FAQ

Entity regulation simply means regulating the business unit through which legal services are delivered in addition to regulating the lawyers operating within the entity. This can mean regulating traditional law firms or, possibly, other organizations that provide legal services, such as corporate legal departments.  

The Prairie law societies continually strive to become more modern, proactive regulators, attuned to the changing needs of the public and the profession.

Law societies from around the world have come to recognize that the environment in which a lawyer practises can play a major role in individual conduct. We know that the vast majority of insurance claims and complaints about lawyers stem from practice management or client management issues. In 2014 in Alberta, 73% of insurance claims received related to issues around miscommunication, practice systems and administrative procedures.

It is recognized that the environment in which a lawyer practises can play a significant role in determining professional conduct, yet the entities through which lawyers provide services are largely unregulated.  Law firms have a unique ability to influence behaviours and create firm cultures that can align with ethical standards articulated by law societies - for example, in the management of articling students, conflict of interest protocols and file management systems. In this way, law firms bear some responsibility for the improper conduct of individual lawyers.

The Prairie law societies believe a renewed focus on effective practice management at the entity level can improve the way lawyers provide services to their clients, reduce complaints, better protect the public and increase public confidence in the legal profession. 

Proactive entity regulation can encourage and accommodate new business models, which may enhance access to justice and provide further opportunities for affordable legal services.

To start with, we anticipate that we would focus on entities that primarily provide legal services directly to the public.  This includes law firms of all sizes (including sole practitioners) and could include organizations such as legal aid.  

After further consideration, we might include other types of entities, such as corporate and government legal departments. 

Yes, in fact, the proposed management principles described on this website are related to Code obligations, such as:

• Quality of service 
• Conflicts of interest
• Supervision of staff
• Competence 
• Preservation of clients’ property
• Civility
• Communications from the Law Society

The proposed management principles aim to help entities create an environment that will make it easier for lawyers to comply with their obligations under the Code of Conduct and the Rules. 

The management principles are broadly drafted so that they can be applied flexibly, in a manner appropriate to each firm’s size and practice. Proactive entity regulation generally allows entities to develop their own processes and management systems to achieve organizational outcomes. Many firms may already have sound management systems in place, and may not be required to change in order to comply with the management principles. Compliance-based regulation may include some or all of the following components: 

The Law Society would not review an entity’s management systems in detail; we would simply need to know that the systems are in place.  

The practice could be similar to the way an entity’s trust accounts are currently monitored by the Law Society – through regular reporting and spot audits.

An entity self-assessment form would likely have to be completed by the Designated Compliance Officer. The assessment form might be a questionnaire to determine the appropriateness of the entity’s structure, policies and procedures that ensure lawyers in the entity comply with their ethical duties and that non-lawyers within the entity behave in an appropriate manner. The assessment may take place annually or less frequently.

Entities may also be subject to random practice audits where they will be required to demonstrate compliance with management principles. Entities may be asked to meet with the Law Society to review its compliance or non-compliance. 

The Designated Compliance Officer might be responsible for fostering compliance at their firm, by identifying and limiting ethical risks and serve as the Law Society’s point of contact.

The Designated Compliance Officer should be someone in a management position, or otherwise well-positioned to implement components of the entity’s management systems. 

The Designated Compliance Officer would not incur personal liability for an entity’s failure to comply.

The Prairie law societies anticipate that some requirements would be modified for sole practitioners and would consider a reasonable standard for the size of an entity. Also, the Law Society would provide resources such as guidelines, best practices, and model policies that entities could adapt for their own use and offer CPD seminars that may help with compliance.  

Overall, entity regulation would enable more flexibility in our responses than is possible under our current regulatory model.  

If the Law Society and the entity cannot work together to rectify an incident of non-compliance in a remedial fashion, the consequences may take the form of a fine, a limitation on the entity’s trust account, or more onerous requirements on that entity to demonstrate compliance on the issue at hand.

Overall the consequences will be proportionate to the risk associated with non-compliance, the unique circumstances of the entity, and other factors.

Proactive entity regulation could help lawyers prevent conduct that could otherwise lead to complaints, costly investigations, irreparable harm and discipline. Some statistics that point to this are:

• In Australia, where proactive entity regulation has existed for more than a decade, research found a 2/3 reduction in complaints against small and sole practices. 
• Australian law firms subject to entity regulation believe it has improved and strengthened their management systems, thereby assisting them to improve service delivery.
• The Legal Ombudsman of England and Wales has reported a 22% reduction in complaints against law firms since proactive regulation was implemented.

Some of the regulatory obligations could be shifted from being each lawyer’s responsibility to a reporting obligation handled by the Designated Compliance Officer.

Under entity regulation, everyone in a law firm (whether they are lawyers or non-lawyers) has a stake in whether the firm is in compliance since law firm discipline directly or indirectly affects all firm lawyers. Greater emphasis on prevention could encourage those who control a legal practice to develop management training, supervision, and quality control systems for the benefit of all employees.

Proactive entity regulation could improve the relationship between the regulator and firm because the regulator’s focus would be on encouraging a competent firm culture, behaviour, and processes, rather than on discipline alone. The Law Society would devote resources to improve the management and culture of the firm as part of reducing complaints and protecting the public. 

Proactive entity regulation could help lawyers prevent conduct that could otherwise lead to complaints, and harm to the public.  As well, compliance-based entity regulation could encourage the development of new organizations to deliver legal services, with more options and lower prices.

While this is not the focus of our current consultation, the ability to regulate entities through compliance-based regulation is an important precursor to exploring new types of business models. 

The primary focus of our current consultation is on entity and compliance-based regulation. While we recognize that alternative business structures are a possible outcome of such regulatory change, we are at the very early stages of exploring ABS here in the Prairie law societies. We are eager to hear your perspective and are using this discussion forum as a way to begin the dialogue with lawyers from the Prairie Provinces about your interest in the potential attributes of ABS. We will reserve a more fulsome discussion of ABS in a subsequent round of consultation, if and when the proposition is brought to the table.