The CLC aims to help its regulated community to achieve compliance with regulatory and legal obligations. Our determination to support innovation and growth means that we want to help the entities we regulate to implement new ways to meet customer needs and grow their businesses. This means helping businesses to understand how they can meet the appropriate regulatory outcomes and not binding them into inflexible forms of compliance. This is the best way of providing consumer protection and choice.
We pride ourselves on having a good understanding of the businesses that we regulate. We aim to have a detailed and rounded view of their activities so that we have a global understanding of the particular risks they might face. This starts with very close supervision of new businesses in the first years of their regulation by the CLC. Our concern then is not simply with regulatory compliance but also with financial stability and health because unsound businesses also present a threat to the consumer and public interest. We aim to work in close partnership with the business so that they succeed and are compliant.
CLC proceeds on the basis that prevention is better than cure and use a wide range of approaches and tools to support regulated entities, ensure compliance and take corrective or disciplinary action where it is necessary. They give us a range of regulatory responses that are proportionate to the risk to clients in any particular case.
Maintaining the health of the profession
When new entities are established under CLC regulation for the first time they will have satisfied us that they have in place the appropriate processes and resources to deliver conveyancing or probate services and manage their own and clients’ money in line with our regulatory requirements. They will also have presented a business plan for their first three years setting out their road to sustainability. We will also have satisfied ourselves as to the qualifications, experience and background of the Authorised Persons, other managers and any external owners. All of these aspects are monitored closely at the beginning of the firm’s life.
Close Initial Support and Supervision
Before a new entity is authorised, Licensing Team at the CLC will have met the managers of the firm to discuss their plans in detail. This takes place at an early stage, to help ensure that submitted applications take full account of our requirements. This helps ensure that we and the applicants don’t waste time dealing with incomplete in insufficient applications. Some applicants will find at this stage that CLC regulation is not right for them or may take time to think more about their plans and how they might need to change in order to meet our requirements for consumer protection.
Either before or very soon after entity authorisation, key managers are required to attend a workshop at our offices led by the Regulatory Supervision Managers. This is valuable in establishing the firm’s relationship with that team and ensuring that the managers are fully prepared for the reporting that is expected of them.
All new CLC-regulated entities will be inspected during their first year of operation to ensure that the systems and processes they have in place are being followed and that they are achieving compliance with the CLC’s Handbook.
Annual Checks
After the early period of regulation of a new entity, we use a mix of self-certification, third-party reports, desk-based supervision and inspection visits to monitor the all-round health of the profession. The key points in the regulatory year are:
- Submission of accountants’ reports – in line with the entity’s audit year.
- Licence renewal
- For individuals – in October each year individuals must inform us of any change in circumstances that might affect their right to a licence for the coming year beginning 1st November .
- For entities – also in October, a licensed Manager must confirm that there is no issue that might affect the entity’s licence to practise.
- Annual Regulatory Return – Each entity is required to provide a response to a questionnaire that probes a range of areas to understand ongoing or emerging risks within the firm and across the sector as a whole.
Concerns raised in accountants’ reports may give rise to requirements on the entity to address shortcomings in their management of client funds. If so, a timescale will be set and compliance monitored until the CLC is satisfied.
Licence renewal is an automated and speedy, but not automatic process and is a key point in the regulatory year. If the CLC has concerns about an individual or entity, we may decide to hold over renewal of a licence until the issue has been addressed or a timetable for its correction is agreed. Licences may also be issued with conditions that need to be met by the individual or entity to ensure retention of that licence.
Data from the Annual Regulatory Return may give rise to further regulatory action in relation to a specific entity or highlight the need for more general action such as enhanced or clarified guidance to the profession or new CPD requirements in relation to specific issues. It also provides an understanding of changes in the profession as a whole.
Monitoring Inspections
In addition to the desk-based monitoring that is set out above we undertake a programme of on-site inspections of regulated entities each year. The largest group of inspections will be arranged because of the time that has elapsed since the entity last had a monitoring inspection. Each practice will be inspected at least once every three years.
Additional visits are arranged in light of specific issues that we have identified with firms and where desk-based supervision is judged to be insufficient. Others will be risk-based, in other words, we will not be aware of a specific issue, but have concerns about the entity’s risk profile that merit a closer look. (That might be because the firm undertakes a significant amount of transactions in which they act for both sides, for example, or are disproportionately dependant on one client.)
Other Intelligence
The CLC may also receive information about a regulated entity or individual from another regulator, The Legal Ombudsman or a mortgage lender as well as an employee, colleague or client. In such cases, the matter will be addressed directly with the firm or individual until the CLC is satisfied that they are in compliance or may lead to some kind of disciplinary action. Conduct complaints may, following investigation, also give rise to some form of compliance assurance or disciplinary action, as appropriate.
Working with Financial Institutions
We engage with mortgage lenders on a range of issues that relate to the work the regulated community does for and with them. Their panel management approaches can offer useful insight into the conveyancing market place for us at an aggregate level and, where there might be problems, with an individual firm that we regulate.
Those same panel management arrangements can create problems where they impede market access for Licensed Conveyancers on a level footing with other lawyers. While this problem has largely been dealt with, it is instructive to understand how panel criteria have had the effect of excluding non-SRA firms in the past. This was because of confusion about membership of the Law Society’s CQS scheme, which many banks require of SRA firms. Some banks were excluding CLC-regulated entities because they were not members of CQS even though that cannot be a requirement of firms that are specialist conveyancers as is the case of our regulated community.
As a regulator, we would not advocate for panel access for an individual firm, but we are anxious to ensure that there are no unfair barriers to market entry or access. We are pleased that lending institutions have responded so positively when we have had to address the issue with them.
Equality, Diversity and Inclusion
The CLC’s efforts to improve equality, diversity and inclusion (EDI) within the regulated community and in relation to the treatment of clients has been significantly mainstreamed within our regulatory work for some time. All policy proposals are assessed for their EDI impact and especially for any negative impact on protected groups. Our Annual Regulatory Return is now tracking the particular challenge of progress from entry to managerial roles of women and BAME lawyers and support staff in the firms that we regulate. This year saw a small but positive move forward for women.
To support individuals and employers better, we are working with the other front line regulators to share insight, ideas and best practice. We have also become a member of Business in the Community, opening up their wider social responsibility resources to the regulated community.
Disciplinary Action
Where an individual or entity fails to achieve compliance to the satisfaction of the CLC, for example, where there is evidence of misconduct or where there is clear evidence of risk to the consumer, the CLC can refer the matter to the independent Adjudication Panel. The Adjudication Panel, which will set an appropriate sanction following consideration, or intervene to close an entity in the interest of existing and potential future clients. At time of writing, work is underway to develop a set of guidelines for the Council to assist in applying sanctions. This reflects the fact that the hearings are infrequent and so what might be called case law is slow to build up. The guidelines will not impinge on the independence of the Adjudication Panel and will be published in the interests of transparency and to guide the profession and other stakeholders.
