Lessons learned from lawyers

Regulator behaviour is the source of much discussion and some consternation in financial services circles. But understanding why regulators do what they do can perhaps be found by examining the way other professions are governed.

Most recently, the Law Society of Upper Canada, the self-regulatory organization overseeing Ontario lawyers, expanded its spot-audit and focused-review programs to include random practice-management reviews for lawyers in their first eight years of practice.

The goal of the new program is to focus on practice-management issues and remedy competence and compliance deficiencies in the early, formative years of a lawyer’s practice.

By 2009, the Law Society plans to conduct approximately 420 practice management reviews and 80 focused reviews for more serious cases annually. Observations gathered will also be evaluated to determine whether the profession as a whole could benefit from being advised of areas for improvement.

What may perhaps be most interesting to those outside of legal circles is the process and rationale used in developing the program, and the Law Society’s focus on prevention, support and remedial measures.

“It is arguable that the more attention a governing body pays to effective preventative tools designed to enhance competence, the more likely the public is to be satisfied with self-regulation,” says a report written by members of the Law Society’s professional development, competence and admissions committee. “Public attitudes to self-regulation have changed significantly in recent years. Traditionally, there has been little intense government or consumer scrutiny of professions’ approach to self-regulation, whether law or other professions. In recent years, however, it has become clear that a positive public perception of a regulator’s actions is essential to a government’s continued support of self-regulation.”

The report’s authors say examples of this can be found in England, Wales and several Australian states where legal industry self-regulation and disciplinary authority has been curtailed by the government over concerns that regulators failed to address complaints and regulate in the public interest. The report goes on to point out that the legal profession in Canada, along with the College of Physicians and Surgeons of Ontario, has been the subject of judicial pronouncements and scrutiny. Government has also stepped in to make legislative amendments that affect the College of Teachers.

“Our self-regulatory status is important to us,” says the Law Society’s director of professional development and competence, Diana Miles. “Given what’s going on in the market with all of the corporate activities, any professionals involved, whether they be financial advisors, lawyers, accountants or others, I think are all ripe for the picking at this point because shareholders are not interested in hearing excuses. I think it’s incumbent upon all regulators to ensure that their professionals are up to standards.”

In considering how to address quality-assurance measures, the committee considered how other professions review their members and found that practice reviews — called “peer assessments” by the College of Physicians and Surgeons or “practice inspections” by the Institute of Chartered Accountants of Ontario and the Barreau du Québec — were among the most widely used and accepted approaches.

The review found several features common in each practice-review regime. For one, while the programs are designed to be educational and separate from the regulator’s disciplinary reviews, they also include more focused components, still outside of the disciplinary arena, to address more serious competence issues. As well, although all of the programs include the possibility of referral to the regulator’s discipline stream, this step is generally reserved for the most extreme situations, and usually requires a separate investigation.

In the new legal practice review program, candidates are told in advance that they have been selected and firms are given time to correct deficiencies, along with checklists and other information to guide them through the review process.

Similar to the Society’s spot audit program, reviewers are expected to be sensitive to the member’s need to conduct business while the review is underway, and each member who has been audited is surveyed for feedback on their view of the process.

In 2005, 93% of those audited found the process constructive, 100% said they found the auditors’ conduct to be professional and helpful, 98% found the audit report to be useful and 94% said the internal control list provided was helpful.

Interestingly enough, concerns expressed by sole practitioners and small law firms are strikingly similar to those expressed by those operating in independent financial advisory channels.

“The [Law Society] sole practitioner and small firm task force report identified multiple pressures on such practitioners, among them concerns that administrative burdens and requirements have a disproportionate impact. The committee was, therefore, impressed by the fact that lawyers in sole and small firm practice, who are clearly included in the survey results, when asked about the spot-audit process, give it such a high rating. Lawyers benefit from receiving both generic practice tools such as the internal control list, and personal guidance such as the audit report and feedback from the auditor.”

Filed by Kate McCaffery, Advisor.ca, kate.mccaffery@advisor.rogers.com