[This is a report of an event run by #CoreLegal on outcomes-focused regulation, presented by Paul Bennett from Bennett's Legal, and Michaela Hardwick, previously at Beachcroft LLP, now driving force behind 'Beyond Expectation'.]

 

 

This page is not endorsed by the Solicitors Regulation Authority. This page is presented for the benefit of law students who wish to become practising solicitors one day. None of this post constitutes professional advice from anyone, and should not be relied upon, and is reproduced in good faith to the best ability of @legalaware. No parties have made any financial contribution towards this article. @legalaware is about to do his LPC as a law student, and does not have a training contract, and so cannot say he will be a trainee solicitor. Many thanks to Paul Bennett for allowing me to report on this event.

I went to a talk on Monday at the Hotel Russell, Russell Square, London on ‘outcomes-focused regulation: what it is and how to achieve it’ presented by Paul Bennett of Bennett’s Legal Limited and Michaela Hardwick of Beyond Expectation. The event was hosted by Core Legal. It was especially lovely to meet @InfoPlanPR for the first time, without whose tweets I would never have known about the event at all. Apparently the event had available CPE points for those on the SRA Roll of Solicitors.

OFR means ‘outcomes focused regulation’ and is linked to the Legal Services Act (2007). It is inaccurately described as ‘deregulation’, when it is simply a different kind of regulation with some new regulators and ombudsmen. The changes have been presented as de-regulation or self-regulation, but the focus has been on potential wider legal business ownership rather than law firm overnership. As a consequence, one has to start at a basic level to deal with some emerging myths, media hype, with a view to looking beyond the mayhem.

The reality is that it’s not deregulation at all – it’s a different type of regulation, involving the Legal Services Board, Solicitors Regulation Authority, Legal Ombudsman, and Solicitors Disciplinary Tribunal. It is currently a bit unclear who will do what. Tesco have no plans to enter the market which are known. Media hype has in fact probably created a place for them if they choose to replicate Financial Services offering with legal. Other brands are more likely to enter the market.

The SRA and OFR handbook has been produced for law firms and alternative business structures. It is a new handbook and code, and consists of ten principles. It represents a new structure and approach in the regulatory activities of the SRA, and a change in the SRA’s focus from prescriptive to retrospective, and from objective to subjective. The principles are the ethical starting point, and the outcomes are required achievements (both are mandatory); the indicative behaviours are not mandatory but persuasive.

“The Code is underpinned by effective, risk-based supervision and enforcement”.

The SRA’s objectives are said to be three-fold:

1. Thematic risks – groups/sectors;

2. Risk assessment – desktop supervision; reporting-based;

3. Consider regulatory impact (on SRA’s Outcomes x Probability (of the issue arising) = Supervision and Risk approach).

Firms are encouraged to identify and tackle the regulators’ risks and objectives. This year, there is one combined online renewal form – it permits the SRA to assess risk. According to the 2012 annual report, the scope is yet to be confirmed, but is likely to focus on risks, systems, processes, individual or firm behaviours.

There are six familiar principles:

1. uphold the rule of law and the proper administration of justice;

2. act with integrity;

3. do not allow your independence to be compromised;

4. act in the best interests of each client;

5. provide a proper standard of service to your clients;

6. behave in a way that maintains the trust the public places in you and the provision of legal services.

There are four new principles:

7. comply with your legal and regulatory obligations, and deal with your regulators and ombudsmen in an open, timely and co-operative manner;

8. run your business or carry out your role in the business effectively and in accordance with proper governance and sound financial and risk management principles;

9. run your business or carry out your role in the business in a way that encoruages equality of opportunity and respect for diversity;

10. protect client money and assets.

The outcomes are mandatory requirements which you must achieve. The SRA helpfully provide that,

“the outcomes contained in rach chapter are not an exhaustive list of the application of all the Principles. We have tried to make them as helpful as possible.”

“Acting in the following way(s) may tend to show that you have achieved the outcomes and therefore complied with the Principles”

Evidence

The file alone is no longer king but is part of a wider evidential package. Clients’ intended outcomes are supposed to be evidenced, and the legal profession is meant to be working towards the clients’ objectives and expectations. Any objective changes indeed should be evidenced, and the purpose of OFR is to manage clients’ expectations far more rigorously.

Practicalities

You will be expected to differentiate between the sophisticated commercial clients, lay clients dealing with the lawyer for the first time, and vulnerable clients; your interaction with these different types of clients needs to match the client’s identified characteristics. Law firms need to be confident that staff have the skill to the match their behaviour to their clients; and legal professionals need to communicate with their clients in such a way they will not only understand, but the communication is appropriate for them. You therefore need to set out an engagement letter, setting out and agreeing the expectatios. Substantive advice focusing on any deviation should be evidenced in writing. Any changes should be acknowledged by the client, rather than being imposed by the law firm. File reviews and audits will be far more important with a focus on client objectives. Management findings and action points after the review should include remedial action and training (and the monitoring of such), any future business outcomes, and any effect on future clients and/or decisions of whether to accept particular clients. Client satisfaction monitoring options include surveys, interviews, 360 degree appraisals, collection and verification of objective evidence and changes to policies and procedures. Other aspects might include how you assesss, train and monitor clients’ mental capacities or other vulnerabilities, and whether there is a general complaints register to identify themes that emerge (and also recording how they are dealt with).

Risks constitute a pet area of concern of the SRA. You need to take (and evidence) a risk-based approach to compliance. Risk assessment of each area of the business taking into account of the principles and outcomes should be conducted. The SRA will be interested in how you have documented these, and what systems you have for reviewing these. The SRA are especially concerned with actions stemming from non-compliance. Law firms and ABS businesses will need to appoint  compliance officers, with ultimate jurisdiction for failures, and responsibility for all reportable issues including ‘loss of confidence in the firm or provision of legal services’ The COLP role becomes the eyes and ears of the SRA, and the COP is obliged to report all material of non-compliance. The COLP must monitor and deal with any issues, and report them to the SRA if material. Failing to carry out all requirements of the function including reporting to the SRA can lead to SRA or SDT sanction. The COFA role is an accounting compliance role, with responsibility for internal systems, financial stability and governance.

 

 

 

 

 

 

Please feel free to comment on any aspects of this article below, especially if you feel that the description of the OFR needs improving. Thank you.

Core Legal specialises in events such as this one (details on their website). Core Legal is a specialist initiative to provide a range of support services such as insurance, business coaching, marketing, public relations, and management accounting, for professional legal services.