Law Firm Regulation

Author: Herman Van Ommen, QC, Law Society of British Columbia

Law-firm regulation is moving closer to becoming a reality in most Canadian provinces, but there are still a few misconceptions about what it is, and what it will mean for lawyers and the profession.

Nova Scotia has been studying ways to regulate legal entities, in addition to individual lawyers, for several years, and recently published a draft self-assessment tool for public discussion. The three Prairie provinces recently collaborated to publish “Innovating Regulation,” a discussion paper in which entity regulation figures prominently. The Law Society of Upper Canada also recently published a discussion paper seeking public input on entity regulation

When the BC Legal Profession Act was amended in 2012, the Law Society was given the power to regulate law firms, and the Law Society began to examine how that might be done. After some preliminary work, the Law Firm Regulation Task Force was created in late 2014, and it has been meeting over the past year to consider how to develop a framework to implement the powers given to the Law Society by the statute. The Task Force recently issued a consultation brief and conducted an online survey, and is planning meetings around the province in February to gather input from the profession.

The most common misconception I come across is that law firm regulation will just add another layer of regulation, adding to the demands already made on lawyers. I know it’s counter-intuitive, but expanding the regulatory net to include firms is expected to actually lighten the regulatory burden on individual lawyers by shifting a degree of responsibility to firms.

If firms were regulated, they would bear responsibility for activities that transcend the work of any individual. Imagine, for example, that a firm’s advertising practices raise ethical or regulatory questions. Under the current system, the regulator has no choice but to investigate the matter through an individual lawyer within that firm rather than investigate the firm’s practices. If law firms themselves were regulated, the Law Society could investigate the firm’s practices directly and the firm would bear responsibility for its collective conduct.

I’m often asked whether law firm regulation would apply to sole practitioners and small firms. The answer is yes it could — in BC at least, where the Legal Profession Act defines “law firm” as “a legal entity or combination of legal entities carrying on the practice of law.” The Task Force is considering including sole practitioners and small firms in its recommended framework.

I have to stress again, though, that the envisioned framework does not aim to add to the regulatory demands on individual lawyers. Lawyers already have a duty to avoid conflicts of interest, for example, or to ensure their accounting is in order, so the approach under discussion does not involve drafting more rules. If sole practitioners and small firms are included in the framework, it would just mean that individual lawyers and small firms would bear the same responsibility as larger firms for instituting systems and processes ensuring that their practices are guided by a broad set of principles

Law firm regulation is meant to ensure that the entity providing legal services has systems in place guiding key areas of practice. Areas currently being considered include:

  • Practice management – active supervision and training of the practice, practitioners, articling students and staff, including obligations around privilege, confidentiality and privacy, safe and respectful workplace and interpersonal relations;
  • Client management – management of client relations including complaints, avoiding conflicts of interest and communications with clients to ensure effective, timely and courteous delivery of services, business continuity and succession planning;
  • File management – opening of files, file documentation and file closure;
  • Financial management – Law Society accounting and insurance requirements, billing practices;
  • Professional management – supporting lawyers in remaining current and building competencies; and
  • Equity and Diversity – equality of opportunity within firms, cultural sensitivity, respect for diversity in recruitment, hiring and advancement.

The role of the regulator would be to ensure each firm or legal entity has systems in place governing practices within these areas, but it would be up to each firm to design and implement the specific systems or protocols that meet its particular needs. The Task Force’s current thinking is that the Law Society might design some model policies so that firms that were not in a position to design their own processes from scratch could access the model policy and tailor it to suit their circumstances.

Another common misconception that I’ve come across is that law firm regulation is inextricably tied to alternative business structures. The two issues are related in the sense that a form of entity regulation will be needed if ABSs are to be permitted. However, whether to allow non-lawyer ownership of legal-service providers is a separate matter from law firm regulation. It would be wrong to conclude that entity regulation necessarily leads to alternative business structures. I can’t speak for other provinces, but the framework currently envisioned by the Law Society of BC does not encompass alternative business structures.

As our Law Firm Regulation Task Force prepares to hear from lawyers and others around the province, I look forward to the results of their consultation. And as we all prepare for some form of law firm regulation, I think it’s important to understand that it’s not just another layer of regulation, but a new approach to regulation.

Herman Van Ommen, QC
First Vice-President and chair of the Law Firm Regulation Task Force,
Law Society of BC

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