The LSUC Wants Your Input on “Compliance-Based Entity Regulation”: What is it and Why Should You Care?

Once again the LSUC is asking its members for input, this time about the possible implementation of “compliance-based entity regulation”. So, what is it? Why should you care? And how will it affect you?

​According to a consultation paper prepared by the related LSUC Task Force, “compliance-based entity regulation” refers to “the proactive regulation of the practice entity through which legal services are delivered”. From what I gather, in the most basic terms, this means that the LSUC wants to start regulating firms (in addition to individual lawyers) in order to help prevent lawyers from messing up, instead of just dealing with lawyers after they have messed up. Makes sense to me. But what will law firms (or “entities”) be required to do? Clearly, the LSUC will need to find the proper balance between regulating the individual lawyer and the legal entity. 

Practice Management System / Ethical Infrastructure
Entities would be required to implement certain “practice management principles” through a “practice management system” or an “ethical infrastructure”. What does that mean? Basically, firms are going to have to put in place policies and procedures to help their lawyers behave. The Task Force is considering the following "principles":

• Practice Management – active supervision of the practice, practitioners, and staff
• Client Management – conflicts of interest, client communication, managing client expectations
• File Management – opening / closing files, file documentation, etc.
• Financial Management and Sustainability – business planning and budgeting, management of finances, By-Law 9 etc.
• Professional Management – competence and capacity in new practice areas, staying up to date in chosen practice areas, collegial relationships within the profession
• Equity, Diversity and Inclusion – respectful workplace, equal opportunity and respect for diversity and inclusion in hiring and decision-making regarding advancement etc.
• Access to Justice – playing a role in improving the administration of justice and access to legal services

Proof of Compliance?
The law firms would have to demonstrate to the LSUC that they have implemented the above principles in their practice. However, they would have flexibility and autonomy in the implementation process. For example, a firm would have to show that it has a policy or procedure in place to deal with conflicts of interest, but the LSUC would not dictate what that policy would be.

It does not appear that the burden on the entities (which will likely include solo and small firms) is too onerous. I would suspect that firms already have most of these policies in place.  

On February 8th  the LSUC broadcast a webinar on this topic from 5-7pm, but I was only able to catch the first 30 mins (it wasn’t the most convenient time as it was right smack in the middle of kids’ homework, bath, and bedtime, etc., but I digress). The speakers that I managed to hear were quite clear that the approach was not going to be “one size fits all” and that a version of the compliance-based entity regulation that might apply to sole-practitioners and small firms would likely be different from the approach for medium to large firms. [Update: The webinar is now on youtube.]

Other questions in the consultation paper include to which entities this new regulation should apply; whether entities should be registered with the LSUC; and whether there needs to be a designated practitioner at the entity that would have certain regulatory responsibilities.The paper also summarizes the positive impact of proactive regulation in other jurisdictions such as Australia and England and Wales.

If you feel strongly about this topic, either for or against, or simply want to comment on it, I suggest you review the paper and questions and provide your input by the deadline of March 31, 2016. The full consultation paper can be found here.

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