1. business and industrial

Firm authorisation webinar
27 April 2015
David Nix, Head of Firm-Based Authorisation
Jas Chauhan, Senior Authorisation Officer
Agenda
• Part 1
• Part 2
• Part 3
• Part 4
• Part 5
Factors to consider prior to
submitting an application
What a complete application
should contain
Tailored approach for firms
Tailored approach for authorised
role holders
Issues specific to criminal legal
aid connected applications
PART 1
Factors to consider prior to submitting an application
Assess the risks
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Risk Framework – our approach to risk
Risk Index
Risk Framework
Refer to Professional Ethics line
– Telephone: 0370 606 2577
– Email: professional.ethics@sra.org.uk
Consider
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SRA Authorisations Rules 2011
SRA Practice Framework Rules 2011
SRA Practising Regulations 2011
SRA Suitability Test 2011
Legal Services Act 2007 ("LSA")
Section 176 duty to comply with the SRA's
regulatory arrangements.
• LSA Schedule 2 - The reserved legal activities
• LSA Schedule 13 - Ownership of licensed bodies
How we assess risk
Three different types of firm level risk:
Risk category
Risk level
Operational risks
Risk arising from a firm’s internal processes,
people and systems
Viability risks
Risks arising from the viability of the firm and
the way it is structured
Impact risks
Risk that firm or individual undertakes an action
or omits to take an action which impacts
negatively on us meeting the regulatory
objectives
How we assess risk
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Identifying and managing risk(s)
Business structure and governance
Business planning and financial management
Succession and contingency planning
Lack of legal experience
Lack of management experience
Lack of financial competence - adequate systems and
controls re: client account and compliance with the SRA
Accounts Rules 2011
Any questions?
PART 2
What a complete application should contain
Overview: five-stage
process
1. Assessing if an application is complete
2. Researching application, including conducting
background checks and analysing risk
3. Evaluating research results
4. Making the decision
5. Updating our records and issuing Certificate of
Authorisation
Reasons why applications
are rejected or delayed
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Missing or incomplete forms (e.g. No FA2 form)
Missing declarations
No PII quote
Incomplete Suitability Test
Insufficient consideration of risk by applicant
Any questions?
PART 3
A tailored approach for firms
Recognised Sole Practitioners
1.
2.
3.
4.
5.
6.
FA1 form
FA2 forms for COLP and COFA
Professional Indemnity Insurance quote
Explanation of business model
Cash flow / Profit & Loss account
Prohibited separate business (possibility of a waiver)
Recognised Bodies
1.
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6.
7.
8.
FA1 form
FA2 forms for the COLP and COFA
Professional Indemnity Insurance quote
Explanation of business model
Cash flow / profit and loss account
LLP Agreement / Shareholders Agreement
Group and governance structure
Prohibited separate business (possibility of a waiver)
Licensed bodies / ABS
1. FA1 form
2. FA2 forms for the COLP, COFA and owners / managers
3. FA3 forms for corporate owners / managers
4. Professional Indemnity Insurance quote
5. Explanation of business model
6. Cash flow / profit and loss account
7. LLP Agreement / Shareholders Agreement
8. Group and governance structure
9. Prohibited separate business (possibility of a waiver)
10. Schedule 13 of the Legal Services Act 2007 – restricted
interest holders needing approval
Any questions?
PART 4
A tailored approach for authorised role holders
Authorised role holders
• COLP
• COFA
• Individual and Corporate Owner / Manager
Approval of role holders
• SRA Authorisation Rules for Legal Services Bodies
and Licensable Bodies 2011
• SRA Practising Regulations 2011
• SRA Suitability Test 2011
COLP and COFA – Overview
• Critical for firm being able to comply with regulatory
arrangements
• "The right person in the right role"
– Fitness and propriety
– Seniority and responsibility
• SRA requires a strong element of legal and
regulatory expertise in all legal practices
• Overall responsibility for compliance and managing
regulatory risk rests with all individuals in the firm
COLP
• Must satisfy the eligibility criteria in Rule 8 of the
SRA Authorisation Rules 2011 including:
– Must be a lawyer of England and Wales/ REL authorised by
the Bar Standards Board
– Must be a manager or employee (including a manager or
employee of a related authorised body)
• Also see Guidance note to Rule 8 which includes:
– Clear reporting lines
– Access to all management systems
– Access to client files and business information
COLP (continued)
• COLP -What are we looking for?
• Some questions we may ask
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What is their experience of working within a legal practice?
Will they have access to all client files?
What is their past work experience?
Do they have clear reporting lines?
Can they fulfil their role?
Are they a manager or employee of a related authorised
body? (Consider issues of conflict and confidentiality)
COFA
• Must satisfy the eligibility criteria in Rule 8 of the SRA
Authorisation Rules 2011 including:
– Must be a manager or employee (including a manager or
employee of a related authorised body)
– Must ensure compliance with the SRA Accounts Rules 2011
• Also see Guidance note to Rule 8 as above and in
addition:
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Ensure that they have access to all accounting records
Carry out regular checks on the accounting systems
Carry out file and ledger reviews
Monitor, review and manage risks
COFA (continued)
COFA - What are we looking for?
Some questions we may ask:
• What is their experience of dealing with the SRA
Accounts Rules 2011?
• What accounting system will the firm utilise?
• Who will undertake the day-to-day accounting
activities?
• Will they review all reconciliations?
• What systems will they have in place to record
breaches?
Employees who are
compliance officers
• Will they have access to office account bank
statements?
• Will they have authority to review any ledger or file
within the firm?
• To whom do they report?
• Do they have authority to changes processes within
the firm?
• Will they attend manager/partner meetings?
• Does the governance structure obstruct their ability to
fulfil the role?
• Is there a whistle-blowing policy?
Key issues identified
• Failure to disclose
• Regulatory history
• Lack of seniority and responsibility
Owners and managers
Approvals:
• Non-lawyer owners and managers (including
corporates)
• Specific approval (including other lawyers)
Any questions?
PART 5
Issues specific to criminal legal aid connected applications
Risks associated with CLA
applications
Type of risk
Issue
Breach of confidentiality
• Two existing firms form new entity. Possible issue of
breach of confidentiality through shared staff, premises or
computer systems
• Delivery partners having access to contract provider’s
case management systems. How will access be
restricted?
• s190 of LSA and legal professional privilege
Misleading a party
• White labelling through use of delivery partners
Disorderly wind down /
financial difficulty
• Contingency and succession plans if a duty provider
contract is not secured and the firm is no longer viable
Risks associated with CLA
applications
Type of risk
Issue
Failure to provide a proper
standard of service
• Due diligence on delivery partners
Group contagion /
structural insability
• Safeguards to mitigate risk that liabilities, losses or events
affecting one part of a group structures affects the whole
group
Inadequate complaints
handling
• Are proper complaints handling procedures in place?
What information is provided to clients?
Acting outside regulatory
permissions
• PII covers eventually of professional negligence claims
against delivery partners
Client Accounts
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If taking on private clients, is there a client
account?
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Use of escrow accounts can be considered on a
case-by-case basis
Any questions?
Useful contacts
• Contact Centre 0870 606 2555 or
contactcentre@sra.org.uk
• Professional Ethics 0370 606 2577 or
professional.ethics@sra.org.uk
• Guidance on SRA website:
www.sra.org.uk/authorisation