Yearly Archives: 2012

Information security survey finds that most COLPs are not taking responsibility for data security

A survey carried out by our partners Oyez and the IAAITC on?information security has revealed that the majority of compliance officers are not taking responsibility for data security despite the SRA Handbook requirements.

A third of firms unaware that SRA Handbook requires compliance with the Data Protection Act 1998 whenever handling personal data.

Half of all firms are not aware of the requirements regarding encryption of sensitive personal data and the consequences of not getting it right (monetary fines and damage to reputation).

92% of firms when outsourcing activities such as their IT provision,?data shredding or typing do not put in measures to protect clients’ personal data.

The DPA has eight principles with which you and your staff must understand and comply. Lapses in the protection of personal data, when they occur, can be more and more costly not just in terms of monetary loss but also in terms of reputational damage for your firm.

While COLPs may be held?responsible for information security breaches, ?Ultimately under both the SRA code of conduct and the?Data Protection Act?the responsibility rests with the partners/owners of the firm regardless of where the day-to-day responsibility is delegated.?

Although 84% of firms had information security policies, fewer than a third had ?basic policies covering the sending and receiving of personal data via secure e-mails, or saving and retrieving files securely from a laptop, for example?.

Whilst firms recognise [the problem] and acknowledge the potential financial, regulatory and reputational impact a breach in information security could have on the firm, there is a lack of the necessary appropriate actions to achieve the legal and regulatory requirements to protect the integrity of personal data. Formulation of polices in an ad hoc way rather than through the implementation of any rigorous methodology, and the lack of regular evidence-based training would be suggestive of a profession not yet coming to terms with what it really means to be fully compliant with the legal and professional regulation.

To view the survey, please click here.

SRA emphasizes benefits of proactive engagement and outlines plans to support compliance officers

One year on from the introduction of outcomes-focused regulation, SRA Executive Director Samantha Barrass spoke at the COLPs and COFAs conference in Holborn Bars today on the SRA’s view on firm-wide compliance and the benefits of proactive engagement and co-operation.

Whilst Ms Barrass emphasized that the majority of firms had embraced the new regime, she also sent?a message that the SRA would take action against those who?have failed to?properly to cooperate.

The SRA is currently checking all nominations and has gone back to 150 randomly selected firms to take part in an exercise to test that the process which is based on self-declaration is actually working in practice. The test asks questions on the relevant qualification and level of seniority of the nominated officers and their support structures to establish whether the firm has taken taken its approach to nominating appropriate people seriously.

She also?revealed how the SRA is planning to support compliance officers in their new roles through the publication of a risk index which will identify a full list of risks to meeting the SRA’s regulatory objectives, a risk framework showing how the SRA uses risk profiling to regulate in a proactive and constructive way and a Risk Outlook?which is to be a guide on the SRA’s view of the risk landscape.?She announced the publication of regular risk bulletins and ‘COLP/COFA alerts’. All of these would help?establish a shared understanding between the SRA and firms on the SRA’s view of current and emerging risks, supporting firms’ identification and management of risk.

She reemphasized her point from her speech in April (see here) that compliance officers’ roles were a key part of outcomes-focused regulation, where clear responsibility for managing risks to the delivery of competent and ethical legal services was on firms themselves. She stressed that the COLP and COFA were not to be regarded as ?sacrificial lambs’ in that firms, and particularly senior managers, held the ultimate responsibility for creating a firm-wide culture of compliance.

To read the full speech, please click here


SRA continues to develop its approach to ABS licensing

Law firms seeking to be licensed as Alternative Business Structures (ABSs) by the Solicitors Regulation Authority (SRA) have found a variety of ways of organising themselves, Chief Executive Antony Townsend has revealed in a speech today.

And the SRA has been developing its approach to authorisation and supervision in the light of its ten months’ experience of licensing ABSs. Mr Townsend said that the flexibility allowed by the introduction of ABSs had seen successful applicants come up with a wide range of different business models.

The SRA would continue to adapt its processes to reflect the changing nature of applications and the wider legal services market.

Mr Townsend said: “ABS applicants have proved to be highly innovative and forward thinking, whether they are existing legal bodies taking external investment to grow successful business models, proposing to grow by acquisition or creating joint ventures, or entirely new entrants to the legal services market wanting to take market share in areas of law traditionally serviced purely by all-lawyer firms. Seventy per cent of applications are from existing regulated entities, but what they?re doing is very different from each other and extremely interesting.”

Mr Townsend explained that the knowledge gained in licensing the first 31 ABSs had enabled the SRA to issue new guidance to applicants. He said: “The authorisation process is now being revised to enable the SRA to concentrate upon the areas of real risk, thus reducing the burdens on applicants, streamlining the process, and improving regulatory effectiveness.”

As a regulator, the SRA had to strike the right balance between appropriate rigour and not inhibiting the market. Mr Townsend said: “We?re seeing a significant number of applications drop out as they progress through the application stages. This is for a number of reasons ? not least because further down the line some realise there are issues they failed to consider fully.” Potential ABS applicants are therefore urged to consult the SRA from the outset.

The personal injury market remains a key area of interest for applicants, especially in light of the referral fee ban and wider Jackson reforms. Firms are taking a conservative view of the ban and erring on the side of caution, setting up joint ventures/wholly owned subsidiaries to offer a range of services.

Legal Compliance Services assists organisations with the ABS application process. For further information please click here.

Serious Fraud Office reviews its policies on facilitation payments, business expenditure (hospitality) and corporate self-reporting

The Serious Fraud Office has reviewed its policies on facilitation payments, business expenditure (hospitality) and corporate self-reporting.? The purpose is to:

  1. restate the SFO’s primary role as an investigator and prosecutor of serious or complex fraud, including corruption;
  2. ensure there is consistency with other prosecuting bodies; and
  3. meet certain OECD recommendations.

The revised statements of policy can be found on the website:

See Q and A page relating to revised policies.

SRA releases fifth version of the Handbook

The SRA published the fifth version of the Handbook on 1 October 2012. The changes take effect immediately.

The changes in summary are:

SRA Handbook Glossary 2012

The definitions in the SRA Indemnity Insurance Rules 2012 and SRA Indemnity Rules 2012 have been replaced by references to the Glossary. Changes to the SRA Indemnity Insurance Rules necessitate the introduction of definitions of “cessation period”, “existing instructions”, “extended indemnity period” and the amendment of the definitions of “employee”, “SIIR”, “SRA Indemnity Insurance Rules”, “SRA Indemnity Rules”.


SRA Indemnity Insurance Rules 2012

Changes to the Qualifying Insurer’s Agreement, the SRA Indemnity Insurance Rules (including the Minimum Terms and Conditions for compulsory professional indemnity insurance) and the SRA Compensation Fund Rules have been made to implement the next stage of the SRA’s Financial Protection Review. The principal changes are:

  • the closing of the assigned risks pool (ARP) as a provider of policies of qualifying insurance from 30 September 2013 (with the exception of the continued provision of run-off cover incepted before that date);
  • the introduction, from October 2012, of a requirement that all policies of qualifying insurance make provision for extension by 90 days at the end of the insurance period if the insured firm has not taken out a new policy of qualifying insurance;
  • provisions for the funding of the ARP in 2012/13 to be provided by both the regulated community and the qualifying insurers; and
  • provisions to remove the role of the ARP in 2012/13 for making payments in respect of uninsured firms and to move this responsibility to the Compensation Fund.

The key changes to the SRA Indemnity Insurance Rules and the Minimum Terms and Conditions (MTC) are as follows:

  1. commencing 1 October 2013, a firm?s last insurer of record under the QIA 2012 will be liable for cover for an “extended indemnity period” and a “cessation period” if the firm does not renew its policy of qualifying insurance with its existing qualifying insurer, and does not obtain a policy of qualifying insurance with another qualifying insurer. Amendments are made to implement the changes as follows:
    1. SRA Indemnity Insurance Rules 2012: Rule 4.2, commentary following Rule 4.4 and Rule 5.3; and
    2. MTC: clauses 5.1 to 5.5 and clause 7.2;
  2. the introduction of a requirement on firms that have not obtained a policy of qualifying insurance at the expiration of the cessation period to cease practise and to notify the SRA (rules 4.2 and 17.3);
  3. no firm will be eligible to remain in the ARP beyond 30 September 2013, and any certificate issued to a firm in the ARP will cease to have effect from that date (rule 6.3);
  4. the addition of a new power to collect contributions from firms for the purpose of allowing the SRA to raise and apply the profession?s contribution in any manner necessary (i.e., by way of levy or otherwise)(rule 13);
  5. amendment of rule 3.1 to remove Appendix 4 (Definitions) which has been replaced by the application of the definitions contained in the SRA Handbook Glossary; and
  6. arrangements to provide cover for claims made against uninsured firms, which were set out in rule 15, have been deleted as from 1 October 2012 – such claims will be dealt with by the Compensation Fund.


SRA Indemnity (Enactment) Rules 2012 and SRA Indemnity Rules 2012

If a firm closes without successor practice then the qualifying insurer (or the ARP) on risk at the date of closure is required to provide cover for the balance of the indemnity year and for a further six years thereafter. At the end of the six years “post six year run-off cover” is provided by the Solicitors Indemnity Fund, currently until 30 September 2017. The cover is being extended by three years which requires an amendment to a date in rule 8.5(a) of the SIR. In that rule “30 September 2017” has been replaced by “30 September 2020”.


SRA Compensation Fund Rules 2011

An amendment has been made to rule 14.2 (previously rule 13.2). The effect of the change is that the provision of emergency funds will be by way of an interim grant rather than general use of the Compensation Fund under rule 2.12(d), and a new rule 14.3 has been inserted.

Since emergency funds are needed with great urgency, it has been necessary to make a further amendment to abrogate the need for advance notice to be given to the intervened solicitor. The existing exception to the requirement to give notice has been extended, but the effect has been mitigated by the introduction of a requirement to provide retrospective notice, with a discretion given to the SRA to waive its rights of recovery against the defaulting practitioner. The change can be seen in rule 14.3.

From 1 October 2012 the Compensation Fund is to provide cover for claims made against uninsured firms that would previously have been covered by the Assigned Risks Pool (ARP) under the arrangements for “non-applied firms”. New rules have been inserted at rules 3.2, 5, 8.2 and 13.3, and amendments have been made to existing rules, see rules 3.1 and 3.4.


Andrew Becconsall joins Legal Compliance Services

Legal Compliance Services have again strengthened their team by the addition of Andrew Becconsall, a former SRA Investigation Manager in the SRA?s Investigation Unit who until recently headed up the SRA?s Assigned Risks Pool. The regulatory compliance consultancy which provides bespoke compliance and risk management systems and advice to law firms now has a six-strong team of ex-SRA compliance experts.

Andrew qualified as a solicitor in 1992 with city firm Penningtons. He worked for the regulator for over ten years and has extensive practical experience of solicitors? accounts, money laundering, mortgage fraud, mergers and acquisitions and the orderly closure of firms as well as a detailed knowledge of insurance issues facing law firms.

Richard Robinson, Managing Director of Legal Compliance Services, said: ?I am delighted to welcome my former SRA colleague Andrew to Legal Compliance Services. He brings a wealth of practical regulatory know-how and experience to our team which will prove of great benefit to our clients.?

SRA releases version 4 of the Handbook

The fourth version of the Handbook was published on 21 June 2012.

This latest edition reflects the delay in the introduction of the COLP and COFA regime. This was due to go live on 1st Novemer 2012, but due to delays in the nomination process, the new edition of the Handbook now confirms that this has been put back to 1st January 2013.

Rule 4 of the SRA Practice Framework Rules has been amended to clarify when in-house legal teams need to act from an ABS.

The third change relates to the SRA Quality Assurance Scheme for Advocates (Crime) Notification?Regulations 2012. The new notification regulations are an interim measure to ensure that all solicitors wishing to conduct criminal advocacy under the upcoming Quality Assurance Scheme for Advocates notify the SRA. Regulations to implement the scheme in full will be made in due course.

To view version 4 of the Handbook, click here.

Legal Compliance Services strengthens its team

Former SRA Practice Standards Advisers Dawn Lindop and Judith Stanway have this week joined Legal Compliance Services. The regulatory compliance consultancy which provides bespoke compliance and risk management systems and advice to law firms, now has a five-strong team of ex-SRA compliance experts.

Dawn and Judith are both qualified solicitors who worked in private practice for a number of years before joining the SRA. During their time with the regulator, they each visited several hundred law firms to provide advice on practical compliance and helped shape the SRA?s regulatory strategy and approach. More recently, both of them contributed to the development of outcomes-focused regulation.

Richard Robinson, Managing Director of Legal Compliance Services, said: ?I am delighted to welcome my former SRA colleagues Dawn and Judith to Legal Compliance Services. Both of them bring a wealth of practical regulatory know-how and experience to our team which will prove of great benefit to our clients.?

The third edition of the SRA Handbook is now online

The SRA has released the third edition of the?Handbook after it was approved by the Legal Services Board.

Further editions of the Handbook have been necessary for a number of reasons. These included technical matters, such as some matters out for consultation and issues arising from the delayed designation of the SRA as a licensing authority for Alternative Business Structures (ABSs).

The SRA also wanted to review rules working in the new outcomes-focused regime, and hindsight has allowed the Authority to make a number of minor amendments that ensure they work in practice and accurately reflect the Legal Services Act (LSA).

One of the key changes for Edition 3 is the implementation of the SRA Handbook Glossary. The glossary contains all terms used throughout the Handbook which are shown in italics, and sets out their definitions. This will allow online users simply to ‘click’ on an italicised word to view the glossary definition.

Other amendments include clarification on conflict of interest matters overseas (where if compliance with the Code would result in a breach of local law or regulation, the outcomes can be disregarded to the extent necessary to comply with the local law or regulation) and Rule 53 on Transitional provisions has been deleted.

In the Authorisation Rules, some amendments have made rules clearer and ensure they accurately reflect the LSA. In particular, the Practice Framework Rules have been amended so solicitor involvement in a body owning a licensed body does not automatically mean the solicitor is “practising” in that body. And Rule 8.6 has been amended to ensure licensed bodies are specifically authorised by the SRA to provide immigration advice services under the Immigration and Asylum Act 1999.

There are also amendments that deal with SRA Practising Regulations to mirror existing provisions in the Authorisation Rules such as the requirement to appoint a Compliance Officer for Legal Practice and a Compliance Officer for Finance and Administration. This is necessary because the SRA Practising Regulations continue to apply to the recognition of sole practitioners, so that as far as possible the same standards of the regulation apply to the different types of firm the SRA regulates.

The current Handbook was published online in October 2011 and it underpins the SRA’s introduction of outcomes-focused regulation. The web version has been designed to be as easy to use as possible, and includes advanced search options that allow specific sections to be looked at, a quick guide to the Handbook itself and the ability to print only those sections that are needed, rather than all 500+ pages.

The online version also has a “history of” facility, so users can compare the third edition to previous copies of the Handbook.

Go to the Handbook