Operation change: Maintaining the standards expected
Adapting to the post-covid new world requires maintaining appropriate oversight and conformity with regulatory and ethical duties, says Tracey Calvert
Last year, I wrote two columns about lockdown lawyering in 2020. The first one was written in early spring when we were all being knocked sideways, with the realities of working from home and rapidly becoming familiar with words and phrases like social distancing and furloughing.
My second column was written in late spring and I was optimistically looking forward to life back in the office, recognising that the pandemic had changed some of the customs and practices associated with legal practice, but still assuming that the concept of office life would resurface.
Move forward to 2021 and we have lived through national tiers and two more lockdowns since last spring. It’s clear that the pandemic has moved our work culture far further forward than we imagined possible back in March 2020. It has created a tsunami of change and it’s inconceivable that we will ever return to how things were before the pandemic.
The argument for flexible working now applies to all members of staff and technology has replaced a lot of processes and procedures previously performed in other ways.
I have not spoken with any law firm managers who tell me they are planning for a wholesale return to the office as and when possible. All the talk is about flexible working, reducing office space and overheads; and even the Solicitors Regulation Authority (SRA) has announced plans for what is described as hybrid homeworking for its workforce.
In other words, it is all change from the operational perspective; and I would expect planning to be well underway.
However, a word of caution is needed. Not everything about post-lockdown legal life has been relaxed. Restraint is needed when considering the necessary response to meet the behavioural standards set and tested by the regulator.
The SRA’s attitude towards this topic remains constant and it remains vigilant.
Nothing about last year, or our plans for the future, should allow us to entertain any idea that the regulator will accept any slipping of standards.
While we have been advised that the SRA will adopt a pragmatic approach to compliance, nothing should be read into this statement other than understanding that the SRA is prepared to have conversations with us about our innovative ways of ensuring high standards are maintained.
We only have to peruse the disciplinary stories of the past few months to know that we are not in an era of light touch regulation. Recent headlines show the SRA’s approach remains rigidly steadfast.
A trawl through decisions of the Solicitors Disciplinary Tribunal (SDT) reveals that enforcement action has been taken to deal with many risks, including the misuse of client money; acting as compliance officer without SRA-approved status; incorrect use of electronic signature facilities for court documentation; client due diligence failures; dealing with residual client protection matters on the death of sole principals; dishonesty and the backdating of documents; and racial abuse in the working environment.
In other words, it is business as usual in terms of the action the SRA will take to ensure that it’s fulfilling its duties to act in the public interest.
This means the firm’s compliance team (whether that’s the compliance officers for legal practice (COLPs) and compliance officers for finance and administration (COFAs) alone, or compliance professionals within the business, have another huge task on their hands in the coming months.
Responding to the change
The immediate response to lockdown and the workarounds to ensure good quality and ethically based legal services were delivered, must be reviewed to ensure that the firm’s policies, controls and procedures suit the new age in which the office is not necessarily the only (or even the main) location from which the firm provides legal services.
How do we protect client money and ensure colleagues understand the severity of backdating documents or acting dishonestly? How do we keep up to date with SRA reporting duties? How do we ensure due diligence procedures do not slip?
In other words, the challenge is to adapt to flexible working while maintaining appropriate oversight and conformity with regulatory and ethical duties. So, where to start? My benchmarking questions are:
Is the firm’s governance system still fit for purpose? – The SRA regards good governance as one of the mainstays of a safe authorised environment. To reinforce the expectation that this will be the case, managers were made jointly and severally liable for compliance in the SRA Code of Conduct for Firms (introduced in November 2019).
It’s crucial to consider chapter 2 of this code and be satisfied that the structures, arrangements, systems and controls remain suitable to address the need for the firm to demonstrate regulatory arrangements are satisfied, records are accurate, financial and business viability is monitored and risks are managed.
Should risk assessments be updated to reflect changes? – Changes to non-office-based services must have an impact on risk management and mitigation techniques. Have these been discussed and recorded? Have you, for example, considered whether the risks relating to client money have increased and, if so, how you will make changes?
Can compliance officers fulfil their individual roles? – The compliance officers are the first responders when it comes to the relationship with the SRA. They need to have up-to-date data to hand to engage in constructive conversations with the regulator. Do they know all that they need to know?
Are systems of supervision still effective? – Remember that the SRA requires firms to have effective systems of supervision so that the risks of providing legal services can be managed. A supervision methodology that is not documented and or does not reflect and accommodate remote supervision is not appropriate.
What is expected from senior colleagues? – Flexible working practice is not the same as the occasional day working from home. The latter was previously largely the perk of fee earners, particularly senior colleagues.
While they may have appropriate legal knowledge to run cases with minimal supervision, they must not be allowed to be a partner or senior employee in name only.
How are junior colleagues supported? – In the same vein, now that junior colleagues are working more flexibly, firms must ensure that less experienced colleagues are supported; there is inclusivity; and they remain team players.
Who needs to be visible and why? – Everyone needs to count as a member of the team, so no one should be able to hide away in the new era. Communication between colleagues needs to be continual; supervision needs to be effective; and everyone needs to be reminded they are brand ambassadors for the business.
Have essential procedures been communicated? – In brief, everyone should understand the lower threshold of compliance procedures below which they must not fall: client onboarding, due diligence, conflict analysis, confidentiality safeguards, clear lawyer-client communications, records of undertakings and reporting of issues are starting considerations. Do colleagues know what is expected from them?
Training
A well-designed training programme cures many compliance ills. Leaning and development should continue, not only to support the topics that bolster the firm’s longevity (such as equality, data protection and, of course, anti-money laundering) but also to ensure that tailored fixes are given where individual needs are identified.
The firms that adapted more smoothly to lockdown lawyering in 2020 were those in which compliance systems were well-established and resources had already been allocated to developing a firmwide culture. Investing time in such considerations largely paid dividends in that the culture was sustainable notwithstanding the environment was spread far and wide.
Now, the compliance journey needs to continue with this further re-evaluation of what a firm looks like post-covid and in the new age.
Tracey Calvert is a consultant at Oakalls Consultancy Limited oakallsconsultancy.co.uk
