Monthly Archives: July 2015

SRA publishes 2015/2016 Risk Outlook

The SRA has published its third Risk Outlook. The Outlook is the SRA’s assessment of the most significant risks law firms will have to address over the coming 12 months.

The purpose of the Risk Outlook is to communicate the SRA’s view of risk in the legal services market, demonstrate the priorities to which the SRA will allocate its resources, explain how the regulator will control these risks and act in the public interest and to help solicitors and firms manage risk.

The Risk Outlook is divided into two sections. The first sets out the factors that the SRA believe are driving change in the legal market, and the second discusses each of the eight priority risks which are:

  • Failure to provide a proper standard of service particularly for vulnerable people
  • Misuse of client money
  • Lack of a diverse and representative profession
  • Lack of independence
  • Failure to act with integrity: improper or abusive litigation
  • Information security and cybercrime
  • Bogus law firms
  • Money laundering – inadequate systems and controls over the transfer of money.

The SRA state it is important that firms try and manage these risks in order to help support the rule of law and the proper administration of justice, whilst providing proportionate protections for users of legal services.

Each of the priority risk includes:

  • A description of the risk
  • Why the risk matters
  • Trends of the risk
  • Information on SRA controls over the risk
  • Case studies based on real events
  • Information on how to manage that risk within a firm

Along with the publication of the Risk Outlook, the SRA have produced a webinar to provide a detailed overview of the Risk Outlook.

To view/download the Risk Outlook and webinar, click here.

Reporting Accountants’ requirements relaxed

Changes to the format of accountants’ reports for solicitors’ practices – and the criteria for qualifying accounts and submitting them – should further improve their value and reduce the burden on firms, the Solicitors Regulation Authority has said.

Following a decision by the SRA Board at its meeting today, Wednesday 15 July, existing, rigid requirements on the submission of accountants’ reports are set to be relaxed. Accountants will be able to use their professional judgement in future to assess if the reports they prepare for solicitors’ practices comply with SRA account rules. Accountants will no longer need to qualify accounts for trivial breaches of the rules, but instead can focus on risks to client money.

Crispin Passmore, Executive Director, Policy said: “These changes give accountants more scope to use their expertise and advise firms on potential risks. Some firms may find that obtaining reports is very expensive because of their size and structure, so it makes sense to use accountants’ expert views in this way to ensure value for money.

“At the other end of the scale, where firms hold smaller amounts of client money and are relatively low-risk, relaxing the current arrangement is sensible. This second phase of changes is part of our drive to reduce bureaucracy and be proportionate.”

The SRA changes are subject to approval by the Legal Services Board. If approved, the amendments would be part of the Version 15 of the SRA Handbook that goes live on 1 November 2015. Revised accountants’ report forms will be available for use after 1 November 2015 and will apply to all firms whose accounting period ends on or after November.

Guidance on the new approach has been developed through an external working group of key stakeholders and will be available on the SRA’s website well in advance of implementation. The exemption from the requirement for lower-risk firms to obtain an accountant’s report will be extended to include firms with an average client balance of less than £10,000 a year and a maximum account balance of £250,000.

Amending accountants’ reports was one of the first strands of work in the regulatory reform programme launched in May 2014 aimed at reducing the burdens on firms without reducing the protections for consumers of legal services. The first phase of the project saw removal of the need for firms to deliver unqualified reports (ie those where no breaches of the rules were identified) to the SRA and of the need for those firms that receive all of their fees from legal aid to obtain reports in the first place.

A third phase, currently being developed, will begin in the autumn and will look at simplifying the Accounts Rules themselves.

Go to the accountants’ reports page

Changes to client care documentation and Ombudsman complaint limit (update)

There has been some confusion in the press over the last few days regarding the EU Alternative Dispute Resolution Directive (ADR) and exactly when the requirements of new Ombudsman scheme rules come into effect. Other commentators have added to the confusion.

LeO have said:

The Legal Ombudsman has applied to be certified as an alternative dispute resolution (ADR) provider under regulations implementing the requirements of the EU ADR Directive. 

The Directive aims to improve access to redress for European citizens and to improve the consistency and quality of dispute resolution schemes. 

The Legal Ombudsman’s application is made on the basis that all necessary changes to its scheme rules will, subject to the necessary approvals, come into force within six months of the Directive’s 9 July 2015 implementation date. 

These changes will:

  • Increase the time limit within which consumers can bring a complaint to the scheme; from within six months of the service provider’s final response to 12 months
  • Align and amend the grounds for dismissal of a complaint to reflect those specified in the ADR regulations
  • Remove the current six-year and three-year time limits for bringing a complaint to the scheme
  • Set out how ‘stale’ complaints, which are too old to be investigated satisfactorily, will be handled under the revised grounds for dismissal 

The Ombudsman will shortly publish proposals for how these changes will be implemented. The proposals will not require service providers to make any changes to their existing document retention policies.

3 July 2015

LeO has confirmed in a further statement that the scheme rules changes will not be coming into effect in July and have indicated that they expect the changes to be implemented by no later than 9th January.

Note that both, the time limit following a firm’s final response will change, together with removal of the limitation periods for bringing a complaint.