake this important work.

“We note the decision and have and will take steps to avoid similar issues in the future.

“Purchasing a house is the biggest investment most people make, and they need to feel confidence in the process, as do lenders. That was always our motivation – CQS has never been about profit.

“We are grateful to the tribunal for their guidance on changes to CQS that they make in their ruling and we will be looking at their comments as a matter of priority in the coming days.”

Socrates v The Law Society Judgment

Compliance Survey

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We are conducting a survey of your accreditation and quality standards and would be delighted if you can enter the Compliance Survey

SRA approve Solicitors Qualifying Examination

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The SRA is going ahead with the Solicitors Qualifying Examination. Plans were approved during its 12 April board meeting.

The idea of a centralised exam attracted widespread criticism, including from the Law Society, when it was first floated in early 2016. A second consultation, on revised proposals that were generally considered an improvement, closed in January.

AML 4th Directive an unnecessary burden on Law Firms

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‘Gold plated’ regulations transposing the EU’s fourth money laundering directive into UK law threaten to impose unnecessary burdens on law firms, the Law Society has told the government.

Responding to a consultation by HM Treasury on the proposed Money Laundering Regulations 2017, Chancery Lane says that small firms and sole practitioners ‘will struggle more than most to bear the cost of additional red tape’ resulting from the regulations. ‘Gold plating’ the directive could place UK firms at a competitive disadvantage compared with other EU firms, and those based elsewhere in the world after the UK leaves the EU.

The response, prepared by the Society’s Money Laundering Task Force, identifies numerous examples of what it calls ‘unjustified gold plating’. These include:

The requirement for some firms to appoint an individual at the level of ‘board of directors’ to ensure compliance – despite the fact that firms already have a compliance officer for legal practice and a money laundering reporting officer.
The extension of certain obligations to ‘agents’ in addition to employees. This will impose a ‘significant additional burden on the regulated sector’ with no additional benefit.
The obligation to apply due diligence to domestic ‘politically exposed persons’, including all members of governing bodies of political parties. ‘Given that there are over 400 registered parties in the UK, most of which are small… we think the definition in the draft regulations is excessively broad and not risk based,’ the Society states.
The register of beneficial owners of trusts. Trustees could be required to submit duplicate information. This will be time consuming, onerous and, where trustees are professional trustees, will incur associated, duplicate costs. The proposed obligation to report on events in the same tax year that they occur is ‘unworkable’.
The Society also describes as ‘unrealistic and unworkable’ a proposed requirement to provide due diligence information within two working days. ‘There are approximately 4,000 sole practitioners and 4,000 firms with two to 10 partners in England and Wales that will have many competing priorities and statutory deadlines to meet at any given time,’ the response notes. Responding within two working days ‘while continuing to meet clientss needs is an unrealistic expectation for sole practitioners and legal professionals working in small firms’.

The consultation closed on 12 April. HM Treasury says it is ‘analysing feedback