Society newsLegal Services Regulation: A progress update
The journey to Legal Services Regulation (LSR) has taken a major step with the November 17, 2017 approval by Council of several regulatory amendments to advance the Society’s initiatives. The result is a model of regulating legal services that is risk focused, proactive, principled and proportionate. Key components of the regime and the impacts on law firms are described below.
Law firm registration
Core to LSR is implementation of law firm or entity regulation. This reflects the changing nature of legal services provision and is marked by a shift in regulatory focus from individual lawyers to law firms, where appropriate. Most existing firms will only notice minor changes, as the primary regulatory focus will be on new practices and trust accounts.
The first significant shift relates to law firm registration. The Society will now maintain its records based on law firms and who in the firm provides legal services to clients. That will include lawyers, paralegals and legal support staff who have direct interaction with clients. This information will be captured through the Annual Firm Report. For new firms, provision of this information is the only implication of the registration process.
From January 1, 2018 onward, newly established law firms must register with the NSBS before they deliver legal services to the public. This will allow us to work with new practices to ensure they have an effective management system for ethical legal practice in place and appreciate the complexities of running a law firm and their regulatory obligations. A package of information about this process, including a prescribed registration form, is being prepared and will be available on our website in December. (See Opening a new practice for existing tools and resources, including a list of steps to opening a practice in Nova Scotia.)
The NSBS has had a regime in place for many years regarding designated lawyers from law firms, under regulation 7.2.1(a). This role was administrative and namely, it identified a lawyer who would receive NSBS correspondence on behalf of the firm.
The new regulations expand upon the responsibilities of the designated lawyer. Besides the communication role that has been in place, the designated lawyer will now be required to submit the Annual Firm Report, which includes the Trust Account Report. If the firm is asked to complete a self-assessment relating to its management system for ethical legal practice, described in more detail below, it is the designated lawyer’s responsibility to use reasonable efforts to ensure that the self-assessment is accurate and complete.
Annual Firm and Trust Account Reports
In late December or early January, firms in private practice will be asked to complete their Annual Firm and Trust Account Report Form (AFTAR). To minimize the number of times we seek information from firms, the two documents now constitute a single report.
The Annual Firm Report has been expanded slightly in order to prepare for the amendments to the Legal Profession Act that will allow more staff in law firms to deliver supervised legal services. It is for that reason we are asking for the names of support staff who assist or on their own deliver legal services to clients. The list of support staff will not need to be updated during the year, but the list of lawyers must be kept current. The AFTAR will be due on January 31, 2018.
Accountant’s Report waivers
Because the NSBS is using risk as a driving factor in its regulation, some firms that have had no problems or concerns arising from their trust account reports for several years may have the requirement for an accountant’s report on the TAR waived this year. We are piloting this initiative to determine if we can reduce the cost of compliance by law firms without increasing the risks borne by the NSBS. Because this is a new initiative, only a few firms will benefit from it in year one and will be notified in early January. All other firms will have to have their Accountant’s Report on trust accounts filed with the Society by March 31.
Operating a trust account
Another significant change under the new regulations is the requirement that lawyers and law firms obtain the permission of the Executive Director before operating a trust account. Permission will be granted upon the successful completion of an assessment and demonstration that the lawyer/firm has the infrastructure in place to safely and appropriately operate a trust account. In approving these changes, Council accepted as a principle that holding other people’s money in trust is a privilege and not a right for lawyers. The NSBS must ensure that lawyers/law firms have the requisite knowledge and infrastructure in place before they can exercise that privilege.
Core to the new regulatory framework is the requirement that all firms have a management system for ethical legal practice in place. The NSBS has prescribed the elements of an appropriate management system – but not how those elements will be uniquely reflected in the systems or practices of a particular firm. The work the NSBS undertook earlier this year to test a self-assessment process demonstrated that most firms have many aspects of an appropriate management system in place. However, all firms can improve on how they address key management and ethical systems to minimize risk in their operations and improve client service.
Over a three-year period, we will invite firms to provide the NSBS with a self-assessment form. This will allow the firm, in whatever way it thinks is most appropriate, to review its management system and ethical guidelines to determine how they can be improved. The NSBS has compiled and will make available as part of this process significant resources to assist firms in effecting their identified improvements.
The list of firms required to submit a self-assessment in 2018 will be compiled by the end of February. Your designated lawyer will be advised if your firm is on that list and of the timing for submission. This process will allow us to work with you directly to ensure that completing the self-assessment tool is done so it is most appropriate for your circumstances.
If you have questions relating to Legal Services Regulation or self-assessment, please contact Jennifer Pink, Legal Services Support Manager, at (902) 422 1491 or firstname.lastname@example.org.
Darrel I. Pink