SRA focuses on high standards in shorter Handbook

SRA focuses on high standards in shorter Handbook

The Solicitors Regulation Authority (SRA) is proposing a second phase of changes to its rules for solicitors to make them simpler and more focused on high standards, reducing the length of its Handbook by more than 300 pages.

The SRA’s Handbook sets out the standards it expects solicitors and firms to meet and the rules they should follow. The SRA has already consulted on the first phase of changes to create a simpler code of conduct and accounts rules. It is now consulting on its other rules, including how it approves firms, and assesses the suitability of those entering the profession.

The new Handbook is set to be around 130 pages and would keep rules that help maintain high professional standards, such as the need for compliance officers in all firms. However, it would get rid of some restrictive rules that add cost without sufficient public benefit. Changes include removing:

    • the need for early checks on students and trainees, so that character and suitability testing is focussed on point of entry to the profession
    • the need for a solicitor owner or manager to seek SRA approval before moving firms or roles. In future, they will inform the SRA
    • the, often misunderstood, rules around being ‘qualified to supervise’, which do not provide any guarantee of competence, but prevent solicitors establishing their own firms once they have qualified.

The SRA also proposes allowing a solicitor to provide reserved legal services, in certain circumstances, on a freelance basis to the public. They would not be able to hold client money or employ people, but would need appropriate indemnity insurance. This would simplify the current situation where there is a complex series of exemptions for solicitors who want to work in areas such as certain insurance services, law centres and doing pro bono.

Other changes aim to make the Handbook easier to use. For instance, the details of how people can appeal SRA decisions are now all grouped in one place.

The consultation also includes a revised enforcement policy. It aims to provide more clarity about how, and when, the SRA will, or will not, enforce. Factors it would take account of when considering action include intent, harm caused, patterns of behaviour, vulnerability of the client, seniority of the solicitor, and any remedial action taken.

The policy reflects the findings of the SRA’s ‘Question of Trust’ campaign which collected the views of 5,400 members of the public and profession. In keeping with the results, the SRA will continue to treat offences such as misuse of client money, dishonesty and criminal activities as the most serious.

Paul Philip, SRA Chief Executive said: “This is a simpler Handbook with a sharp focus on what matters – high professional standards and appropriate public protections.

“Pages of complex bureaucracy do not benefit anybody. Our approach rightly puts the onus on professional judgement and ethics. Most solicitors do a good job and earn the trust people place in them. But a small minority do not. Our enforcement policy makes clear when and how we will act if things go wrong. It is essential that both the public and the profession can have confidence that we hold solicitors to account and act in a fair way.”

The consultation also includes proposals for transitional arrangement for the introduction of the Solicitors Qualifying Examination (SQE). This is set to be introduced in autumn 2020. All those starting the qualification process from then onwards must take the SQE. However, the SRA wants to make sure that those who have started the process of qualification through the current routes have a fair opportunity to complete it. They will have until 2031 to qualify this way.

The consultation Looking to the future: phase two of our Handbook reforms runs until 20 December. As part of this programme of work, the SRA is also consulting on publishing better information to help the public make legal choices. The consultations are available at: www.sra.org.uk/consultations

Online consent tick boxes to be banned

Online consent scam outlawed in fight over personal data
Automatically ticked consent boxes that allow companies to harvest and exploit valuable personal information are to be banned in an overhaul of consumer protection laws for internet users.

DNA profiles and browsing histories are also to be included in a new definition of personal data, with companies facing criminal prosecution if they fail to protect users’ identities, report Francis Elliott and Mark Bridge.

Ministers will today spell out the details of a Data Protection Bill to be introduced in the Commons next month. It will include the right of adults to request the deletion of social media content they posted as children.

While that measure was expected, ministers will say that they intend also to expand the definition of personal data to include IP addresses and cookies. Matthew Hancock, digital policy minister, said that the bill would contain the most robust, yet dynamic, data laws in the world. “It will give people more control over their data, require more consent for its use and prepare Britain for Brexit,” he added.

Experts said that it could have far-reaching effects on companies that trade in anonymised data harvested online. Some offer cheap genetic tests for genealogy and then sell the information to medical researchers.

CML is now UK Finance

From 1st July the Council of Mortgage Lenders is integrated into a new trade association, UK Finance. For the time being, all UKF mortgage information will continue to be published on their website, and UKF member-only mortgage information will only be available on UK Finance site.

UK Finance represents around 300 firms in the UK providing credit, banking, markets and payment-related services. The new organisation takes on most of the activities previously carried out by the Asset Based Finance Association, the British Bankers’ Association, the Council of Mortgage Lenders, Financial Fraud Action UK, Payments UK and the UK Cards Association. Please go to www.ukfinance.org.uk for wider content and updates from UK Finance.

AML Masterclass from Amy Bell

AML Masterclass in London from Amy Bell Thursday 15th June 2017 at 1300

DESCRIPTION

The Masterclass is a 3.5 hour course, which looks at the requirements for the MLRO, and includes the changes which will be needed to implement the upcoming Money Laundering Regulations 2017.

The course includes:

In-depth review of the Proceeds of Crime Act, including test for Suspicion

Analysis of the proposed Money Laundering Regulations 2017 and how to prepare to comply

o Changes to CDD

o Appointment of a compliance officer

o Reporting obligations to the SRA

o Risk Assessment requirements

o New Data Protection requirements

Making reports to the NCA and understanding their responses

Horizon scanning: 5MLD and the SARs regime review

https://www.eventbrite.co.uk/o/amy-bell-compliance-13921236255

Solicitors’ agents could face prison

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

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

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

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

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.

VAT on local authority searches

The Law Society has issued new guidance for conveyancers amid continuing uncertainty over the imposition of VAT on local authority searches.

Though HMRC has still to provide any formal confirmation, Chancery Lane understands that although the change did take effect on 1 January, there will be a ‘long stop’ date of 31 March this year for councils who are not ready.

It remains unclear whether councils that do not begin charging VAT from 1 January will now wait until 31 March. It could mean there will be a ‘trickle’ of councils who begin charging on different dates in between.

Such ‘piecemeal implementation’ would be far from ideal, said the Society, which has urged solicitors to look at the local land charges sections of council websites to establish when their authority is proposing to implement the changes.

Society president Robert Bourns said: ‘It is extraordinary that we have not received substantive and direct responses to our letters to HMRC about this issue, as we could have provided better information to our members and this may have assisted in a smooth transition to a new regime.

‘We will be providing more information to solicitors as it becomes available.’

Council searches provide information for buyers and lenders about matters including planning decisions, building regulation consents, highway information, road schemes and public footpaths.

They are carried out on the Law Society’s CON29 and CON29O forms, providing standardised questions to make conveyancing searches quicker and more efficient for both councils and property buyers.