A changing legal landscape 16 October 2013 Jatinderpal Loyal – SRA Policy Executive Lesley Horton – SRA Investigation Officer

Embracing Change

• • • The Legal Services Act 2007 has opened up the legal services market The advent of ABSs has presented opportunities for all sizes of firm and investors – Access to finance – New combinations of service (MDPs) – Recruitment and retention of other professionals The SRA – the implementation of risk-based, outcomes-focused regulation

Legal & political pressures

• • • Legal Aid Sentencing and Punishment of Offenders Act 2012 – Referral fee ban – End to civil legal aid – Changes to civil litigation costs Financial Conduct Authority and consumer credit activities The end of the Assigned Risk Pool

“if it quacks like a referral fee, it is probably a referral fee

”

• • • • • • • Ban came into effect on 1 April 2013 Collaborative working between SRA, FCA and MoJ’s CMR Have you adjusted your business model?

Diversification or closure?

ABS – is it the golden ticket?

LASPO and the SRA Code of Conduct 2011 SRA concerns - guidance revisited

What are we seeing…

• • • • • • Agreeing with an introducer to deduct money from clients’ damages; Failing to advise clients regarding any solicitor/introducer agreements where these are not in the clients interests; Inappropriate outsourcing of work to introducers; Referrals to other service providers which are not in the best interests of clients; Failure properly to advise clients about the costs and how their claim should be funded; and Lack of transparency about the arrangement.

ABS – the golden ticket?

• • • • Odd models - various tiers of ownership of shares No joint ownership, not profit taking Payments to the % category C shareholder based directly on the number of cases taken up by the venture Insurers looking to protect income stream – will the model ensure client interests are protected?

End to Legal Aid – where

?

• • • • • Private family law, such as divorce and custody battles Personal injury and some clinical negligence cases Some employment and education law Immigration where the person is not detained Some debt, housing and benefit issues

Continued funding…

• • • • Family law cases involving domestic violence, forced marriage or child abduction Mental health cases All asylum cases Debt and housing matters where someone's home is at immediate risk

Immigration

• • • • • What areas of advice and representation will legal aid be available?

Who will be able to undertake legal aid work? Without legal aid, who can offer advice and representation? Has your business adjusted?

Have clients been informed?

LASPO confirms that legal aid

will remain

available:

• • • Asylum cases – advice and representation. But

not

for refugee family reunion cases

.

Asylum support cases but not for representation at appeal hearing. Certain domestic violence related cases – advice and representation.

Legal aid

is not

available for…

• • • • People facing removal or deportation, where no asylum claim is made. People with claims under Article 8 of the 1950 European Convention on Human Rights.

Children in non-asylum immigration proceedings, including separated children and abandoned children applying to regularise their stay in the UK. Refugees seeking refugee family reunion.

Key questions…

• • • • Are you continuing to provide advice in areas where legal aid has been cut?

Are clients being informed?

Have your fee arrangements been reconsidered and explained to clients?

Has your firm been impacted by the changes? Are you managing any identified risks?

Price Competitive Tendering – on hold

• • • The proposals are complex - but in essence what will happen is that firms will have to bid for a contract with the Legal Aid Agency and the winning firms will then be allocated cases. People will not be able to choose who their solicitor is. Only a small number of contracts available – will firms survive?

• The 'winning' bidders will have to bid at such a low level to secure any work – will firms have the resource to do the job properly?

• Firms will be paid a fixed fee per case.

• Will your firm be submitting a bid?

Key concerns

• • For smaller firms: the requirement to cover a whole criminal justice area means an increase in infrastructure and management costs. On top of a 17.5% cut this would almost guarantee bankruptcy.

For larger firms: the artificial cap on the share of the market that they can be awarded means there is unlikely to be sufficient volume to enable them to absorb the cuts.

Timeframe...

• • • • • 3 months from notification to undertake the restructuring and expansion required; Firms will need to implement significant IT and infrastructure changes; Any changes to a firm’s structure will require regulatory approval; Will the costs outweigh the benefits?

Will client interests be protected?

Clients? Who?

• Client choice: The scheme proposes abolition of a client's freedom of choice of solicitor!

• Client choice does not just benefit the client, it provides competition and an incentive to keep standards high!

Transfer of regulation – OFT to FCA

• • • • FCA takes responsibility for regulating all consumer credit activities on 1 April 2014 OFT group licence regime comes to an end on 31 March 2014 Mainstream or incidental activities – Part 20 Financial Services & Markets Act 2000 – where does your business sit?

Retain area of work or diversify? What are the risks?

Professional Indemnity going forward…

• • • • • As of 1 October 2013, the ARP no longer provides qualifying insurance to firms.

Does anything replace the ARP? What does the extended policy period allow you to do?

What if at the end of the 90 days you do not have qualifying insurance? Orderly closure by 30 December 2013?

Key factors…

• If no insurance - firms will enter the extended policy period (90 days) • • The first 30 days - EIP The last 60 days – cessation period – firms cannot take on any new instructions!

• 90 th day firm must close their doors!

Resources…

• www.sra.org.uk

• Professional Ethics - 0370 606 2577 • www.www.justice.gov.uk

• www.fca.org.uk

• Any questions?