SC 4 2005 4 Item 6
Published on Corporate Business
31 March 2005
COMPLIANCE BOARD
Minutes of the meeting of the Compliance Board
held on Tuesday 15 March 2005
at the Crowne Plaza Hotel, NEC, Birmingham
Present:
Richard Hegarty – Chairman
Bill Boyes – Council member
Nigel Dodds – Council member
Sandi O’Neill – Lay member
Ramindar Singh – Lay member
Graham Stuart – Non-council solicitor member
Simon Veysey – Non-council solicitor member
In attendance:
Russell Wallman, Alison Crawley, Ian Wright, Sir Stephen Lander, Cerys
Jones, Martin Webb, David Middleton, Geoffrey Negus, Ian Stevens,
Colin Quinney and Ian Salisbury
1
APOLOGIES:
Apologies were received from Mary Cridge and Ann Kelly.
2
MINUTES OF THE MEETINGS HELD ON 19 JANUARY 2005
The Minutes of the joint meeting held on 19 January were agreed subject to the
addition of Sir Stephen Lander to the list of those giving their apologies. The
following amendments were made to the minutes of the sole meeting:
-
-
3
in the fifth paragraph of item 4 “should be hived off” to be replaced with “was
likely to be hived off”;
in the third paragraph of item 5, the final part of the final sentence to be
amended to read “it should nevertheless be possible for the Chairman to be
consulted and to speak on the Board’s behalf.”;
the section on costs orders (paragraph 8) to be clarified to the effect that full
reasons should be given.
MATTERS ARISING
The matters arising schedule was noted.
An update was given on post Clementi matters. Advertisements had appeared for
the Chairmen and members of the two new Boards for which the closing date was 24
March. The Council had accepted the Boards’ views on the size and composition of
the new Boards and it was expected that those Boards would come into being in
September. There would be a period of shadow running until the end of December
2005 when the existing Compliance and Standards Boards would be disestablished.
During that period there would be some cross over and commonality of meetings.
61
Published on Corporate Business
31 March 2005
SC 4 2005 4 Item 6
There remained significant issues to be addressed on the form and nature of
regulation in the longer term. The Council still adhered to its view that regulatory
powers should vest in the front line regulator under the supervision of the Legal
Services Board though it was accepted that this might not appeal to the present
Government as much as to the opposition parties. The Council also believed that
the powers of the Office for Legal Complaints should concern redress only but that it
should be capable of referring issues about the performance of the regulator to the
Legal Services Board. However, not all interested parties were agreed on this.
Finally, the Council was in favour of legislating now for the regulation of claims
managers.
A statement was expected from the Lord Chancellor on 21 March when some or all
of these issues were expected to be addressed.
Staffing issues remained a major task to be undertaken. For the moment, a
Transition Board under Stuart Bushell had been set up to which Sheila Spicer, who
had been the Secretary to the Clementi Review, would be seconded from the DCA
for two years. The post of Senior Director (Regulation) had been created,
responsible for providing the lead policy advice to the Boards and dealing with policy
matters with the Government.
It was suggested that the Society should have a representative on the DCA’s Bill
team.
An exercise had begun to amend the General Regulations to give effect to structural
and other changes. A copy of the latest version was before the Board and any
comments on the redrafting to date would be welcome. On that subject, the Board’s
immediate reaction was that provision should be made for more direct operational
and budgetary responsibility.
The Board also had before it a copy of the latest exchange of correspondence with
the Legal Services Complaints Commissioner. A meeting would take place with the
Minister the following day. If the latest version of the plan was not declared
adequate, the next steps were mediation and, if so advised, judicial review. The
Society was adhering to the line that it would not subscribe to targets which it did not
believe could be met. Additional factors which now had to be taken into account
were a letter from the DCA, after a long period of silence, concerning the raising of
the IPS limit to £15,000 and a trend in recent LSO reports to require reinvestigation
to be undertaken within a month. With regard to the latter, clarification had been
sought from the LSO as to whether a failure to do this would result in subsequent
additional adverse reports. If that were so, it appeared to be a deliberate attempt to
depress the “satisfaction” rating.
As to miners’ compensation, Ethics had produced a detailed paper and the subject
was ongoing.
As to the SIF surplus, Council had agreed to the return of contributions as previously
discussed (if the Master of the Rolls agreed to the necessary rule change). The
remainder would be applied to run off cover for SIF and for other regulatory
purposes.
Council had not approved the paper on the Post Qualification Development and
wanted certain issues to be looked at again.
The position with regard to TAG was that the profession had been told to repay the
62
Published on Corporate Business
31 March 2005
SC 4 2005 4 Item 6
premiums in question but the Society had not checked the extent to which this had
been complied with. There was the possibility of a legal challenge to the guidance
which the Society had issued. The Board was concerned that the Society was laying
itself open to a charge of disinterest and of abdicating its responsibility. It had to be
recognised that not all clients were aware of the deductions which had been made
and, as a consequence, were not likely to complain. They were therefore dependent
upon the Society taking proactive steps. However, in contemplating such steps, it
had to be recognised that the list of TAG firms which the Society has been given
might have been given on certain undertakings as to its use. The Board asked for
this to be clarified by the time of its meeting on 3 May when it would consider the
possibility of writing to firms for confirmation. A draft letter to that effect should be
prepared in time for the meeting.
4
AMC
BEST VALUE REVIEWS
At the Council meeting in December it had been suggested that the Consumer
Complaints Service should consider conducting a best value review of the kind
applied to local and other public authorities.
It could be said that the Society had applied significant resources to complaints
handling without necessarily applying best value principles. The application of those
resources has been directed solely at meeting targets imposed by the then LCD, the
Legal Services Ombudsman and, latterly, the Legal Services Complaints
Commissioner. Indeed, it could be said that there was no very clear understanding
of the cost of complaints handling at the point of delivery.
Having said that, the most pressing reality at the moment was the LSCC plan and
now was not the time to divert attention and resources to another regime of analysis
and audit.
As to the reviews themselves, best value principles could not be applied in their
entirety, given the nature of the business, but it might be that some of the principles
associated with them could be applied.
Overall, the Board’s conclusion was that this was not an exercise to be undertaken
now but would be a priority issue for the new Board(s).
5
ADJUDICATION PANEL
The Board considered a paper which drew attention to the fact that the lay
membership of the Adjudication Panel would, by the beginning of 2006, reach a
critically low level. This was because of retirements in August 2005 and because of
the loss of the services of the lay members of the Board when it was disestablished.
In determining an appropriate level of lay membership, and indeed of membership
overall, competing considerations needed to be balanced. On the one hand, the
need for lay members’ services in IPS reviews would diminish following the abolition
of appeals but at a rate which could not be precisely gauged. On the other hand,
their prospective involvement in other parts of the complaints handling process
tended to increase demand for those services. Then again, in taking any decision
now, the Board would inevitably be disinclined to tie the hands of the Consumer
Complaints Board (and indeed the OLC), either or both of which might decide upon
alternative processes.
In discussion, the Board reached the conclusion that there was a need which
63
Published on Corporate Business
31 March 2005
SC 4 2005 4 Item 6
extended into 2006 and that the risk of under-resourcing in the context of the LSCC
plan were too great. However, the Board recognised that there was, at the same
time, a risk associated with diluting the expertise of the Panel by the recruitment of
too many new members. Therefore, the Board decided to retain the services of
those due to retire in August (if they were willing to continue), to invite the lay
members of the Board to continue as ordinary Panel members after the
disestablishment of the Board until 31 August 2006 and to recruit as many new lay
members as were thereafter required to bring the establishment up to 15. The Board
decided that it would not be appropriate to commit the new Boards to a lay
membership beyond August 2006 and so new lay members would only be appointed
for a year. The Board indicated that the solicitor members due to retire in 2005
should also be invited to continue. The Board considered that it would be one of the
first tasks of the new Boards to consider the roles and requirement for both lay and
solicitor members.
As a preliminary to this, it was decided that the views of the Master of the Rolls
should be sought. At the recruitment of new members, a proposal to restrict
advertisements to the geographical area of the Midlands did not find favour with all
Board members. The position would be clarified with the Equality and Diversity
Director.
6
RIS &
AMC
DIRECTOR’S REPORT (INCLUDING LSCC UPDATE)
The Board had already been updated on negotiations with the LSCC over the plan.
As to CCS performance generally, the Board was updated on the present position
which was essentially that the dip in performance which had been noted at the end of
last year and the beginning of this had been somewhat redressed.
The Director indicated that, particularly given the fact that customer satisfaction was
one of the areas of disagreement in the context of the LSCC plan, he had asked for a
more in-depth analysis of the customer satisfaction ratings and would endeavour to
refine, or find alternative, processes to bring about an improvement. However, it
remained the case that customer satisfaction in complaints handling was irretrievably
linked with the outcome of the complaint itself.
The Board received a report on the position with regard to the budget.
7
CURRENT PROJECTS
The list of current projects was noted.
8
RECONSIDERATIONS/APPEALS/REVIEWS
The Board considered a paper and a proposed policy statement which sought to
clarify and reduce the complexity of appeal and review processes.
In essence, the paper attempted to draw a distinction between what were to be
known as “appeals”, arising in circumstances where one or other of the parties was
dissatisfied with the decision, and “reconsiderations” where the decision, irrespective
of the views of the parties, appeared to the Society to be fundamentally incorrect in
one respect or another. Those fundamental considerations aside, the paper also
addressed specifically the issue of referrals from the LSO for reconsideration and
referrals to the Solicitors Disciplinary Tribunal.
64
Published on Corporate Business
31 March 2005
SC 4 2005 4 Item 6
The Board approved the proposal and agreed the draft policy statement although it
wished the term “LSO reconsideration” to be retained as this was the term used in
the legislation and by the LSO; it also suggested that expectations might be better
managed if a synonym could be found for “wrong” in the context of other
reconsiderations. The list of those authorised to exercise the discretion to reconsider
should be amended to include the Manager of the Adjudication Team and to delete
the reference to Adjudication Panel members. Finally, the Board decided that LSO
reconsiderations should continue to be heard by the Adjudication Panel, rather than
the adjudication team.
9
THREAT ASSESSMENT
The Board received a presentation from the Head of Investigation and Enforcement
about the work of that Unit and his assessment of the nature and origin of the risks to
regulatory integrity.
The Board noted the presentation and asked for confirmation, which was received,
that such regulatory tools as were thought to be necessary would be requested in a
new Solicitors Act. That aside, it was agreed that the Society should be on its guard
concerning attempts to undermine the integrity of its staff by, for example, the placing
of dishonest employees; as much publicity as possible should be given to the
Society’s resolute attitude towards dishonesty.
10
DELEGATIONS
The Board agreed a schedule which delegated various powers in relation to
incorporate practices, Registered Foreign Lawyers and Registered European
Lawyers. These delegations were approved in addition to those already in place.
Additionally, the Board clarified the position with regard to delegations made in
March 2004 concerning referrals to the Solicitors Disciplinary Tribunal. Such
delegations were to include the Manager and Team Leader of IDU Unit, the Manager
of the Regulation Unit and of the Investigation Casework Team, the Head of
Investigation and Enforcement as well as advocates in the Intervention and
Disciplinary Unit. The powers were exercisable in respect of solicitors, Registered
Foreign Lawyers, Registered European Lawyers and recognised bodies.
11
DIRECTOR’S REPORT
The Director of Regulation (Compliance) presented a report on the performance of
that part of the Directorate.
The work associated with the risk based approach to regulation was continuing,
particularly the separation of the IPS and conduct work streams.
A report was also made on the present position with regard to outsourcing. In
essence this was that outsourcing activities were operating effectively and were
providing benefits in line with those projected when funding was first secured. There
had been no adverse reaction from the media and the response from complainants
had on the whole been positive. The desired objective was largely complete and no
further outsourcing was likely beyond May 2005.
The Finance and Resources Board had indicated that the Board should consider a
review of outsourcing which included a value for money assessment. It was
proposed, therefore, that the Board should receive a report following the closure of
65
Published on Corporate Business
31 March 2005
SC 4 2005 4 Item 6
all outsourced files. A more detailed exercise would be undertaken to benchmark
costs and timescales against expectations and against in-house experience.
Currently a sample of outsourced closures was being taken to verify the quality of
work and decision making had met the necessary standards.
The Board noted the position. It observed that the number of compensation
complaints remained high and expressed its concern about the length of time which
it apparently took to deal with these matters. The point was made, however, that the
figures in the Director’s Report did not take account of any interim grants which were
often made early in the process and long before the final closure of the file. The
Board also queried the upward trend line of conduct work in progress though it was
suggested that this could be explained as an administrative consequence of the
separation of the IPS and conduct workstreams.
The Board received a report on the position with regard to the budget.
12
ENDOWMENT COMPLAINTS
The Board considered a paper reporting on issues concerning a number of
endowment complaints that had been received against solicitors who were
subscribers to Solicitors Financial and Property Services Ltd, established by the
Society.
In 1988, partly in response to the complexities of the Financial Services Act 1986,
the Society established Solicitors Financial and Property Services Ltd (SFPS). The
objective of the company was to give to solicitors, who subscribed to SFPS, access
to financial and property services support. This enabled them to provide a more
wide ranging service to clients without necessarily having to acquire financial
services expertise in-house. An agreement was negotiated between SFPS and
Sedgwick Financial Services Ltd, a leading firm of brokers. The arrangement with
Sedgwick was not limited to mortgage related business but also covered advice in
other areas such as personal pensions, school fees and inheritance tax planning.
However, the issues that had arisen only concerned mortgages.
The Society had received a number of complaints involving mortgage related
endowment policies arranged through Sedgwick as a consequence of an assertion
that Sedgwick would only be liable in relation to complaints or mortgage endowment
mis-selling where commission was split equally between the firm of solicitors
concerned and Sedgwick itself. If the commission had been paid mostly to the
solicitors, responsibility for mis-selling rested with them since, in those
circumstances, it was argued that Sedgwick was only providing a quotation service.
In an adjudication on a particular case the Financial Ombudsman Service had
supported that interpretation. The issue only arose with cases where the services in
question were provided between 1991 (when the IPS compensation powers came in)
and 1993 when the agreement with Sedgwick was renegotiated.
It was therefore necessary for the Society to decide whether individual clients were
entitled to compensation for the provision of an inadequate professional service or
from the Society. The dilemma which arose was that any finding of IPS would be
predicated on the basis of the giving of substantive investment advice, probably in
breach at the time of the Solicitors Investment Business Rules. Clearly the whole
purpose of the arrangement at the time was to avoid any breach of the rules and
some or all of the firms concerned were likely to complain that monitoring and other
visits by the Society in the interim had not raised the issue. Alternatively, if IPS were
66
Published on Corporate Business
31 March 2005
SC 4 2005 4 Item 6
not found (on the grounds that the solicitors concerned were not giving substantive
investment advice) and the Society did not accept responsibility itself, the client
concerned would have no means of redress in the light of the view taken by OFOS.
While the Board was not entirely comfortable with what appeared to be a
reinterpretation of what had been intended at the time, it nevertheless agreed in
principle that endowment complaints involving clients of firms that were subscribers
to Solicitors Financial and Property Services Ltd could be considered in the same
way as any other IPS matter. They would not qualify for ex-gratia payments save
through the Special Payments Policy.
13
AUDIT COMMITTEE
There were no matters which the Board wished to refer to the Audit Committee.
14
PRESS/PUBLICITY
The Press Officer reported on current media and publicity issues.
15
ANY OTHER BUSINESS
(i) Tribunal Referrals audit – in approving the new prosecution code in
March 2004, the Board had agreed to regular audits of SDT applications
and findings. The first of these now needed to be arranged, based on
findings from November 2004. Those decisions needed to be reviewed
by three members of the Adjudication Panel and nominations were
required. It was agreed that Mr Stuart would be one of the three and that
the Chairman would nominate the other two.
RIS
(ii) Publication of SDT findings – it was proposed that SDT findings should
be publicised by means other than being open to inspection upon
application. Effectively, this meant publication on either the SDT website
or the Society’s website. The Tribunal considered that responsibility
rested with the Society since this would be in line with the publication
responsibility contained in the Solicitors Act. At the moment, the
intention was simply to post Findings as Word documents on the website.
Decisions still needed to be taken with regard to other formats and
whether publication should be retrospective.
(iii) Independent Commissioner – it had been confirmed that the post of
Independent Commissioner would be abolished in October 2005. A final
report from the Commissioner was in preparation.
(iv) Consultation Sessions – the first of the sessions designed to review older
CCS files had taken place on 23 February. Anecdotally, the session
which had taken place had raised issues about the systems to manage
the progression of cases and the provision of technical advice. The
Director addressed those concerns. The sessions would continue on a
monthly basis and a report would be produced to the Board at one of its
autumn meetings which would include the extent to which
recommendations had been followed to bring matters to a close.
(v) Board dates – The May meeting of the Board would take place at the
NEC. The Board determined that it should have an additional meeting on
6 July in London. It would on that occasion consider the question of
67
Published on Corporate Business
31 March 2005
SC 4 2005 4 Item 6
dates for the remainder of the year.
The meeting concluded at 16:45.
68