Compliance-based Entity Regulation: Questions and Answers

The Law Society would like to thank everyone who participated in the informational webcast on February 8, 2016.

Below are responses to questions which were not reached due to time constraints. Some questions raise issues which will be further reviewed and considered by the Task Force.

If you have further questions, please contact mdrent@lsuc.on.ca.

Questions

  1. The Canadian Bar Association (CBA) Ethical Practices Self-Evaluation Tool is only available online to members of the CBA who login to the CBA website. Would it be possible for the LSUC to make this tool available to its members?

  2. Will reporting on trust accounts compliance be part of the self-assessment or remain a separate report?

  3. Is the intent to regulate entities in the exempted category?

  4. How does the Law Society propose to measure whether a scheme of compliance-based regulation would improve practices?

  5. Can you provide an example of how the ethical infrastructure of a sole practitioner differs from that of a large firm? I would think that ethics should be consistent among licensees, irrespective of job title.

  6. How does this initiative differ from the lawyer’s obligations already enshrined in the Rules? Is it simply that the focus is on the entity and a more collective responsibility?

  7. How will the Task Force’s Work Intersect with the Racialized Licensees Working Group?

  8. How much time (either monthly or annually) does the Task Force estimate that it would take a sole practitioner to meet compliance standards?

  9. Are benchers wedded to the term “entity” which has an odd ring to it?

  10. Wouldn’t it be easier to add these principles, suggestions, guidelines and compliance requirements to the Bar Admissions program? And then add these to the Law Society website for easy reference?

  11. Would there be a review of this initiative after implementation if it does go forward?

  12. If Compliance-Based Entity Regulation is implemented for sole practitioners (as well), could any part of the time spent by the practitioner in complying with the requirements be counted towards professionalism Continuing Professional Development (CPD) requirements?

  13. What difference is this going to make for non-compliant lawyers? If they report that they are compliant and are not, what changes? It seems that you are contemplating forcing the entire profession to go through the practice review process just to give the LSUC the right to discipline the lawyers who are caught falsifying their report (saying that they are compliant, but not in fact). You have to catch the non-compliant ones. How are you going to do that?

  14. Any consideration about a “whistleblower” process within the framework of this initiative?

  15. What are the percentage of “small claims” reported by mid to large size firms? If they self-correct, does that affect or alter your statistics? It seems that it is easier for larger entities to bury information about these claims.

  16. Is part of the motivation to raise the standards of the bar and make it easier to lodge complaints? Right now, it’s impossible to lodge a complaint without disclosing the name of the complainant.Might that change? For example, many lawyers now call themselves “specialists” when they have not been certified as specialists by the Law Society. There have also been high profile cases of lawyers being investigated, but the public is not told or protected when they make inquiries. Might this improve?

  17. If compliance-based entity regulation is to be implemented, does the Law Society expect to review every entity’s self-reflection documents and policies and procedures? Would this not be an infinite task?

  18. What potential liability might there be for the Designated Practitioner?

  19. How do you assess the accuracy of reporting on the self-assessment?

  20. I understand the concept that entities providing a structure may well need regulation to the extent that the practices and procedures required by the entity fall short of the requirements that a regulator would require of an individual lawyer. However, I have difficulty understanding how entity regulation of a sole practitioner is a change from the current situation. To be effective, the regulator is going to have to expand the audit function to cover all of the practice principles and practices beyond financial management and sustainability. This has the potential to be a regulatory nightmare for sole practitioners. If the concern about sole practitioners is communication, for example, then consider making a specified amount of CPD time mandatory to address that. Currently, professionalism is a required part of CPD. Why not change that from time to time so that in a given year, there is a requirement to participate in a CPD related to practice management in a specific area, such as communication?

  21. Could specific types of mandatory CPD, rather than further regulatory oversight, also serve to turn our minds to the way in which we might improve practice management at firms and avoid complaints?

Question

1. The Canadian Bar Association (CBA) Ethical Practices Self-Evaluation Tool is only available online to members of the CBA who login to the CBA website. Would it be possible for the LSUC to make this tool available to its members?

Answer

Because the Tool has been developed by the CBA for the use of its membership, it is only available through the CBA.  However, the Nova Scotia Barristers Society (NSBS) has made the current version of their draft self-assessment tool available on their website.  Please visit the NSBS website for further information at http://nsbs.org/draft-self-assessment-process-legal-entities.

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Question

2. Will reporting on trust accounts compliance be part of the self-assessment or remain a separate report?

Answer

The Law Society has not made any decisions yet about the implementation of compliance-based entity regulation. In the Call for Input paper, the Task Force acknowledges the importance of avoiding the imposition of an undue burden on practitioners, particularly those in sole practice and in small firms.  As part of the Call for Input, the Task Force welcomes suggestions from practitioners about how reporting could be streamlined.

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Question

3. Is the intent to regulate entities in the exempted category?

Answer

If the question is about the possible application of compliance-based entity regulation to in-house and government practitioners, as noted in the Call for Input paper at p. 12, while the initial focus of compliance-based entity regulation may primarily be on practitioners in private practice, there may be some benefits for practitioners in corporate and in-house legal departments, government legal departments, legal clinics, and other practice settings. These practitioners would be consulted at a later stage about the possible application of proactive regulation to them.

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Question

4. How does the Law Society propose to measure whether a scheme of compliance-based regulation would improve practices?

Answer

There are a number of ways of measuring the impact of any regulatory change, if the Law Society were to implement compliance-based entity regulation.  Based on the experience in other jurisdictions, one possibility might be to examine the number of complaints about practice management issues to see if there was a decline following the introduction of Compliance-Based Entity Regulation, in the event that Convocation decided to implement it in some form.  

Another possibility would be to survey licensees regarding their perception of the impact of self-assessment on their practice management.

In Australia, practitioners were surveyed about their experience of self-assessment and indicated that the experience had a positive influence on firm management, risk management, and client services issues.  This is discussed in the Call for Input paper at p. 9.  At p. 10-11, the paper notes that lawyers and paralegals who have been involved in the Law Society’s Practice Review or Practice Audit have provided positive feedback about these initiatives.

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Question

5. Can you provide an example of how the ethical infrastructure of a sole practitioner differs from that of a large firm? I would think that ethics should be consistent among licensees, irrespective of job title.

Answer

As discussed at p. 13 of the paper, the phrase “ethical infrastructure” refers to policies, procedures, and workplace culture within a law practice that would help lawyers fulfil their ethical duties.   If the scope of compliance-based regulation includes sole practices and small firms, the manner in which this is implemented by a sole practice or small firm may differ from the larger firm. The small practice might adopt policies and procedures appropriate to the size, work and clientele of the practice. This is one of the issues that the Task Force is currently considering.  In that sense, applying an ethical infrastructure may not look exactly the same in each practice setting, although the underlying principles would be the same.

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Question

6. How does this initiative differ from the lawyer’s obligations already enshrined in the Rules? Is it simply that the focus is on the entity and a more collective responsibility?

Answer

The proposed Practice Management Principles reinforce the ethical guidance in the Rules of Professional Conduct and the Paralegal Rules and Guidelines.    In that sense, this initiative builds on the existing regulatory framework. 

As noted in the Call for Input paper, there is increasing recognition of the importance of practice environment in determining an individual’s professional conduct. A firm generally sets the overall practice standards for those within the firm. Firms often develop their own cultures, distinct from the culture of individual lawyers and paralegals in the firm. Firm policies and practices in areas such as the management of trust accounts, marketing and advertising, and service standards, are all currently the individual responsibility of all the licensees in a firm.

However, the reality is that these practices are the responsibility of the firm to develop and the practitioner may be required to follow them. This means that, in effect, some of the responsibility for common firm practices is a matter for the firm directly. As such, it seems appropriate, and likely more efficient to require the firm to manage and be accountable for these responsibilities.

However, while the focus of a new proactive approach would be on the entity, or practice, itself, lawyers and paralegals would continue to be subject to Rules of Professional Conduct or Paralegal Rules and Guidelines.   In that sense, lawyers and paralegals would continue to have individual professional responsibilities.

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Question

7. How will the Task Force’s Work Intersect with the Racialized Licensees Working Group?

Answer

As discussed at p. 14 of the paper, one of the proposed Practice Management Principles is Equity, Diversity and Inclusion.  The proposed principle includes

  • a respectful workplace environment that appropriately accommodates equity, diversity, inclusion and disabilities;
  • equality of opportunity and respect for diversity and inclusion in recruitment and hiring;
  • equality of opportunity and respect for diversity and inclusion in decision-making regarding advancement; and
  • cultural competency in the delivery of legal services.

The Challenges Faced by Racialized Licensees Working Group has been considering equity, diversity and inclusion issues for Racialized Licensees in the legal professions. It is expected that the Working Group will report to Convocation in 2016. In the event that Convocation adopts recommendations in these areas, there may be additional guidance respecting the implementation of this proposed framework.

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Question

8. How much time (either monthly or annually) does the Task Force estimate that it would take a sole practitioner to meet compliance standards?

Answer

No decisions have been made regarding the standards that might be introduced.  As discussed in the Call for Input paper, other jurisdictions, such as Nova Scotia, are considering a self-assessment tool that practitioners would be required to complete to indicate their compliance with the practice management principles.  The length of time that would be required to complete a self-assessment process (if one were adopted) would depend on the format and number of questions.  It would also depend on how frequently a practitioner would be required to provide information to the regulator about his or her compliance with the standards.

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Question

9. Are benchers wedded to the term “entity” which has an odd ring to it?

Answer

As indicated in the Call for Input paper, “entity regulation” refers to the regulation of the business entity or practice through which lawyers and/or paralegals provide services, and may include sole proprietors. 

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Question

10. Wouldn’t it be easier to add these principles, suggestions, guidelines and compliance requirements to the Bar Admissions program? And then add these to the Law Society website for easy reference?

Answer

As indicated, no decisions have been made on the implementation of any form of compliance-based entity regulation. It is possible that Convocation might ultimately decide that the benefits of proactive regulation may be achieved through a variety of methods, including educational and informational tools.

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Question

11. Would there be a review of this initiative after implementation if it does go forward?

Answer

The Law Society may decide to review the initiative after a certain period of time, in the event that a decision is made to implement it.

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Question

12. If Compliance-Based Entity Regulation is implemented for sole practitioners (as well), could any part of the time spent by the practitioner in complying with the requirements be counted towards professionalism Continuing Professional Development (CPD) requirements?

Answer

The intersection of CPD requirements and implementation of a compliance-based entity regulation approach has not yet been discussed by the Task Force; however, your question will be reviewed and the issue further considered.

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Question

13. What difference is this going to make for non-compliant lawyers? If they report that they are compliant and are not, what changes? It seems that you are contemplating forcing the entire profession to go through the practice review process just to give the LSUC the right to discipline the lawyers who are caught falsifying their report (saying that they are compliant, but not in fact). You have to catch the non-compliant ones. How are you going to do that?

Answer

At page 12 of the Call for Input paper, there is a discussion of the continuum of regulatory responses from the Law Society, in the event that compliance-based entity regulation were to be implemented. If an entity were having difficulty implementing or complying with practice management principles, the Law Society might contact the entity to discuss the reasons for the entity’s non-compliance, and whether its policies and procedures might be improved.

Another possible approach might be a compliance audit similar to the current Practice Management Review program for lawyers, described in the paper. The objective of the compliance audit, or review, would be to assist the entity to ensure that it had implemented the practice management principles. Your concern regarding regulatory responses to practitioners who are misleading in their reports is noted and will be considered by the Task Force.

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Question

14. Any consideration about a “whistleblower” process within the framework of this initiative?

Answer

If the question relates to the responsibility for reporting lack of compliance with regulatory requirements to the Law Society, as discussed in the paper, the Task Force is seeking feedback on the appropriate role for the Designated Practitioner, who would be designated by each entity to have particular regulatory responsibilities. As indicated on p. 18, the responsibilities of the Designated Practitioner might include reporting on the entity’s implementation of the practice management principles.

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Question

15. What are the percentage of “small claims” reported by mid to large size firms? If they self-correct, does that affect or alter your statistics? It seems that it is easier for larger entities to bury information about these claims.

Answer

If the question relates to claims made to LawPRO, the Law Society does not have this information. At p. 6 of the Call for Input paper, there is a discussion about Law Society complaints data and firm size.  

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Question

16. Is part of the motivation to raise the standards of the bar and make it easier to lodge complaints? Right now, it’s impossible to lodge a complaint without disclosing the name of the complainant.  Might that change? For example, many lawyers now call themselves “specialists” when they have not been certified as specialists by the Law Society. There have also been high profile cases of lawyers being investigated, but the public is not told or protected when they make inquiries. Might this improve?

Answer

The goal of the compliance-based entity regulation initiative is to establish a proactive approach to regulation intended to help lawyers and paralegals to improve their practice standards and client service.  This may reduce the incidence of complaints about a practice management issue, by encouraging practitioners to consider certain issues up front, and make changes to the way they run their practice, rather than having to react to a complaint after one has been made.

Reviewing the current complaints process is not within the scope of this initiative, however we will pass your comments on to the Chair of the Professional Regulation Committee.

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Question

17. If compliance-based entity regulation is to be implemented, does the Law Society expect to review every entity’s self-reflection documents and policies and procedures? Would this not be an infinite task?

Answer

As indicated earlier, the Law Society has not yet made a decision on whether to require mandatory self-assessment, of whom it might be required, and, if required, how it would take place, or the particular tools that would be used.   The resources that would be required, by both the Law Society and by practitioners, would be taken into consideration in any decision to move forward with mandatory self-assessment.

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Question

18. What potential liability might there be for the Designated Practitioner?

Answer

Pages 17-18 of the Call for Input paper include discussion of this issue and the Task Force is giving it further consideration.  The Task Force is seeking input about the scope of responsibilities for the Designated Practitioner which may include

  1. establishing and maintaining a management system that promotes ethical legal practice;
  2. reporting on the entity’s implementation of the practice management principles under “Principles for a Practice Management System”, described earlier in this paper;
  3. communicating to the Law Society that the entity has been and remains in compliance with the principles;
  4. receiving notification of complaints regarding the conduct of a lawyer, paralegal, or other staff member of the entity, or the entity itself;
  5. reporting about entity trust accounting matters as well as ensuring that the firms’ record-keeping is current.

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Question

19. How do you assess the accuracy of reporting on the self-assessment?

Answer

As indicated earlier, Convocation has not made any decisions yet about how self-assessment might occur. As discussed in the consultation paper, one option could be that practitioners would be asked to indicate their compliance with a particular principle on a scale of 1-5. 

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Question

20. I understand the concept that entities providing a structure may well need regulation to the extent that the practices and procedures required by the entity fall short of the requirements that a regulator would require of an individual lawyer. However, I have difficulty understanding how entity regulation of a sole practitioner is a change from the current situation. To be effective, the regulator is going to have to expand the audit function to cover all of the practice principles and practices beyond financial management and sustainability. This has the potential to be a regulatory nightmare for sole practitioners. If the concern about sole practitioners is communication, for example, then consider making a specified amount of CPD time mandatory to address that. Currently, professionalism is a required part of CPD. Why not change that from time to time so that in a given year, there is a requirement to participate in a CPD related to practice management in a specific area, such as communication?

Answer

With respect to the possible impact of these changes on audits, please refer to p. 12 of the Call for Input paper.  If an entity were having difficulty implementing or complying with practice management principles, the Law Society might contact the entity to discuss the reasons for the entity’s non-compliance, and whether its policies and procedures might be improved. A compliance audit is another possible response, but not the only one.

At p. 15 of the Call for Input paper, the Task Force acknowledges that if compliance-based entity regulation applies to sole practitioners and small firms, it should not impose an undue burden on them and the Law Society should make resources available to assist all practitioners with compliance systems.

Your suggestion about enhanced CPD programming is acknowledged.

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Question

21. Could specific types of mandatory CPD, rather than further regulatory oversight, also serve to turn our minds to the way in which we might improve practice management at firms and avoid complaints?

Answer

The Law Society may explore whether the benefits of compliance-based entity regulation might be achieved through enhanced CPD requirements, rather than by making changes to the regulatory system.

In the consultation paper, there is some discussion about the benefits of proactive regulation.  On pages 10-11, there is a discussion of feedback received by lawyers and paralegals who have participated in Practice Management Review or Practice Audit. Lawyers and paralegals who participated provided extremely high approval ratings for the program.

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