Lawyer Checker Regulation & Compliance

Chris Harris – Practical Vision Update: Recent Risk and Compliance Changes

Solicitor Lawyer Checker Today’s Conveyancer Consultant Editor Assist Chris Harris

Are risks increasing in the conveyancing market ? Is the regulation that governs the sector fit for purpose ? Straw Poll

Latest SRA Risk Outlook New SRA Code of Conduct Competition and Markets Authority Interim Report What are we going to look at in the next 30 minutes ?

SRA Risk Outlook “Many of the risks in this report will be familiar to you. This does not make them old news – the challenges around areas such as cybercrime and money laundering are changing rapidly and require constant vigilance”

Users of legal services Source: SRA Risk Outlook 2015/16 6 in 10 people have some form of LEGAL EXPENSES insurance Will writing Conveyancing Power of attorney Immigration Family Law 71% 66% 65% 55% 45% New methods of delivery may provide better access to legal services. 1 in 5 people chose the amount of legal work they need in order to make cost savings. FIXED FEES UNBUNDLING

How does the SRA see the market ? Source: SRA Risk Outlook 2015/16 Only 30% of small businesses currently take external advice. 1 in 3 people don’t feel it is good value for money 37% of people handle legal problems alone without taking advice. 1 in 3 people feel they have little or no choice of legal provider.

How does the SRA see the market ? Source: SRA Risk Outlook 2015/16 39% of small businesses make use of online legal resources. 1 in 3 people accused of minor traffic offences now make their pleas online. However…1 in 5 UK adults don’t use the internet. Of the people who don’t currently have a solicitor 45% would search online to find one.

How does the SRA see the market ? Source: SRA Risk Outlook 2015/16 Competition from rated insurers has reduced a small law firms’ reliance on unrated insurers, leading to a relatively trouble-free professional indemnity insurance (PII) renewal. 95% of managing partner of top 200 UK law firms predict “MASSIVE CONSDOLIDATION” of the legal market in the next two years. It is clear that successful mergers require a clear strategy, efficient implementation and huge efforts in integration. 394 disorderly closure reports in the last 12 months.

Economy The economy is recovering. UKGross Domestic Product However growth in the legal services market varies across different sectors. Source: SRA Risk Outlook 2015/16 2.6% in 2014 Arbitration and alternative dispute resolution Consumer Commercial / Corporate Residential Property Personal Injury Family / matrimonial Crime Landlord / tenant Social welfare Many firms are taking advantage of increased opportunities to grow. Practicing solicitors 129, , % May 2014 May 2015 UK largest exporter in EU of legal services. Law firm vacancies rose by 48% in 2014

66% fixed fees 1/3 clients dissatisfied 1/3 clients feel have no choice 45% of clients without existing lawyers will search on line 394 disorderly closures Unrated Insurers reducing risk Market growth up 25.1% in conveyancing in last two years Hiring risk SRA – For conveyancers this mean what exactly ?

Standards of Service and considering vulnerability of clients “the areas of law with the highest number of complaints are residential property, family law, personal injury and wills and probate.”

Elderly clients where instructions provided by adult children 1 in 3 clients dissatisfied Land Registry requisitions for August 2016 at 15.8% Complaints increased by 6% in 2015 Standards of Service and considering vulnerability of clients

Have proper risk assessments on your files Measure satisfaction properly Supervise Obtain and measure Land Registry requisition reports Standards of Service

“Crime overall is falling, but cybercrime is rising.” Information Security

“The ICO believes that solicitors are at risk of data loss due to their reliance on paper files containing highly sensitive information. Security of paper based systems is always limited: paper can be lost, requires archiving, and cannot be encrypted. Many of these risks can be managed through effective use of IT.” Information Security

25% of firms report being targeted by cyber criminals. 10% of these resulted in money being stolen. 10,000 solicitors practices roughly 250 firms have had money stolen. True figures are higher. Information Security

2014 – 701 reports Half relating to a real firm Scam alert processes Eldridge LLP Bogus Law Firms

Misuse of Client Account Money The misuse of client money can be the result of: Dishonesty Failing to act ethically or with integrity A lack of competence Inadequate supervision of individuals with access to client money.

Lack of Independence Concerns:- Allowing third parties to cold call potential clients. Taking and acting on instructions from third parties without ensuring that the instructions originate from the client Dependence on referrers

Money Laundering Number of suspicious activity report (SARs) from solicitors have fallen every year since % of firms don’t do e-id in every case ! When did you last review your processes ?

SRA New Code of Conduct what does it mean for me ? Individuals and Firms will have separate codes Aim to encourage non regulated providers to be able to offer unreserved services through solicitors Fears of fragmentation of the profession

SRA New Code of Conduct what does it mean for me ? If firms cease to be regulated because they don’t conduct reserved services fewer firms will contribute to the compensation fund.

Legal Services Market Study – July 2016 Concerns that “the legal sector may not be working as well as it should, including concerns about the affordability of legal services….and the possibility that regulation might be dampening competition.” Competition and Markets Authority Interim report

Does anyone in the room believe that regulation is dampening competition in the conveyancing sector ? Competition and Markets Authority Interim report

“consumers are often unable to judge quality before (or after) they choose to buy a legal service” Isn’t this an inherent problem for all services e.g. My MOT Competition and Markets Authority Interim report

Competition should create the incentive for suppliers to provide information to consumers that enables them to make better choices. Informed purchasing decisions by consumers should create the incentive for suppliers to compete on offering value for money and innovation. The virtuous cycle of competition with informed consumers.

Pressure to publish your pricing Pressure to have more online reviews. Competition and Markets Authority Interim report

“absence of online reviews…reluctance of the legal profession to endorse the use of online reviews.” Competition and Markets Authority Interim report

“We note that some of the markets in which intermediaries play a greater role (for example conveyancing) appear to be more competitive in terms of price.” Competition and Markets Authority Interim report

“We consider that referral fees can have a significant positive effect on competition by incentivising third party intermediaries.” They indicate that they have no plans to re look at referral fees in our sector. Competition and Markets Authority Interim report

Constant vigilance Complacency Use rated insurers Consider online reviews Consider more transparent pricing Take away points

Questions ?

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