ABS and the Future Legal Landscape

 In Comment, Gill's Blog

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Last Friday I chaired a Panel Discussion on ABS and the Future Legal Landscape at the Private Client Section Conference – we had all of 20 minutes! On the panel was Richard Collins (RC), the Director of Standards at the SRA; and Tony Guise (TG) of Guise Solicitors Ltd., who represents solicitors before the Solicitors’ Disciplinary Tribunal.

We kicked off with a question on how will the SRA assess and manage risk under the Outcomes Focused Regulation – what will constitute high risk or high impact. TG explained that

Risk = Impact x Probability

He gave the example of Venn LLP, an imaginary national law firm outsourcing Will writing to an unregulated Will writing business. The SRA would assess its profile in the profession as being in the medium to high probability range of a breach of confidentiality occurring and it therefore puts the impact as HIGH. This would be addressed by way of a SRA relationship manager being in regular contact with the firm to ensure appropriate steps are taken to address any possible breach of client confidentiality either, for example, through individual breaches by people or via hacking.

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RC reminded us that we are responsible for assessing our own risk profile based on the way we are organised and propose to deliver our services. He said that the SRA are divided into three divisions and the authorisation section is going to be scrutinising much more closely requests for new start-ups to confirm both viability (a key risk factor) and proper business planning.

He said there was no particular problem with a sole practitioner compared to a large multi-faceted international firm with OFR – the whole point was to have a relevant regulatory system which was flexible enough to cope with different types of firm and which could respond to their different scales of operation.

I mentioned the fact that OFR had its origins in the Authorised Internal Regulation idea of Nick Smedley when he investigated the future of regulation on behalf of the City of London Law Society. This idea was welcomed by Lord Hunt who was engaged by the Law Society to similarly review the future regulatory framework and he encouraged the idea that all firms should aspire to being effectively their own regulator. RC agreed that OFR was basically encouraging firms of all shapes and sizes to think seriously about risk.

One delegate asked when will he have to change his notepaper and/or my terms and conditions to accommodate the ever-changing requirements of the regulatory authorities – it is a major frustration for practitioners and clients alike to have to issue with updated paperwork. RC simply said in October. However, I suspect this is at least an annual task to make sure your terms of business are current and reflect an appropriate balance between risk management and client protection and information.

In the short time available we had to finish with an interesting question as to whether there are any examples of the effect of these changes from other countries that may help us to foresee how we will be affected.

TG advised that we had a more prescribed system than most other countries. He had recently advised a Canadian firm on setting up an office here which was surprised at the regulatory requirements as Canadian firms are mostly self-regulating.

Similarly, in Europe most countries with a notarial system will historically have a different culture of the notaire as a state official who is empowered to conduct business on behalf of the state.

TG gave the example of Germany where lawyers do not hold client’s money instead there are escrow services which are regulated to do this so as a result there is mostly self-autonomy among the lawyers.

RC explained that most other countries in the world were watching what we were doing with interest as this change to OFR and the ABS system was at the cutting edge.

What a pity we did not have more time to explore in greater depth some of your real concerns. I particularly would have liked to consider with the panel how firms undertaking Wills & Probate work will be risk-profiled but perhaps this is something which our insurers will effectively do!

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