Entity-based Regulation of Law Firms in Canada’s Prairies: Considering the Options.

June 2, 2016

1. INTRODUCTION –

The Law Societies of Alberta, Saskatchewan, and Manitoba, being the “Prairie Law Societies”, have initiated a dialogue – the “Innovating Regulation Consultation”,[1] to engage the local legal profession in a discussion of entity-based regulation, as opposed to the generally prevalent paradigm of practitioner-based regulation.[2]  With a multifactorial consideration of entity regulation, compliance-based entity regulation, and alternative business structures or ABS (which I have blogged on before),[3] the responses have, understandably, been both highly varied and voluminous.  Having recently attended a Town Hall meeting on the subject in Edmonton, I can summarize my own understanding of and thinking on, entity-based regulation, as follows; with advance and cumulative credit given for the inputs of all Town Hall meeting participants, the leadership of the prairie law societies, and authors featured on the website.[4]

 

2. PRACTICE OPTIONS –

The practice of law in the prairies varies widely.  This ranges in the traditional firm format from sole practitioners – including in very remote areas, through firms of 2-10 lawyers, then of 11-25 lawyers, and finally, larger entities of 26 and more licensed legal practitioners.  Too, there are corporate in-house counsel; government legal department lawyers; court duty counsel, children’s aid lawyers, and legal aid practitioners; as well as lawyers in other settings who may be regulated, such as those working within non-profit entities, or carrying licenses from multiple jurisdictions with rules that don’t always overlap.[5]

As such, one size will not fit all applications, and on this we can all agree.  Despite the significant and legitimate resistance to adding an additional layer of law society regulation and compliance, there is much that can be said for the anticipated benefits of drilling-down on problem areas, encouraging firm peers to “actually” be collegial and supportive of one another in terms of watching those problem areas, enhancing client satisfaction at a time when “apps” and other professions are making significant inroads into the legal market  with few to none of the burdens of entry and licensing, and the public – whether through fiscal constraints or generalized dissatisfaction, is increasingly constrained in access to justice.

 

3. ENTITY REGULATION OPTIONS –

Considering the discussions had and the materials presented, I can summarize three options for entity regulation of the legal profession: Tri-thematic option, 5 Key management principles option, and the “PACES” paradigm option.  I will now present and discuss these in some greater depth, as follows.

 

a. TRI-THEMATIC[6]:

This option has three principal themes, each with three of its own sub-elements for a total of nine compliance lines.

 

i. Professionalism:

-File management (file integrity, timeliness and limitations statutes, conflicts checks);

-Professional management (CPD, human resource practice, competence and civility);

-Professional insurance (naming conventions, advertising, SRO compliance and communications).

 

ii. Confidentiality:

-Client management (returning calls, retainer letters, non-engagement letters);

-Security (physical and cyber-security, combating burnout through work-life balance, and combating substance abuse);

-File retention, subordinates oversight, and safeguarding client property.

 

iii. Operations:

-Financial management, trust accounting, peer consulting and sustainability;

-Practice management (day-to-day management, certifications, access to justice);

-Business insurance, legal and regulatory compliance, and diversity.

 

b. 5 KEY MANAGEMENT PRINCIPLES[7]:

This option, as put forward by the prairie law societies, has 5 major principles, with several sub-elements that I have structured into a total of nineteen compliance lines.

 

i. Practice Management:

-Managing the practice;

-Managing practitioners;

-Managing a staff;

-Playing a role for the improvement of justice administration and access to justice, through:

I. Informing low income clients of alternate options and service providers;

II. Training staff to engage appropriately with self-represented litigants;

III. Considering taking-on matters for members of under-served populations.

 

ii. Client Management:

-Managing client communications;

-Managing client expectations;

-Managing conflicts of interest.

 

iii. File Management:

-Ensuring consistent procedures for opening of client files;

-Ensuring consistent procedures for closing client files;

-Managing the documentation in (and of) client files.

 

iv. Financial Management:

-Managing business planning and budgeting;

-Managing entity finances;

-Ensuring consistent billing practices;

-Ensuring appropriate and adequate insurance coverage;

-Managing business continuity, succession planning, and entity dissolution planning.

 

v. Professional Management:

-Managing currency and best practices in established firm practice areas;

-Managing capacity and competency building in selected new firm practice areas;

-Ensuring civil relations within the profession;

-Playing a role for the improvement of equity, diversity, and inclusion within the firm, through:

I. Training staff towards cultural competency in the delivery of legal services;

II. Working towards equal opportunity, diversity and inclusion in recruitment and hiring;

III. Working towards equal opportunity, diversity and inclusion in promotions;

IV. Ensuring the work environment accommodates equity diversity, inclusion, and disabilities.

 

iii. 5, P-A-C-E-S[8]:

This option has five major, free-form principles, with the intention that entities selecting this option will be able to create and add-in their own sub-elements as compliance lines that they find both suitable and attainable considering their own interests, ranges of practise, geographic scopes of operations, human and capital resources, and such other considerations that they deem applicable.

– “P”rofessional Standards and Competence;

– “A”ccounting and Stewardship;

– “C”lient Interactions and Marketing;

– “E”thics and Stakeholder Management;[9]

– “S”ecurity, Cybersecurity, and Compliance;

 

4. COMPLIANCE-BASED ENTITY REGULATION OPTIONS –

 

a. SOLE PRACTITIONERS:

Perhaps it would be best to leave the sole practitioners as directly-regulated individuals without any additional levels of law society regulation, for obvious reasons of time and resources.  But, then again, it might be a relatively simple thing to have sole practitioners annually check the boxes on a form and submit that form to the appropriate law society or law societies (SRO), in order to certify that: (i) they subscribe to a particular entity regulation option (likely the tri-thematic option for sole practitioners); (ii) they are aware of and undertake to regularly (throughout the one year reporting period) review the contents and requirements of that entity regulation option as promulgated by the SRO; (iii) they undertake to continue to develop and update their internal compliance procedures in accordance therewith; and (iv) they will endeavour to have, by a specified time (perhaps by the third form submission), a written compliance code and procedures in place for SRO inspection and stress test.[10]

 

b. SMALL and MEDIUM LAW FIRMS:

Similarly, firms of 2-10 practitioners and firms of 11-25 practitioners might be given the option to choose between the Tri-Thematic (having 9 distinct compliance lines) and the 5 Key Management Principles (having 19 distinct compliance lines), with a single champion or a firm committee for each of the 5 Key Management Principles.  In this case, the firm might be required to check the boxes on a form (twice yearly) and submit said form to the appropriate law society or law societies (SRO), to certify that: (i) it subscribes to a particular entity regulation option (as the firm shall select); (ii) it is aware of and undertakes to regularly (throughout the six month reporting period) review the contents and requirements of that regulation option as promulgated by the SRO and discuss them internally; (iii) it undertakes to continue to develop and update its internal compliance procedures in accordance therewith; and (iv) the firm will endeavour to have, by a specified time (perhaps by the fifth form submission), a written compliance code and procedures in place for SRO inspection and stress test.

 

c. LARGE LAW FIRMS:

Firms of 26+, on the other hand, might be mandated to apply the 5 Key Management Principles, or develop their own “5, P-A-C-E-S[11] content and distinct compliance lines – with a single champion or committee for each of these 5 primary letters, pursuant to what those firms perceive as the risks, their client bases and practice settings, and their size or geographic scope and operational reach, because firm policies, expectations, and culture tend to determine the conduct of legal practitioners therein.[12]  Each one of these large firms might therefore be required to check the boxes on a form (twice yearly) and submit that form to the appropriate law society or law societies (SRO), to certify that: (i) it subscribes to a particular entity regulation option (as the firm shall select, within limits); (ii) it is aware of and undertakes to regularly (throughout the six month reporting period) review the contents and requirements of that regulation option as promulgated by the SRO and discuss them internally; (iii) it undertakes to continue to develop and update its internal compliance procedures in accordance therewith; and (iv) the firm will endeavour to have, by a specified time (perhaps by the fifth form submission), a written compliance code and procedures in place for SRO inspection and stress test.

 

5. CONCLUSION –

Admittedly, the consultation is still in its very early stages, and so significant work remains to be done by both the regulators and the regulated.  This, however, constitutes my two cents, and my learned colleagues in prairie and other jurisdictions will, doubtless, add their own 98 to this our ongoing debate.

 

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Author:

Ekundayo George is a lawyer and sociologist.  He has also taken courses in organizational and micro-organizational behavior, and gained significant experience in regulatory compliance, litigation, and business law and counseling.  He is licensed to practise law in Ontario and Alberta, Canada, as well as in New York, New Jersey, and Washington, D.C., in the United States of America.  See, for example: http://www.ogalaws.com.  A writer, blogger, and avid reader, Mr. George has sector experience in Technology (Telecommunications, eCommerce, Outsourcing, Cloud), Financial Services, Healthcare, Entertainment, Real Estate and Zoning, International/cross-border trade, other services, and Environmental Law and Policy; working with equal ease and effectiveness in his transitions to and from the public and private sectors.  He is a published author on the National Security aspects of Environmental Law, has represented clients in courts and before regulatory bodies in both Canada and the United States, and he enjoys complex systems analysis in legal, technological, and societal milieux.

Trained in Legal Project Management (and having organized and managed several complex projects before practising law), Mr. George is also an experienced negotiator, facilitator, team leader, and strategic consultant – sourcing, managing, and delivering on complex engagements with multiple stakeholders and multidisciplinary teams.  Team consulting competencies include program investigation, sub-contracted procurement of personnel and materials, and such diverse project deliverables as business process re-engineering, devising and delivering tailored training, and other targeted engagements through tapping a highly-credentialed resource pool of contract professionals with several hundred years of combined expertise, in: healthcare; education and training; law and regulation; policy and plans; statistics, economics, and evaluations including feasibility studies; infrastructure; and information technology/information systems (IT/IS) – also sometimes termed information communications technologies (ICT).  See, for example: http://www.simprime-ca.com.

Hyperlinks to external sites are provided to readers of this blog as a courtesy and convenience, only, and no warranty is made or responsibility assumed by either or both of George Law Offices and Strategic IMPRIME Consulting & Advisory, Inc. (“S’imprime-ça”) including employees, agents, directors, officers, successors & assigns, in whole or in part for their content, accuracy, or availability.

This article creates no lawyer-client relationship, and is not intended or deemed legal advice, business advice, the rendering of any professional service, or attorney advertising where restricted or barred.  The author and affiliated entities specifically disclaim and reject any and all loss claimed, no matter howsoever resulting as alleged, due to any action or inaction done in reliance on the contents herein.  Past results are no guarantee of future success, and specific legal advice should be sought for particular matters through counsel of your choosing, based on such factors as you deem appropriate.

[1] Innovating Regulation – a collaboration of the Prairie Law Societies of Alberta, Manitoba, and Saskatchewan on consulting the legal profession regarding transitioning to entity and compliance-based regulation.  Visited May 8, 2016.  Online: http://www.lawsocietylistens.ca/

[2] Id.

[3] Ekundayo George.  U.K. Alternative Business Structures (ABS) – Caution is best for new law practice models.  Posted on ogalaws.wordpress.com, October 7, 2011.  Online:  https://ogalaws.wordpress.com/2011/10/07/u-k-alternative-business-structures-abs-caution-is-best-for-new-law-practice-models/

[4] Numerous or overly-detailed footnotes and citations would simply and unnecessarily re-hash the consultation website and the large volume of materials there offered for the reading of all interested parties, at their own leisure.

[5] Not all law societies, bar associations and the like move in the same direction or even at the same time, and so permitted actions in one jurisdiction may always subject one to query in another.  Hence, collaborative efforts on such as these on seeking consensus and buy-in amongst several SROs and their members on matters of key and common importance are always and equally welcome to those with multiple licenses, and the simply curious.

[6] These three themes are my own composition, as inspired by materials on the website and my own experiences.

[7] These five management principles are the creation of the Prairie law societies, and additional details regarding same are available on the consultation website.  I have, however, moved or slightly modified some of their sub-elements for fit and format.

[8] These five elements are my own composition, as inspired by materials on the website and my own experiences.

[9] Of note, this term “stakeholder engagement” is sufficiently broad to encompass shareholders in a law firm and the non-lawyer shareholders and/or directors in an ABS, and also sits on the same line as ethics to allow for a proper balancing of profit motives in an ABS, against the professional interests of an entity’s licensed practitioners.

[10] I suggest SRO inspection and stress tests in situ as opposed to submission in full format, due to the volume of materials, the diversity of practice settings, and the fact that some of the larger firms or more specialized practitioners might want to keep their plans confidential – especially if publicly owned as an ABS, when these may be akin to Trade Secrets; the improper disclosure of which might subject those unwitting officers and directors in the ABS to a securities derivative suit from shareholders when the share price is diminished or firm reputation hit.

[11] Again, this is my own formulation.

[12] These determinants of conduct and choice of regulatory option, however, are from the consultation website.

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