COLP Seminars – Demystifying OFR

The lack of clarity of the new SRA regime presents a great opportunity for consultancies to run seminars to try an demystify OFR.

COLPs are to be appointed in the next few months and should be attending seminars to determine what their obligations are and what exposure they face.

It will be the COLP who will be responsible for ensuring that the firm has systems and controls in place to enable the firm, as well as its managers and employees, to comply with the requirements on them.

To be authorised, firms have to have suitable arrangements for compliance and some guidance is given as to what a “compliance plan”/risk register should cover although it will very much depend on the nature and size of firm, its work and its areas of risk. The COLP will need to be involved in the creation (if it doesn’t exist already) and monitoring/review of this on an on-going basis.

When choosing a COLP seminar you should be looking for a course  which will provide practical support as you set up the Compliance Officer for Legal Practice role in your firm, covering:

• What the COLP will need to do and when.
• What breaches should the COLP report?
• Getting buy-in from partners/staff.
• Indemnifying and protecting the COLP.
• The implications of getting it wrong.

A list of COLP courses are listed to right of this page.

10 Reasons COLPs need Compliance Optimisation Technology

Whether you are a sole practitioner or a managing partner of a legal practice, you must prepare for the increased regulation, scrutiny, and oversight inherent in the new SRA regime. Law firms across England and Wales should already have begun evaluating their compliance and control systems, but this is now being brought into sharper focus as firms are expected to nominate their Compliance Officer for Legal Practice (COLP) by 31 July 2012.

Even though expectations of evidential compliance has never been higher from the SRA, insurers, clients, and management, resources to perform compliance functions have not increased commensurately. Compliance programs must meet demands — to perform better, dig deeper, provide broader coverage, faster — without significant additional expense. To assist their COLP, leading firms are already embracing technology that can help them manage their day-to-day compliance functions and meet these new expectations.

New technological tools such as COMPLETIONmonitor make compliance in the high-risk areas of residential and commercial property law both more effective and more efficient. Compliance technology can help utilise existing resources and can extend the breadth and depth of coverage.

As COLPs  build their compliance programs, plan improvements, and determine the associated costs, they should realise that technology is integral to the solution. The COLP, like other managers or partners within a firm, can leverage technology to automate manual processes and maintain audit trails while greatly improving efficiency, precision, and overall effectiveness.

More importantly, technology can play a key role in fulfilling requirements to test the adequacy of compliance policies and procedures. It allows the COLP to focus on analysing results and identifying potential breaches rather than performing labor-intensive, manual reviews.

The SRA and, given the new ABS environment, potential investors expect to see technology at the heart of a firm’s compliance strategy, demonstrating a robust culture of compliance. And in the face of growing regulatory demands for information, technology can assist with timely production of key indicia of the operation of the compliance program.

In addition, senior partners, accreditation scheme auditors, management boards, and partners dealing with PI Insurance renewal forms are demanding more assurance with respect to compliance as they are asked to certify, report on, or oversee the effectiveness of risk management (and nowhere is this more relevant that highest-risk areas – namely the property department). Technological tools can help provide a robust foundation for these representations.

Unfortunately for many solicitors firms, they are not exploring or embracing the idea of compliance technology. Some firms maintain manual compliance processes, which are time-consuming, costly, and prone to error, although clearly having an external audit is better than nothing. Others combine manual and automated processes, making it difficult to reconcile data and ensure accurate real-time reporting. Some firms, even the more progressive firms, have purchased or built risk programs on piecemeal basis. It is not unusual for us to see a firm and be told they have a combination of a case management system, CRM, Outlook Explorer (diary and tasks) panel management-imposed tracking systems to update and spreadsheets to update .This approach could lead to disparate, nonintegrated which duplicate data and are costly to maintain yet fail to provide a consolidated view of risks.

Law firms and their COLPs who do not leverage technology to modernise their compliance may find that they expend valuable human resources on manual processes that could be directed to better use. They may put the firm and its employees at risk by not having as broad or as deep a focus on compliance risks as other firms and missing indications of noncompliance that would otherwise be revealed and addressed early. And, as the use of technology continues to grow, they will find that they are not meeting industry “best” practices or even industry “standard” practices. This last point is  relevant from a compliance perspective but also from the point of view of demonstrating insurability to potential PI insurers or being able to receive work in certain panel management situations, for example being able to act for certain lenders on commercial or residential conveyancing.

Here are some of the main reasons to integrate compliance optimization technology into your compliance program

1. COLPs and COLFs can spend more time analysing data rather than gathering information.
2. Increased efficiency leads to less red tape and cost reduction.
3. It enables identification conflict of interest management, a key area of the Code.
4. Data accuracy is enhanced, which reduces risks by limiting human error.
5. It demonstrates a prudent, responsible compliance culture, providing confidence to the SRA.
6. New infrastructure, especially web based services, can scale quickly as the business grows, and it is resistant to staff turnover
7. It allows the COLF and COLP to track issues uniformly, eliminating ad-hoc records.
8. It can identify important training requirements
9. It may impact your attractiveness to PI insurers.
10. It reduces the panic and burden of inspections by automatically generating predesigned reports that can be downloaded at the request of the SRA

As COLPs scramble to make their firms compliant they have to be careful not to implement technologies and processes with little thought to their impact on the firm. Thus, firms can end up either under-controlled — which leads to exposure to the SRA— or over-controlled, which means overburdened processes and ballooning costs. Choose wisely but choose something.

Are you sure that you are insured ?

Having recently recommended Travelers as preferred insurers, the Law Society and the Solicitors Regulation Authority are to take on the insurer over its aggregating of fraud claims and subsequent capping of a solicitors’ professional indemnity insurance policy. Such a move by Travelers has significant implications on the industry.

According to on-line insurance magazine The Post the original claim arose out of the activities of a conveyancing partner at a long-established Berkshire solicitors firm, Willmett Solicitors. Before resignation the partner had been, for some years, involved in a number of allegedly fraudulent conveyancing transactions, which SRA and Law Society claims unbeknown to other partners. Once the losses came to light as a result of the financial crisis numerous claims were brought against Willmett Solicitors and its partners by various lenders, including the claimant Godiva.

Willmett Solicitors has subsequently gone into liquidation and has no funds to meet the claims. Travelers assert that all activities arising from the individual partner's involvement in alleged frauds can be aggregated as ‘one claim' and therefore refuse to pay further sums beyond the £2m. In consequence, some of the innocent partners at Willmett have already been made bankrupt and the remainder are facing bankruptcy.

Law Society chief executive, Desmond Hudson, said: "It was vital that we, as well as the SRA, were able to intervene in this case. The insurer's interpretation of the aggregation clause, which led them to cap their insurance indemnity, could have widespread significance for the public as it will affect many claimants' right of redress.
"It is also of great concern to the profession in terms of their PII coverage and hence to the Society to ascertain how aggregation applies in a case such as this. Our members need to have confidence in their PII cover, and this could cast doubt on what they and their clients are protected against."

Did she really just say that ?

Following on from HSBC’s controversial decision to restrict their conveyancing panel just 43 firms (down from approximately 4000) the bank may have added fuel to the fire by certain assertions about the quality of the restricted panel.

The Guardian Newspaper yesterday quoted HSBC spokeswoman Suman Hughes who said that while previously it "couldn't guarantee the consistency" of conveyancing firms, using the panel "guarantees a better service".

I am no litigator but that phrase “guarantees a better services” jumps out to me as a rather bold (and potentially dangerous statement)
1) Could that statement open up HSBC to a misrepresentation claim in the event that a customer receives poor legal advice ?
2) Does the reference to “better service” create a higher a duty of care on the part of their lawyers?

Only time will tell.

Why conveyancers need to know parish of Hebden Royd

Hebden Royd is a civil parish with a town council in the Metropolitan Borough of Calderdale in West Yorkshire, England. According to the 2001 census it had a population of around 9,000.It includes Hebden Bridge, Mytholmroyd and Cragg Vale.

The reason why this parish is relevant to conveyancers is because Nationwide has identified this as the only area in the UK where they will lend on freehold flats. In a change to Section 5.6.1b of Nationwide’s Part 2 of the Handbook on the 10th January, the lender added properties in the parish as an exception to their general decision not to lend on freehold flats.

In answer to the question “Does the lender lend on freehold flats?” The new Section 5.6.1b now reads:

Generally no Exceptions-
i) see 5.7.1
ii) coach house flats - where there is one flat in a block built above garages and/or an access way there is no need to report details to us.
If there is an element of flying freehold - the requirements in part 1 paragraphs 5.6.2 must be adhered to.
Insurance - where the purchaser arranges insurance on more than one garage or garages owned/used by other parties, please ensure that the insurance company is aware of the arrangements.
iii) for properties in the parish of Hebden Royd see 5.6.1a above.


LENDERmonitor provides conveyancers with a subscription service that sends out email alerts advising when a lender makes a change to their policy. The recipient is then able to click through from the email to see the change in more detail on the LENDERmonitor website.

Increasing water pressure on Lenders

It looks as though Water Industry Property Information Network (WIPIN), the trade association representing the 10 Water and Sewerage companies of England and Wales who provide Drainage and Water Searches, are finally reaping the rewards for lobbying lenders on the issue of personal water and drainage searches.

Personal water and drainage searches exist in the marketplace as an alternative to the official Law Society approved CON29 Drainage and Water Enquiry, the standardised and underwritten product provided by the water companies. WIPIN warn of the potential for misunderstanding by conveyancers that personal searches are comparable substitutions for the CON29DW. The organisation posits that personal searches do not contain the same robust guarantees as the CON29DW, exposing the lender and homebuyer to unnecessary risk.

LENDERmonitor has recently notified hundreds of conveyancers that subscribe to their service of changes to Section 5.3.5 of the P2 of the CML Handbook for Yorkshire Bank Home Loans Ltd and Clydesdale Bank Plc.

The answer to the afore mentioned section has changed from :

Yes, provided the firm has adequate professional indemnity insurance. This will be treated as being the case if the firm is registered with the Council of Property search Organisations and the firm states that it complies with the Code of Practice for Compilers or Search retailers as the case may be.

To

For Local authority searches, yes, provided the firm has adequate professional indemnity insurance. This will be treated as being the case if the firm is registered with the Council of Property search Organisations and the firm states that it complies with the Code of Practice for Compilers or Search retailers as the case may be.

We do not accept personal searches in respect of other statutory searches or other utility undertakings.

Significant case could hinder conveyancers on sub prime negligence claims

In a recent article entitled “Significant case helps conveyancers on sub prime negligence claims” Alexia Ward argues that the decision in the case of Paratus AMC Ltd & RMAC 2005 NS1 Plc v Countrywide Surveyors Ltd is good news for solicitors. I beg to differ.

The facts of the case are well explained in the article by Alexia. In short, the court decided against the lender in assessing the retrospective market valuation of a property a valuation method which relied upon comparable sales evidence obtained from the Land Registry for the period immediately prior to the historical valuation was to be preferred to one which primarily relied upon the application of a price per square metre to the floor area of the property.

The court’s decision itself is uncontroversial as the defendant was found not to have negligently overvalued the property; what is of interest are the judge’s ruling on the recoverability of the loss in light of the consequences of loan’s securitisation; and his comments on both the quality of GMAC's underwriting for the purposes of contributory negligence and on the market approach adopted by sub-prime lenders at the height of the property boom.

Alexia Ward comments “ The obiter dicta raised in this case suggests that courts will hold lenders to account for careless lending, even if valuations are found to be negligent. If large percentages of any damages are taken away by the courts for contributory negligence, then it may well not be financially worth taking these cases to court. More consideration to the circumstances in which the loans were approved will have to be given, before lenders decide to pursue claims against surveyors through the courts”

I would stress that this is a first instance decision and the judge's comments on contributory negligence were either fact-specific to the case or made obiter dicta, so they are not binding on any successive cases. It is also worth pointing out that the judge's view was that a “sub-prime lender” should only be measured against the standard of care expected of a lender in that market and that a LTV of 90% was not in itself negligent.

The conclusion Alexia reaches is that this case will result in “..fewer lenders making negligence claims against professionals after the issue of contributory negligence is raised”.

I tend to take the opposite view and would suggest that if one did have a persecution complex (something that conveyancers are entitled to have in the current climate) then one could argue that this decision will result in more claims against conveynacers.

If the lending industry’s confidence is knocked by this decision then instead of pursuing surveyors for their losses they will turn their attention to conveyancers. It is fascinating that two of the more recent reported cases against solicitors indicate that in relying on a breach of the CML Handbook and a claim for Breach of Trust, issues of contributory negligence disappear. Indeed, in the case of Mortgage Express v Iqbal Hafeez Solicitors (Ch) the lawyers sought to avoid a claim for breach of trust by arguing the firm was entitled to relief under s.61 of the Trustee Act which could mean that could reduce the damages as a result of the contributory negligence on the part of the lender. In this case it was held that it was not appropriate to make any deduction for contributory negligence.