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Entity Authorisation and Supervision

Work of the PRWG The Practice Rights Working Group continued to provide challenge and direction on the practice rights applications, entity regulation and client protection arrangements. They oversaw the change in emphasis from application to implementation and will continue the work in 2015 to demonstrate that IPS is an effective regulator.

Portfolio Holder:

Luisa Fulci Independent Board Member

Key Objectives: IPS will ensure that it: • Secures Parliamentary Orders for entity regulation and Orders for ancillary applications.

• Develops interventions/ practice management arrangements to meet the new regulatory remit.

• Implements the arrangements for regulating CILEx members and practices which provide regulated and reserved legal services.

• Implements intelligence gathering processes for entities and share intelligence with legal services sector.

• Implements the annual return process for entities.

• Uses information on risks from the sector and from insurers to target the supervisory process.

• Implements client protection proposals and develops the consumer reference website.

Preparation for entity regulation We completed our programme of visits to legal practices in 2014 to test our processes and procedures. We were grateful for the opportunities from our partner members to visit their legal practices.

The feedback from the visit programme was positive. The responses demonstrated that members and entities gained value from the visits as much as IPS. They were invaluable in developing our experience of entity regulation

Being able to visit a wide range of legal practices enabled us to refine our risk assessments and procedures further. It led to the entity authorisation process being finalised and tested, both through the visits and desk based approach, ready for entity regulation to go live in early 2015.

We implemented a new IT system to record information on practice rights and entity regulation. We are developing the supporting information we will provide to entities via the IPS website in readiness for entity regulation.

Client Protection IPS has developed indemnity and client protection arrangements, to provide consumer redress.

Professional Indemnity Insurance (PII) IPS has established a scheme of professional indemnity insurance.

During 2014 we have drawn up a Qualifying Insurer’s Agreement (QIA), to which Qualifying Insurers will subscribe. It requires Qualifying Insurers to offer a minimum level of cover to each IPS regulated entity and for each insurer to adopt the CILEx Minimum Wording.

The CILEx Minimum Wording provides consistent protection for consumers who seek assistance from an IPS regulated entity.

IPS has generated much interest from insurers into its scheme. Many have committed to sign up to the QIA.

Compensation Fund IPS has secured a Parliamentary order to set up a Compensation Fund. Compensation Fund Rules and guidance to trustees have been drawn up and implemented.

A company limited by guarantee is being set up as the Compensation Fund. Trustees are being appointed to manage the Fund. The trustees will make decisions concerning grants out of the Fund and advise how the Fund is to be utilised and invested.

IPS regulated entities will be required to make contributions to the Fund. IPS has also entered into a contract of insurance for the Fund to help build and maintain the Fund.

Intervention Powers IPS has secured a Parliamentary order enabling it to intervene into an entity. The order enables IPS to obtain a Court Order and close down an entity.

Statute sets out the grounds for which an intervention can take place. Procedures have been drawn and implemented for interventions.


IPS continues to make progress on developing an escrow arrangement.

IPS has sourced and has been working with an escrow agent. We hope to make available an escrow arrangement to entities in 2015.

Risk intelligence and work on entities We continued to develop our risk based approach to the regulation of entities and at the end of 2014 the members of the Strategic Risk Committee were appointed. The gathering of risk and intelligence information will now also focus on providing the required support to the SRC.

We proactively engaged with other regulators to share risk information and enable a better understanding of each other’s approach to regulation. We continue to work on those issues that affect us all with entity regulation.

In addition we worked closely with the enforcement team on identifying risks and our approach to targeting breaches of the Code of Conduct.

We supported members running their own firms providing unregulated work through further guidance and help as part of the introduction to entity regulation. Alongside the annual review of complaint handling procedures, we reviewed client care information. We also expanded the support and guidance given to members seeking advice on setting up new firms. The feedback received was very positive.

10 Professional standards for specialist lawyers

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