Call to give SRA power to strike off solicitors

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Call to give SRA power to strike off solicitors

Posted By Neil Rose 

Disciplinary cases involving solicitors are now akin to High Court trials and there needs to be a major overhaul that would make the Solicitors Regulation Authority (SRA) responsible for handing out all sanctions, including strike-offs, a former prosecutor has said.

Iain Miller said the Solicitors Disciplinary Tribunal (SDT) should turn into an appellate body for those unhappy with SRA decisions.

Mr Miller, a partner at City firm Kingsley Napley who acted for the SRA for many years but now advises law firms, said the “current long-winded system of disciplining solicitors is inefficient and costly and must not be allowed to survive much longer”.

At the moment, the SRA can only rebuke solicitors and fine them up to £2,000 – for any more severe sanction, it has to refer them to the SDT. Mr Miller said this “flies in the face of more streamlined regimes”.

He pointed to the high-profile case involving Phil Shiner, which ran for more than two years with costs expected to hit £500,000. If Mr Shiner is unable to pay, then the costs will be borne by the wider profession.

Mr Miller said: “Doubtless those involved in investigating, preparing, presenting and determining the Shiner case did so with skill and diligence. However, the system means that it simply could not have been done quicker or at less cost. The problem is a structural one and that must change.

“Under the current model, once the SRA receives a complaint, it must investigate, seek a response from the subject, decide whether to refer the matter to the SDT, prepare its application, deal with any interlocutory applications and directions, and then wait for a listing slot. Hearings are akin to High Court trials.

“While a process in which the initial decision is taken by a disciplinary tribunal is common within a professional regulatory scheme, it is less common in the financial and services sectors. There is no legal requirement to have such a disciplinary tribunal process.”

He said an alternative model would be to allow the SRA to take the initial enforcement steps subject to appeal to a tribunal. That is the model applied to alternative business structures, he pointed out, where the SRA is able to fine up to £250m, subject to a review by the tribunal.

The SRA has been pushing for an increase in its disciplinary powers for some years.

Law Society of England and Wales has appointed Paul Tennant OBE as interim chief executive.

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Robert Bourns, Law Society president, said: “I am delighted to be working with Paul Tennant whilst we finalise arrangements for recruiting a permanent chief executive for the organisation.

“Paul has been chief executive of a large and complex housing organisation but also has a clear understanding of non-executive leadership roles, having been president of the Chartered Institute of Housing. This perspective will be helpful as we consider future ways of working.

“We have a clear business plan for the year focused on understanding and serving our members, transforming our IT and improving our efficiency and Paul will be working with our executive team to deliver our plans.

“Meanwhile, my focus will be on ensuring we represent the profession effectively through a period of significant change and working with council colleagues and others to progress our governance review.

“We have appointed the Good Governance Institute to help us with the governance review and have also brought member perspectives on to our review working group.

“I will say more about the recruitment of a permanent chief executive in due course and in the meantime thank Catherine Dixon for her hard and effective work with the Society.”

Paul Tennant said: “I am looking forward to working with the president, council and staff at the Law Society for the next few months.”

CQS and HSBC conveyancing threshold raised for SPs from £150k to £350k

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Nearly five years after the Law Society successfully campaigned for HSBC to expand its conveyancing panel to include all firms accredited under Chancery Lane’s specialist kitemark, the High Street lender has raised the mortgage threshold for sole practitioners who can act for the bank and borrowers.

HSBC has announced that it will increase the loan threshold imposed on sole practitioners registered under the Society’s Conveyancing Quality Scheme (CQS) from £150,000 to £350,000.

HSBC’s head of secured lending, Tracie Pearce, said the bank’s decision would provider ‘greater choice and flexibility’ for customers and cut homebuying costs.

The Society welcomed the change, which came into force today. Robert Bourns, president, said: ‘The CQS accreditation marks a solicitor’s commitment to maintaining the highest standard of skill and service, and the value solicitors bring to an often complex deal.

‘HSBC’s decision shows that those dealing with conveyancers know that when a solicitor is CQS-accredited they can be relied upon to be at the top of their game. It is a welcome change that will benefit both solicitors and their clients.’

In 2012 HSBC agreed to amend its conveyancing approach to enable all CQS-accredited solicitors to act for HSBC and its mortgage customers, following a four-month campaign by the Society. CQS-accredited sole practitioners were able to handle all cases with mortgage values up to £150,000.

Previously only firms on HSBC’s managed panel of conveyancers were able to act for the borrower and lender, with all other firms able to act for the borrower only.

Under HSBC’s conveyancing system, those applying for a HSBC mortgage have three options when seeking a solicitor or licensed conveyancer. They can choose:

  • A solicitor firm or licensed conveyancer on its managed panel;
  • A CQS-accredited solicitor firm or licensed conveyancer who can act for the homebuyer and the lender; or
  • A solicitor or licensed conveyancer who is able to act for the mortgagee but not HSBC, which would cost £295 including VAT in addition to the chosen firm’s fees.

The Sole Practitioners Group was ‘delighted’ with HSBC’s announcement. Chair Kemi Mosaku said: ‘Everyone should have access to independent legal advice from a solicitor of their choice and, of course, we welcome any initiative on the part of lenders which widens consumer choice.

‘Obtaining CQS accreditation requires solicitors to have stringent procedures in place and the public and indeed banks can thus rest assured that they are getting advice from experts.’

Mosaku urged other lenders to follow suit by increasing mortgage lending limits in the same way.

Solicitors’ agents could face prison

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The Bar Council has warned unregistered barristers acting as solicitors’ agents that they could face prison if they do not comply with a ‘narrow’ area of law.

In guidance published this week the body said anyone working as a solicitor’s agent needs to ‘consider carefully’ whether they meet requirements outlined in the Legal Services Act 2007.

The guidance, which follows a similar warning published last year, has been reiterated because ‘it is understood that there are a number of unregistered barristers currently appearing in court as solicitors’ agents’.

It also references two recent hearings McShane v Lincoln (June 2016) and Ellis v Larson (September 2016), in which solicitors’ agents were judged not to have rights of audience. In McShane the case centred on a pre-action protocol for low-value personal injury claims in road traffic accidents. Ellis was focused on a similar claim.

The council warned that the decision of District Judge Peake, an ‘experienced district judge’ in McShane, that the agent did not have rights of audience is ‘likely to be persuasive’ in other similar cases.

The conditions under which solcitors’ agents can be exempt under the LSA 2007 are: that the individual must assist in the conduct of litigation; must be under instruction from an authorised person (usually a solicitor) and that the hearing must be heard ‘in chambers’.

‘All individuals undertaking work as solicitors’ agents are urged to consider carefully whether they fulfil the requirements upon accepting every new instruction and when attending at court,’ the council said.

It added: ‘It is a criminal offence for a person to carry on a reserved legal activity unless he is entitled to do so, such being triable summarily or on indictment, the latter carrying a maximum penalty of two years’ imprisonment.

‘The Bar Council is concerned to promote compliance with the act, since this is in the interests of the proper administration of justice, the protection of consumers and the protection of unregistered barristers who might otherwise open themselves up to potential criminal liability.

‘They should consider with care whether the nature of their work properly enables them to describe themselves as assisting in the conduct of litigation in the narrow sense explained.’

Proposed SRA SQE reform criticised by Society of Legal Scholars

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Law professors lambast proposed reform of solicitor qualification

A planned radical overhaul of the solicitor training regime is “fundamentally flawed”, says a report from senior academics.

The proposed reform – which involves a centralised exam for all those aiming to qualify as solicitors in England and Wales – risked creating a two-tier system that “will damage the reputation of all solicitors”, according to the report.

In a damningly critical analysis, the 118-year-old Society of Legal Scholars says that the proposals have been put forward despite research showing that the legal profession is “broadly happy with the current system”.

The society, whose 3,000 members are mostly legal academics at universities, criticises the Solicitors Regulation Authority, the body that has mooted the reforms, for having “failed to provide robust evidence as to inconsistency of standards in the present system”. In a jibe seemingly aimed at riling the solicitor watchdog, the academics predicted that if the reforms were implemented “the Bar … will truly be able to say that barristers are better educated in the law than solicitors”.

In addition to creating a single qualifying exam, the SRA wants to widen the route to that final hurdle, meaning that a qualifying law degree or the conversation course, the current graduate diploma in law, will no longer be required.

Therefore, SRA officials are likely to suggest that the society’s arguments are based on a degree of self-interest. Indeed, the society’s response to the SRA proposals says: “Most jurisdictions around the world require possession of a law degree as a complement to a centralised assessment. There are real risks that the qualification of solicitor will be devalued in international perception.”

SRA fines COLP who misunderstood obligations £7500

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Compliance Officers for Legal Practice (COLP) and Compliance Officers for Finance and Administration (COFA) have vital roles in the regime of outcome focused regulation of the SRA.

This is aimed at giving the most appropriate result for legal services consumers. The positions of COLP and COFA are key in creating a compliance culture within a firm, and allowing a focal point for risk identification to form, as well as a key point of contact for the SRA.

The roles involve taking responsibility for the systems and controls of the firm, ensuring appropriate processes are in place so those involved with the firm comply with the SRA handbook.

Full awareness of the obligations involved in being a COLP or COFA are of upmost importance, in order to ensure the right steps are taken should any relevant issue arise within the firm.

The true extent of this required awareness has been demonstrated in a recent case, where a newly appointed compliance officer ‘fundamentally misunderstood his obligations’, resulting in a fine of £7,500.

Having been in the post for just one year, the Solicitors Disciplinary Tribunal also banned the officer from being a COLP or COFA.

Steven David Hulme was had been working at Lancashire based Orbis solicitors, where he was employed as an assistant solicitor. The firm was subsequently closed down on the 7 April 2016 by the Solicitors Regulation Authority, following suspicions of dishonest action from Anne Bradley, the founder and director of the Orbis.

Hulme began working at Orbis in April 2006 and in 2013 went on to become the firm’s COFA.

A SRA forensic investigation took place in February 2014, which revealed a cash shortage of £84,666.63 in the firm’s client account. This amount consisted of professional disbursements which had not been paid, received into the office account between 8 August 2011 and 30 January 2014. These should have been paid out within two days of receipt.

Hulme argued that he was aware of the breaches in his defence. As well as being discussed in board meetings, he had also recorded them in the Accounts Rule Breach Record of the firm which he maintained.

Although he agreed that the breaches should have been reported to the SRA, Hulme stated that he had alerted Anne Bradley in her capacity as the firm’s compliance officer for legal practice. He said that Ms Bradley assured him that she had reported the breaches to the SRA.

£5,000 was agreed as an appropriate sanction by Hulme and the SRA.

However, having considered the seriousness of the misconduct, the tribunal believed a higher fine should be ordered of £7,500. In addition to this, attached to Hulme’s practicing certificate should be the condition that he may not be a compliance officer.

The tribunal commented on Hulme’s misunderstanding in regards to his obligations in regards to acting as the COFA of the firm.

‘The tribunal considered that [Hulme]’s misconduct was serious. There was a substantial shortage that subsisted on the firm’s client account over an extended period of time. The respondent was aware of that amount, and indeed recorded the breach in the Accounts Rules Breach Record he maintained. He had agreed to act as the firm’s COFA, but had fundamentally misunderstood his obligations in that regard.’

It was also agreed by Hulme that he would pay the SRA costs in the sum of £2,250.

Following a separate investigation, Bradley was suspended from practicing as a solicitor for five years on 16 November 2016. This was a week after Hulme’s tribunal.

COLPs and COFA have important responsibilities and this case highlights the need to be aware of them.

Recording breaches is a fundamental part of the role, both in terms of documenting and increasing firm knowledge on where issues may be arising

CMA report on Accreditation

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Accreditation schemes 

Accreditation schemes or quality marks have been developed by providers as a way of demonstrating that specific quality standards have been met or that the provider has specialist expertise. The majority of quality marks focus on specific practice areas but they commonly aim to signal that providers who have the accreditation are operating at a higher standard than others. Providers who are members of these schemes have made an active decision to participate. 

The Law Society suggests that these accreditation schemes: ‘promote high standards in legal service provision and ensure that clients are able to easily identify legal practitioners and firms with proven competency in specific areas of law’.

However, the LSCP has previously reported that there is minimal awareness of quality marks and consumers make little use of them. Our qualitative research with consumers confirmed this, finding that: ‘Overall, consumers had little awareness and knowledge of formal quality indicators such as quality mark schemes. This is reflected in the fact that no such indicators were referenced by consumers’.

The latest consumer research by the LSB and the Law Society also showed that when choosing a main adviser, consumers only looked for services which had quality marks or other standards for 4% of issues.

Further, there are questions about whether such schemes really provide a signal of ‘better’ quality. The SRA notes that: ‘while these schemes cost providers money to join and an annual fee, we are not aware of any evidence that they improve the quality of service. There is also the risk that they can confuse consumers or provide unwarranted assurance’.

The CLC elaborates on this by explaining that: ‘Such kitemarks as exist attest to certain inputs by the firms in question in terms of business processes but do not measure or attest to quality of outputs’.

Despite the limited awareness from consumers, some quality marks may benefit consumers indirectly, as they are used by intermediaries who filter providers on their behalf. In principle, the use of quality marks by intermediaries can be beneficial because it can drive higher quality standards. However, there is the possibility that the use of an accreditation scheme as a requirement for access to a particular part of the sector can create an issue for competition, for example where the scheme is only open to one type of provider. The CLC raised this concern in relation to the Conveyancing Quality Scheme (CQS) which is managed by the Law Society for solicitors. However, in practice this has not been an issue. This is because, although solicitor firms are often required to hold CQS membership to access lender panels, CLC-regulated firms are not. 

The CLC also has concerns about the quasi-regulation that intermediaries can introduce through their requirements for quality and questioned whether the costs to providers are matched by the benefits, given their existing regulatory obligations. 

HMRC confirm dates for VAT on CON29 searches

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HMRC have confirmed dates for VAT being applicable on CON29 searches.

An HMRC spokesperson has said:

“We are creating a level playing field for all conveyancers. Solicitors will be able to claim back the VAT payable in the normal way.

“We are in ongoing discussions with stakeholders and will address any questions they may have.”

It has been confirmed that the change is to be implemented by local authorities from 1st January 2017. However, should any local authorities foresee delays in implementation, they are to inform the HMRC – with the final deadline being no later than 31st March 2017.

Catherine Dixon resigns from CEO at The Law Society

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Law Society chief executive Catherine Dixon said: “It is my firm belief that the Law Society will not be perceived by its members and other key stakeholders to have changed and to be representative of solicitors and the diverse solicitor profession, without changing the way it is governed.

“The Law Society’s governance is costly (over £2m per annum not taking into account my time or my executive’s and staff time in reporting), bureaucratic and does not reflect how successful modern organisations, including membership organisations, operate.”

She said she found it “impossible” to navigate the complex and often overlapping boards and committees in a way which best served the organisation and its members.

“It had taken council nearly a year to get to a point where a decision could have been made to start making changes to governance.

“As any implementation of a main board will not now start until further work has been undertaken on council seats, as optimistic as I am, I fail to see how this work can be completed in a timely way – particularly taking into account the external pressures on the Law Society to demonstrate effective and modern governance arrangements, which should not be underestimated.

“I truly believe that the longer-term future of the organisation rests with it having in place an effective governance structure. It is competing against hostile organisations which already have agile and effective governance structures in place.

“If the external environment was not so hostile, the Law Society could take its time to review its governance and make any changes at its own pace. However, the organisation does not have this luxury.

“I want to be part of an organisation with a board and council which works effectively and collaboratively with its executive. I want to take responsibility as CEO and be accountable. For me this means being part of a board which has the expertise, experience and skill sets to oversee a complex multi-million pound organisation.

“I believe that boards should make collective decisions which their senior executive are party to and which the board stands behind and is accountable for. I don’t see the role of a CEO as merely attending and reporting to a board. If this is how council sees the role of the Law Society CEO, (which the agreed main board structure suggests it does), then unfortunately this is not me.

“It is for this reason and because of the failure to agree to progress with the creation of a main board that I have decided to leave the Law Society. I cannot in good conscience continue to act as the CEO of an organisation when I do not support the decision by council not to rigorously pursue governance reform in what I believe is in the best interests of the profession and the organisation.

“Therefore, just like any accountable board member who does not support a critical decision of that board, I feel that I am left with no option but to resign.”

Law Society president Robert Bourns said: “We are extremely grateful to Catherine for her tireless and effective work for the Law Society as chief executive. Her achievements in the last two years are numerous and include delivering a new strategy and three year plan, building our influence and thought leadership and promoting member focus at the heart of our work.

“I note Catherine’s comments on the pace of the governance review. It is important that we press on with changes in order to take the organisation and the profession forward. I aim to use the rest of my presidency to help drive the next stage of the review and propose further changes.

“We will be announcing plans for the recruitment of a new CEO in due course and in the meantime will focus with Catherine on the substantial work in progress.”

SPG hits back at Hazelwood’s figures

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The Sole Practitioners Group said the SRA data did not provide a breakdown between sole practitioners who are incorporated and those who are not. Over the five year period, according to SRA data, the number of incorporated law firms has actually gone up from 2,583 (24% of the total) to 4,225 (41%) – a rise of 63%.

SPG chair Kemi Mosaku reported that the organisation has had an increase lawyers wanting to set up their own sole practices, and work with the SRA has successfully minimised the red tape involved.

She added: ‘For a lawyer who is an entrepreneur setting up in sole practice has never been easier and is more attractive than switching from employment in a law firm to being a consultant in a so called virtual law firm where they cannot build their own brand and are not in charge of their own destiny.’

Tony Roe (pictured), a member of the Law Society’s Family Section and Small Firms’ Division committee, said Hazlewoods’ figures were ‘entirely out of context’.

‘I am not sure how useful it is to be presented with this sort of press release, particularly one which does not set out all its sources or data upon which it might rely,’ said Roe. ‘Many SPs are converting to limited companies or setting up as them in the first place – often on the advice of accountants.’