International Conference of Legal Regulators London 27 and 28 September 2012

1. Panel Workshops: The Challenge of Raising Professional Standards International Conference of Legal Regulators London 27 and 28 September 2012 Tahlia Gordon Research & Projects Manager Office of the Legal Services Commissioner (NSW)

2. THE NEW SOUTH WALES OFFICE OF THE LEGAL SERVICES COMMISSIONER (OLSC) • Established in 1994, the OLSC receives all complaints about legal practitioners in New South Wales (NSW) • Acts as a co-regulator with the Law Society of NSW and the NSW Bar Association • Purpose – to reduce complaints against legal practitioners within a context of client protection and support for the rule of law and to increase professionalism • OLSC is an independent statutory authority

3. RELEVANT FACTS • Approximately 25,973 legal practitioners in New South Wales • Approximately 18,000 legal practitioners in private practice, 2,900 in government and 4,880 corporate practice • OLSC comprises 30 staff with a budget of AUD4million • 2010-2011 – received 2,561 written complaints (1,843 consumer disputes, 718 investigations) • 2010-2011 – received 8,128 calls from the public on our Inquiry Line

4. ALTERNATIVE BUSINESS STRUCTURES (ABS) • Historically, legal practitioners in NSW only permitted to practice in a partnership structure • 1990 - legislation enacted allowing legal practitioners to form solicitor-corporations = LLPs in USA • 1994 – legislation enacted allowing multidisciplinary practices (MDPs) • MDP requirement – legal practitioners had to retain 51% of the net income of the partnership. (51% rule) • 1999 – 51% rule abolished – anti-competitive • 2001 - legislation was enacted allowing legal services providers to incorporate as companies under the Australian Securities & Investments Commission • Legislation permitted legal practices to incorporate, share receipts and provide legal services with other legal and non-legal service providers

5. INCORPORATED LEGAL PRACTICES – State of Play • There are currently 1,258 incorporated legal practices (ILPs) in New South Wales • ILPs represent approximately 30% of legal practices in New South Wales • The majority of ILPs are situated in suburban Sydney • Approximately 65% of ILPs are sole practitioners • Approximately 30% of ILPs are mid size practices with between 2-7 partners • There are several larger national firms operating as ILPs

6. LEGAL-PRACTITIONER DIRECTOR • Must be an Australian legal practitioner with an unrestricted practising certificate • Additional obligations over and above traditional professional obligations • Must implement and maintain “appropriate management systems” • Must report professional misconduct of any director or legal practitioner in an ILP • Must identify and report legal and non-legal services of practice

7. APPROPRIATE MANAGEMENT SYSTEMS • Appropriate management systems (AMS) are not defined in legislation • OLSC together with the profession identified 10 objectives of sound legal practice • ILPs must convince the OLSC that they have a management system which addresses the 10 objectives • ILPs use a self-assessment process to prove compliance • ILPs required to complete a self-assessment document setting out their system with OLSC assistance if required

8. TEN AREAS TO BE ADDRESSED TO DEMONSTRATE COMPLIANCE WITH “APPROPRIATE MANAGEMENT SYSTEMS” Negligence - (providing for competent work practices) Communication (providing for effective, timely and courteous communication) Delay (providing for timely review, delivery and follow up of legal services) Liens/file transfers (providing for timely resolution of document/file transfers) Cost disclosure/billing practices/termination of retainer (providing for shared understanding and appropriate documentation on commencement and termination of retainer along with appropriate billing practices during the retainer) Conflict of interests (providing for timely identification and resolution of “conflict of interests”, including when acting for both parties or acting against previous clients as well as potential conflicts which may arise in relationships with debt collectors and mercantile agencies, or conducting another business, referral fees and commissions etc) Records management (minimising the likelihood of loss or destruction of correspondence and documents through appropriate document retention, filing, archiving etc and providing for compliance with requirements regarding registers of files, safe custody, financial interests) Undertakings (providing for undertakings to be given, monitoring of compliance and timely compliance with notices, orders, rulings, directions or other requirements of regulatory authorities such as the OLSC, courts, costs assessors) Supervision of practice and staff (providing for compliance with statutory obligationscovering licence and practising certificate conditions, employment of persons and providing for proper quality assurance of work outputs and performance of legal, paralegal and non-legal staff involved in the delivery of legal services) Trust account regulations (providing for compliance with Part 3.1 Division 2 of the Legal Profession Act and proper accounting procedures)

9. SELF-ASSESSMENT DOCUMENT

10. SELF-ASSESSMENT DOCUMENT Cont’d

11. BENEFITS OF THE ILP REGULATORY REGIME 2008 research study by the OLSC and Dr Christine Parker, University of Melbourne Analysed self-assessment forms of 631 ILPs before and after incorporation Study found that the complaint rate of ILPs have reduced by two thirds after going through the self-assessment process Majority of ILPs (62%) assessed themselves to be in compliance on all ten objectives after initial assessment Demonstrates that the ILP regulatory regime is a success

12. 2012 STUDY Mixed method  Surveyed designated directors for all ILPs with 2+ solicitors who completed SAF  Surveyed designated directors for all ILPs with 2+ solicitors who completed SAF Interviewed 40+ directors Used Qualtrics

13. HOW SAP CONTRIBUTES TO DEVELOPMENT OF AMS 84% reviewed firm policies or procedures 71% revised firm systems, policies or procedures 46% adopted new systems, policies or procedures 6% hired a consultant to assist the firm in developing policies and procedures

14. IMPACT OF SAP IN IMPROVING Firm management 2.47 Risk management 2.38 Supervision 2.24 Client communication 2.13 Professionalism 2.07 Accountability to clients 1.97 No impact (2) Some impact (3) High impact Ethical culture 1.90 Ethical leadership 1.85 Ethical conduct 1.85 Workplace satisfaction 1.65 Firm morale 1.54

15. APPROACHES TO SAP AND AMS Ticking Implementation for compliance Implementation for clients Implementation for risk management Implementation for business development