- Forms of Alternative Business Structures (ABS)
2.1 The 2007 Act removed restrictions on the management and ownership structures of traditional legal services firms. Non-Authorised Persons (non-lawyers) are now able to be owners of legal services providers and such firms are now able to provide other services alongside legal activities. For instance:
- a sole CLC lawyer and an independent financial adviser might set up a business providing conveyancing services and mortgage advice;
- conveyancing services are provided alongside estate agency or surveying services;
- probate activity is made available alongside funeral services.
2.2 Combining businesses in such a way might allow overhead savings to be made, enhance career progression opportunities for Non-Authorised Persons - providing skills such as strategic leadership, management, human resources, finance and IT, essential to a well-run business - and offer clients the opportunity to source a range of different services from one provider (a one-stop shop).
2.3 We use the term licensable body to mean a business which is applying to become a CLC Licensed Body. 'Alternative Business Structure' is a widely recognised term, but it s not used in the main body of the 2007 Act text. Therefore we use the term 'Licensed Body' when referring to the licensing of such structures.
2.4 A Licensed Body may take the form of:
- A legal body part-owned by a Non-Authorised Person
- A legal body owned by Authorised Persons but managed by at least one
- Non-Authorised Person
- A business wholly owned by a Non-Authorised Person(s) providing both legal and other services; or
- A range of models in between.
2.5 It may be constituted as a partnership, a Limited Liability Partnership, or Limited Company. The structure and business model is of the body’s choosing.
2.6 A licensable body can be partly or wholly owned by a Non-Authorised Person(s) and it can provide both legal and non-legal services. Provided that one manager, the Head of Legal Practice (HoLP), is an Authorised Person it can otherwise be managed by Non-Authorised Persons. NB. If the HoLP is not authorised to deliver the particular legal service the body provides there must be another Authorised Person who is so authorised.
2.7 As a Licensing Authority regulated by the Legal Services Board the CLC is able to license and regulate ABS providing conveyancing, probate, litigation and advocacy* services with a range of other services.
*Applicable should our application to regulate litigation and advocacy prove successful.
- 1 Who can apply?
The licensable body must have:
- A practising address in England and Wales (or Wales)
- A designated Head of Legal Practice who is an Authorised Person in relation to Reserved Legal Activities
- A Head of Finance and Administration (HoFA).
3.2 Legal services must be provided or supervised by Authorised Persons licensed by an Approved Regulator, such as the CLC or Solicitors Regulation Authority. Any non-reserved legal activities must be provided or supervised by appropriately experienced and/or qualified persons.
3.3 A Licensed Body must have professional indemnity insurance in place which complies with the minimum requirements of Article 3 IMD and the CLC’s PII Policy Wording.
3.4 If the CLC is not satisfied by the conditions and cover provided by the authorised insurer, the body will be required to take out a supplemental policy so that the professional indemnity complies with the minimum requirements of Article 3 IMD and the CLC’s PII Policy Wording.
3.5 No body may provide legal services regulated by the CLC unless and until it has Professional Indemnity Insurancewhich complies with these requirements and has produced evidence of insurance to us. NB. A body may increase the level of indemnity cover above the minimum required under Article 3 IMD and the CLC’s PII Policy Wording.
3.6 The CLC maintains a Compensation Fund for the purpose of making discretionary payments to persons who have suffered loss as a result of negligence, fraud or dishonesty or a failure to account, by a CLC-regulated body. Each body licensed by the CLC is required to make a contribution to the Compensation Fund. The fee payable is a percentage (as determined by the CLC and approved by the LSB) of the turnover (or estimated turnover) of that body. The income received is applied solely for the purpose of maintaining, managing and administering the Fund.
3.7 The CLC requires each body to pay an annual regulatory fee. The fee payable is a percentage (as determined by the CLC and approved by the LSB) of the turnover (or estimated turnover) of that body. The income received funds the regulatory activities of the CLC, but not any costs attributed to the Compensation Fund.
3.8 A body which is able and willing to meet all of these requirements can apply to become a CLC Licensed Body.
3.9 We cannot accept applications from Special Bodies.
- Licensed Body (ABS) Applications
4.1 Applications must include:
- a correctly completed CLC ABS Licensed Body application form (including identification of the Regulated Services the body wishes to provide);
- declaration, and proof of identity, of the HoLP and HoFA and consent for data verification to be carried out;
- declaration, and proof of identity, of each Authorised Person Manager;
- declaration, and proof of identify, of each Non-Authorised Person Manager, and consent for data verification to be carried out;
- declaration, and proof of identity, of each Authorised Person with a material interest*;
- declaration, and proof of identity, of each Non-Authorised Person with a material interest*, and consent for data verification to be carried out (the declaration must identify any associates);
- the following information:(A) the identities of shareholders or members, whether natural or legal persons, that have a holding in the applicant that exceeds 10 %, and the amounts of those holdings;(B) the identities of persons who have close links with the applicant;(C) information that those holdings or close links do not prevent the effective exercise of the supervisory functions of the CLC.
- if it is a Company or LLP its certificate of incorporation;
- evidence (or an offer) of appropriate professional indemnity insurance;
- the application fee payable.
There are many ways a person can hold a material interest* – please ensure you reference the CLC Handbook Glossary of Terms.
4.2 We would prefer to receive applications electronically (in Microsoft Word format), but hard copy applications by post are also welcome.
Licence Application Data
4.3 Full and frank information disclosure is needed to help us determine if:
- owners are fit to own;
- managers are fit to manage; andthe body is fit to provide legal services to the public.
4.4 We require the following information:
| Persons |
- Declaration of Persons with a material interest of 10% or more interest in the body;
- Declaration of associates with 3% or more interest;
- Declaration of Head of Legal Practice accompanied by details of relevant experience, qualifications, training and professional history information;
- Declaration of Head of Finance and Administration accompanied by details of relevant experience, qualifications, training and professional history information;
- Declarations of all Managers;
- Declarations of Authorised Persons (specifying which activities they are authorised to provide and by which Approved Regulator);
- Staff structure, including numbers of Authorised Persons and Non-Authorised Persons.
|
| Financial |
- Proof of funding source;
- Business Plan & Financial Forecasts;
- Bank details;
- Where applicable, the organisation’s last 3 years of accounts.
|
| Statements |
- An outline of the services proposed and how you will ensure they are delivered to a high standard;
- Statement outlining compatibility with delivery of the Code of Conduct Outcomes and the Licensed Body Code (and where there are issues, details of how these have been, or will be resolved);
- Who will carry out Reserved Legal Activities;
- How the body aims to improve access to justice.
|
| Arrangementsfor: |
- Compliance with CLC regulatory arrangements;
- Notifying us of a breach of regulatory responsibilities;
- Notifying us of a proposed change of material interest;
- Provision of any non-reserved legal activities;
- Governance and management;
- HoLP and HoFA to have management level status and entitlement to dissent from decisions made by the management;
- Preventing and dealing with conflicts of interests and improper influence;
- Complaints-handling;
- Ensuring the body employs only fit and proper persons (and no-one disqualified by a Licensing Authority).
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| Fit and Proper Declaration – Persons with material interest, HoLP, HoFA & Managers |
- Any criminal charge or conviction (including spent convictions and cautions) or cases pending in the UK or elsewhere;
- Any previous disciplinary proceedings commenced by a professional or regulatory body in the UK or elsewhere (whether concluded or not);
- Any adverse order or finding of a civil court or employment tribunal;
- Any disqualification as a director;
- Any declaration of bankruptcy (and whether or not this has been discharged) or Individual Voluntary Arrangement;
- Disqualification from acting in any capacity for a legal services, financial or other provider (including a Licensed Body);
- Any other information that could reasonably be expected to have a bearing on the individual being fit and proper to own or manage a Licensed Body.
|
Persons
- Declaration of Persons with a material interest of 10% or more interest in the body;
- Declaration of associates with 3% or more interest;
- Declaration of Head of Legal Practice accompanied by details of relevant experience, qualifications, training and professional history information;
- Declaration of Head of Finance and Administration accompanied by details of relevant experience, qualifications, training and professional history information;
- Declarations of all Managers;
- Declarations of Authorised Persons (specifying which activities they are authorised to provide and by which Approved Regulator);
- Staff structure, including numbers of Authorised Persons and Non-Authorised Persons.
Financial
- Proof of funding source;
- Business Plan & Financial Forecasts;
- Bank details;
- Where applicable, the organisation’s last 3 years of accounts.
Statements
- An outline of the services proposed and how you will ensure they are delivered to a high standard;
- Statement outlining compatibility with delivery of the Code of Conduct Outcomes and the Licensed Body Code (and where there are issues, details of how these have been, or will be resolved);
- Who will carry out Reserved Legal Activities;
- How the body aims to improve access to justice.
Arrangementsfor:
- Compliance with CLC regulatory arrangements;
- Notifying us of a breach of regulatory responsibilities;
- Notifying us of a proposed change of material interest;
- Provision of any non-reserved legal activities;
- Governance and management;
- HoLP and HoFA to have management level status and entitlement to dissent from decisions made by the management;
- Preventing and dealing with conflicts of interests and improper influence;
- Complaints-handling;
- Ensuring the body employs only fit and proper persons (and no-one disqualified by a Licensing Authority).
Fit and Proper Declaration – Persons with material interest, HoLP, HoFA & Managers
- Any criminal charge or conviction (including spent convictions and cautions) or cases pending in the UK or elsewhere;
- Any previous disciplinary proceedings commenced by a professional or regulatory body in the UK or elsewhere (whether concluded or not);
- Any adverse order or finding of a civil court or employment tribunal;
- Any disqualification as a director;
- Any declaration of bankruptcy (and whether or not this has been discharged) or Individual Voluntary Arrangement;
- Disqualification from acting in any capacity for a legal services, financial or other provider (including a Licensed Body);
- Any other information that could reasonably be expected to have a bearing on the individual being fit and proper to own or manage a Licensed Body.
NB. The requirement for accounts for the 3 years immediately preceding an application applies to companies which own (10% or more) of the licensable body.
Governance and Management Arrangements
4.5 The CLC Code of Conduct and the underpinning Conflicts of Interest Code make clear our requirements regarding the prevention, identification and mitigation of such conflicts. All bodies regulated by the CLC must comply with these requirements in order that Clients receive high standards, and independent, service.
4.6 The CLC Licensed Body Code explicitly requires that Non-Authorised Persons with a material interest must not be allowed to exert improper influence. Licensed Bodies and the Authorised Persons within them must always support the constitutional principle of the rule of law and act in the best interests of their Clients. Licensable bodies must be able to demonstrate that they have in place arrangements enabling this.
4.7 To be licensed a licensable body must employ at least one Authorised Person who is authorised to provide each of the Reserved Legal Activities the body proposes to deliver. If these persons are not managers we will need to be satisfied that the body’s arrangements take this into account.
4.8 Given the importance of the roles of the HoLP and HoFA we will be looking for skilled individuals suited to the business needs of the body. We set no specific requirements in this area other than the HoLP should be an Authorised Personand a recommendation that the HoFA should have accountancy experience and/or an accountancy qualification.
4.9 The suitability of the proposed candidates will be judged according to the body’s size and risk profile. For example, it may be acceptable for the HoFA of a small firm not to have an accountancy qualification. In such instances, accountancy experience would be acceptable.
4.10 Only those bodies with appropriate arrangements will be licensed. Examples of high-level good practice of risk management and business arrangements are provided in the CLC Handbook, Management and Supervision Guidance.
Employment Arrangements
4.11 Our licensing terms are clear in their requirement that the interests of the public and of Clients must be protected. It is therefore very important that a Licensed Body employs only those persons it is confident will act in a manner compatible with these interests.
4.12 It is for the body to determine the most appropriate arrangements for it to be confident of the fitness and probity of its employees. This may take the form of an employment contract clause which requires employees to declare an issue to the body, a self-declaration form (which is completed when an offer of employment is made and on an annual basis thereafter), a Disclosure and Barring Service (DBS [criminal history]) check, or other system. The body may target particular roles which it considers more important in this regard than others e.g. those handling Client monies may be subject to a DBS check whilst other employees are required to declare any fit and proper issues.
4.13 The Legal Services Board (LSB) maintains a list of all persons disqualified from roles in Licensed Bodies. The list is available to view on the LSB’s website for you to check against your employees, or proposed employees. The list is available to view on the LSB’s website: http://www.legalservicesboard.org.uk/
4.14 You must not employ any listed person in the role in respect of which they are disqualified. To do so is a significant breach of your regulatory responsibilities and is likely to result in the body’s licence being suspended and/or revoked.
4.15 We consider the qualifications and experience of the Licensed Body’s employees to
be a matter for the body itself to decide. It is the licensable body’s duty to ensure it has the appropriate individuals in place to ensure the regulatory requirements are met and that the rule of law is supported.
Business Plan and financial projections
4.16 The Business Plan must cover the 3 years from when the body could reasonably expect to be licensed (90 days after the CLC has received a complete application). An applicant will need to demonstrate they have critically examined their:
- financial forecasts;
- employees numbers, skills and knowledge;
- anticipated turnover;
- running expenses;
- capital investment;
- capital expenditure and liquidity;
- how the body will be initially funded (and how prepared for a given initial period where it is likely to receive little comparative income);
- proposed premises;
- the body’s marketing strategy;
- its accounting systems and procedures;
- any expansion plans; and
- any other information deemed relevant by the applicant or the CLC.
Access to Justice
4.17 An applicant must be able to demonstrate that licensing the body would improve access to justice i.e. recognition of, and response to potential and actual, consumer needs. This may take the form of provision of a greater range of services and methods of accessing these services, lower prices, extended opening hours, accessibility, online provision, or other factors. It is up to the individual applicant as to how they define access to justice and how they demonstrate they will improve it.
4.18 We anticipate that an application will be refused because of access to justice considerations only in exceptional circumstances.
Supplementary Information
4.19 You may wish to provide examples of how you actively promote the CLC Outcomes, e.g.:-
- Certification or assessment of activities by independent or accredited bodies; or
- Drawing up your own quality charter or participation in quality charters or labels drawn up by professional bodies (particularly consumer association assessments).
4.20 Provision of supplementary information will be welcomed and judged favourably by the CLC as long as it is pertinent to your application. Please do not provide irrelevant material as this is likely to unnecessarily prolong the application determination period time.
Any other info
4.21 We require the declaration of ‘any other information that could reasonably be expected to have a bearing on their being fit and proper’ with regard to Non-Authorised Persons with 10% or more material interest, HoLPs and HoFAs. This could include:
- by a reason of character, conduct or association and in particular has been in breach of statutory requirements regarding payment of tax or for a licence;
- they lack capacity within the meaning of the Mental Capacity Act 2005 and powers under sections 15 to 20 or section 48 have been exercised.
Material Interest Details
4.22 The holding by a Non-Authorised Person (i.e. non-lawyer) of a material interest in a Licensed Body is subject to the CLC’s approval. A licence will not be granted until we have approved all Non-Authorised Persons with a material interest. A licence application must identify all Non-Authorised Persons who own or are expected to own such a material interest in the body when the licence is issued. All Non-Authorised Persons with a material interest will be subject to the fit and proper test and must consent to the CLC sharing the information with other bodies for verification purposes.
4.23 The material interest declaration refers both to the actual or proposed material interest (10% or more) and/or any of that person’s associates with a material interest of 3% or more. The type of interest concerned must be identified. Failure to fully and truthfully to declare this information when aware of the facts is a criminal offence making the declarer liable on summary conviction to a fine. There are a number of different ways in which a Non-Authorised Person can have a material interest.
4.24 It is very important that a body providing legal services is able to meet its regulatory responsibilities. Having an accurate picture of those who control Licensed Bodies is an important part of the CLC recognising any risks to this. Therefore all non-Authorised Persons’ material interest must be declared as they are subject to our approval.
4.25 If any of these details look likely to change – e.g. the identity of an owner, or the nature or value of their interest - whilst we are determining the licence application, the applicant must notify us of this within 7 days of the proposal. If the applicant had no knowledge of a change which has taken place they must notify us within 7 days after they are made aware. It is a criminal offence not to identify a non-Authorised Person who has, or expects to have, an interest in the event a Licensed Body licence is issued to the applicant. If such a breach were to occur, the breach and the fine would be likely to be taken into account as part of the determination of the licence application. However, it is a defence for a person charged with such an offence if they are able to show that they had no knowledge of the duty to notify.
4.26 You must inform all Non-Authorised Person with a material interest that the Licensed Body application process requires them to be identified and that they will need to undergo a fit and proper test, which includes a Criminal Record Bureau Check. You must obtain from them a completed and signed fit and proper declaration form. You must advise them that they may need to provide us with information/documents to inform our licence application assessment (or during the duration of the licence if we become concerned by their material interest). You should also explain that provision of false or misleading information is a criminal offence liable on summary conviction to a fine and on conviction on indictment to a term of imprisonment.
4.27 The fit and proper test helps inform our assessment of improper influence i.e. whether the Non-Authorised Person’s material interest would compromise the delivery of the CLC Code of Conduct’s Outcomes or could cause Authorised Persons to be unable to meet their regulatory duties.
- Transitional arrangements for CLC Recognised Bodies
5.1 These arrangements apply to bodies licensed by the CLC as a Recognised Body on the date it is authorised as a Licensing Authority but which, because they are owned or managed by persons who are not Authorised Persons, need to become a Licensed Body by the date specified by the CLC.
5.2 We will provide these bodies with the information we currently hold on them, requiring them to verify or amend it as appropriate. Relevant data to fill any information gaps must be provided. These bodies must appoint their Heads of Legal Practice and Heads of Finance and Admin; and declare Authorised Persons with material interest and their associates.
5.3 These applications will be fast-tracked as they have a track record with us. We are familiar with the structures, systems and controls of these bodies; and have carried out monitoring inspections on them (often over a number of years). A current CLC Recognised Body which applies to become a CLC Licensed Body will receive notification of the CLC’s determination within 42 days of receipt of their completed Licensed Body application. The application will be assessed and determined using the same criteria as new applicants.
5.4 Should there have been significant changes to ownership we will extend the 42 day determination period to 90 days to ensure we are confident of capturing any risks to the Code of Conduct Outcomes the new owner(s) may present. Any additional work we have to undertake will increase the application fee payable (see paragraph 7.5).
- Licensed Bodies regulated by other Licensing Authorities
6.1 An ABS already licensed by another Licensing Authority which is seeking instead to be licensed by the CLC will need to complete the licence application as required by all applicants. An applicant which has had its Licensed Body licence revoked by another Licensing Authority will not automatically be excluded from applying for a CLC Licence. However, the licencerevocation will be a relevant factor in our determination of the application. Where we have revoked a body’s licence we will not accept an application if it is made within 12 months of the licence revocation, unless there are exceptional circumstances. We will need to be fully satisfied that the issue which triggered the revocation has been addressed and the remainder of the application would need to evidence that all CLC licensing requirements are met in full.
- Fees
7.1 The standard licence application fee is broadly reflective of a range of key factors including cost, size and risk profileof Licensed Bodies.
7.2 The applicant will be charged the cost to the CLC of processing a standard application. On the basis that the standard application will take 2 days to process the fee for a first time Licensed Body application is £1200.
7.3 We reserve the right to require further information and/or statements should we see reasonable grounds to do so. We also reserve the right to charge additional amounts for more complex applications .
7.4 The CLC will use external advisers where it feels that it is necessary, more appropriate or more efficient to consider parts of the application (e.g. to deal with technically complex, unusually data intense, poorly prepared or urgent applications). It will ask the applicant to pay for the work performed.
7.5 We anticipate there will be less resource required to process an application from a Recognised Body which is currently regulated by the CLC than from an entity which we have not previously regulated. We shall therefore require payment of a lower standard fee of £600 for such applications. We reserve the right to charge an increased fee (based on an hourly rate of £80) on an hourly basis where the time we need to spend in assessing the application exceeds 2 days (e.g. where there have been significant ownership changes or incomplete information has been provided).
7.6 We reserve the right to review the fee schedule and to vary the fee methodology as appropriate.
7.7 The applicant will be required to pay for the data verification (including Criminal Record Checks) which needs to accompany the application. This will be carried out by a provider accredited by the CLC. As the extent of verification of fit and proper data varies according to the role, so does the cost, which is currently in the range £85-£120. We shall notify applicants at the time of making their application of current prices. You may be able to claim back the Value Added Tax from these costs if VAT-registered. We may carry out additional checks if we believe it is appropriate to do so and shall charge the applicant the cost of doing so.
7.8 We anticipate that licence modifications/removal of conditions requests will take no more than 4 hours to determine. The standard application fee for such requests will be £320. We reserve the right to charge additional amounts for particularly complex applications which take longer than this to determine. These will be charged at £80 per hour.
7.9 Should a Licensed Body apply to change the individual person occupying the role of HoLP or HoFA the standard application fee will be £240. This is based on the assumption that such requests will take no more than 3 hours to determine. We reserve the right to charge additional amounts for particularly complex applications which take longer than this to determine. The applicant will be required to pay for the data verification which needs to accompany the application.
7.10 The annual Regulatory Fee will be determined each year. The current rates are set out in the Fees Rules 2010 at www.clc-uk.org.
7.11 Compensation Fund contribution to be determined each year. For the period 1 November 2010 to 31 October 2011, there is a nil contribution
- Licence Application AssessmentAcknowledgement of receipt of application
8.1 We will aim to acknowledge receipt of your application within 7 working days. If your application is incomplete we will return it to you identifying those elements which are missing or have not been properly completed.
8.2 Provision of any false, misleading or incomplete information is likely to delay consideration of your application and if material will result in the application being rejected. If the CLC becomes aware after granting a licence that a body, a person with material interest or a manager of that body, has provided false or misleading information the licence may be suspended or revoked.Data Verification
8.3 The HoLP, HoFA, persons with material interest and all Managers must sign their declarations to confirm the information they have provided is correct. Information provided will be kept secure and used only for these purposes.
8.4 We shall carry out such checks as we consider necessary to verify the information you have provided. For the Non-Authorised Persons with material interest, Non-Authorised Person Managers, the HoLP and HoFA, this will include checks of the fit and proper declarations e.g. credit, insolvency, and insurance. We will obtain Standard Disclosure and Barring Service (DBS, previously the Criminal Record Bureau) checks of unfiltered[1] cautions and convictions for the HoLP and HoFA and those with a material interest (this may include associates – see item 8.6). We reserve the right to request a Basic Disclosure and Barring Service check (covers unspent convictions only) for a manager or Authorised Person. The applicant will be required to pay for these checks (see paragraph 7.7). We have information-sharing agreements with other regulatory, professional and data verification bodies to aid the verification. The information will be shared in accordance with data protection legislation.
8.5 We will check the disciplinary records of Authorised Persons with their relevant Approved Regulator. Where this identifies issues we may verify the fit and proper declaration data and charge the applicant accordingly.
8.6 Verification of information on all associates is unlikely to be either practical or proportionate. Only where there are concerns about an associate, particularly significant influence or control concerns, will we seek additional, information or require information to be verified.Licensing Approach
8.7 All Approved Regulators of legal services providers must act in a way which is compatible with the regulatory objectives. Therefore the Overriding Principles and Outcomes of our regulatory arrangements are devised to support them and a body’s licence application will be assessed in light of these; on receipt of the application and validation of relevant data we will carry out an assessment of the risks posed to delivery of the Outcomes and compliance with the Licensed Body Code if we approve the application for a licence.
8.8 All interested parties will be signposted to the electronic version, or provided with a hard copy of, the CLC Handbook so they are aware of the regulatory responsibilities of a Licensed Body and those involved with it.
8.9 We will assess the application to determine the body’s capability and capacity to deliver the CLC’s Code of Conduct’s Outcomes and to meet the CLC’s Licensed Body Code. Please see the CLC Handbook.
8.10 This will be determined by an assessment of the following factors:
- The body’s activities and Client type (including whether the non-reserved legal activities the body is proposing to provide are closely related to the reserved legal activities proposed);
- The quality of the governance/management arrangements (including regulatory compliance arrangements such as ensuring Non-Authorised Persons do not cause or substantially contribute to a regulatory breach by the licensed body,or Authorised Persons within it) and risk management strategies;
- The quality of the arrangements to prevent and deal with Improper Influence and Conflicts of Interest, ensuring Authorised Persons maintain the Overriding Principles and comply with their own individual regulatory responsibilities;
- Probity of funding source;
- Financial viability of the body and the integrity of the Business Plan/financial projections in light of the body’s proposals;
- Client money handling arrangements;
- The quality of operating procedures including complaints-handling;
- Resources allocated to, and arrangements for reserved legal activities (in particular who will be providing them or supervising their provision), this will include an assessment of the ratio of Authorised Persons to Non-Authorised Persons;
- Competence to deliver non-reserved activities, including the resources, arrangements, sophistication or vulnerability of their Clients, its relatedness to the reserved legal activities the applicant proposes to provide and access to justice implications if the activities were not permitted;
- Suitability of proposed Non-Authorised Persons with material interests and how they may impact upon the body’s independence and integrity (they must not prejudice a) delivery of the Code of Conduct’s outcomes or b) the ability of Authorised Persons to meet their regulatory duties);
- Suitability of proposed Head of Legal Practice (HoLP) and Head of Finance & Administration (HoFA);
- The arrangements in place which permit the HoLP and HoFA to report on matters direct to the CLC without prior consultation or approval from the licensable body, its Managers, owners or associates;
- Where the applicant is proposing that the designated HoLP and the HoFA are the same person whether this is appropriate taking account of the size and risk profile of the licensable body;
- Suitability of proposed Managers and Authorised Persons;
- its professional indemnity insurance arrangements comply with the minimum requirements of Article 3 IMD and the CLC’s PII Policy Wording;
- Quality of employment arrangements, particularly procedures for ensuring managersand employees are fit and proper persons;
- Any significantly prejudicial access to justice barriers;
- Any other factors which the CLC believes may pose a risk to delivery of the Code of Conduct’s Outcomes.
8.11 We will consider the following factors in determining the suitability of declared Non-Authorised Persons with material interest:
- Whether there is a risk of improper influence i.e. that the person’s material interest is likely to compromise delivery of the Code of Conduct Outcomes and the regulatory duties of both the Licensed Body and its Authorised Persons (e.g. they are subject to other duties which may conflict/compromise the regulatory duties);
- Any concerns identified by the fit and proper tests;
- Their financial position;
d) Whether they have been disqualified by a Licensing Authority from acting as an HoLP, HoFA, manager or employee of a Licensed Body;
- The person’s associates.
8.12 We will consider the following factors in determining the suitability of the proposed HoLP:
Any concerns identified by the fit and proper test;
- If they are an Authorised Person
- Whether they have been disqualified by a Licensing Authority from acting as an HoLP, HoFA, manager or employee of a Licensed Body
- Whether they have been subject to disciplinary proceedings or disciplinary investigation
- Their competence and credibility to fulfil the role effectively
- Their level of seniority and whether this is appropriate to the size and structure of the Licensed Body.
8.13 We will consider the following factors in determining the suitability of the proposed HoFA:
- Any concerns identified by the fit and proper test
- Whether they have been disqualified by a Licensing Authority from acting as an HoLP, HoFA, manager or employee of a Licensed Body
- Their competence and credibility to fulfil the role, including their accountancy experience, competence and/or whether they have a recognised accounting qualification
- Their level of seniority and whether this is appropriate to the size and structure of the Licensed Body.
8.14 We will consider the following factors in determining the suitability of the proposed Managers:
- Any concerns identified by the fit and proper test
- Whether they have been disqualified by a Licensing Authority from acting as an HoLP, HoFA, manager or employee of a Licensed Body
- Their competence and credibility to fulfil the role
- Their level of seniority and area of management.
8.15 Where the beneficial owner is a corporate body the fit and proper test will broadly reflect the approach taken in respect of Licensed Body applications. This may include governance arrangements, financial arrangements and application of the fit and proper test to its Directors. This test may also be applied to the owner(s) of a corporate body.
8.16 We will approve a person’s material interest where we are satisfied that it would not present a risk to the Code of Conduct Outcomes or Authorised Persons’ duties and the person is otherwise considered a fit and proper person to own that interest. Should we approve a Non-Authorised Person’s material interest this will be taken to mean that we have also approved any lesser material interest they have in the body.
8.17 Where we consider a Non-Authorised Person’s material interest presents a risk we will seek to impose conditions on that interest. Where we consider a risk too significant to be mitigated by conditions we will object to the interest. In both cases we will issue a warning notice to both the applicant body and the investor specifying the reasons for our intended measure. The notice will state the reasons for our determination and, if we propose to issue a licence subject to conditions, their nature.
Licence Application Determination
8.18 All of our regulatory arrangements seek to promote the regulatory objectives. Our Code of Conduct identifies positive Outcomes which all licensees must deliver through compliance with a number of Overriding Principles of behaviour. All applications will be assessed against the body’s capability and capacity to deliver on these responsibilities.
8.19 If we are not completely satisfied that the body will deliver the Outcomes, we may issue a licence subject toconditions or may refuse the licence application.
8.19A We shall refuse the licence application if the laws, regulations or administrative provisions of a third country governing one or more natural or legal persons with which the body has close links, or difficulties involved in the enforcement of those laws, regulations or administrative provisions, prevent the effective exercise of their supervisory functions.
8.20 Provision of adverse information concerning an individual does not necessarily preclude our approval of them. We will assess the information provided against the individual’s proposed role and against the circumstances e.g. the individual may be able to satisfy the CLC they have learnt from the identified event. Our determination will depend upon the nature of the information provided and whether this puts at risk compliance with the body’s regulatory responsibilities. For instance, we are likely to disregard spent convictions for less serious offences, provided they are not dishonesty or fraud related. We consider that dishonesty or fraud related convictions are likely to present too great a risk to delivery of positive Outcomesfor Clients. In such instances, we are unlikely to be confident that the body will meet Overriding Principle 1 Act with Independence and Integrity; and Overriding Principle 5 to Deal with regulators and ombudsmen in an open and cooperative way. Where an individual has been declared bankrupt or been subject to an Individual Voluntary Arrangement (particularly if it is recent), it is likely that an application for that individual to be approved as a HoFA will be refused as the role requires both financial capability as well as probity.
8.21 We are likely to defer our decision until after any pending cases or proceedings have been determined, unless the subject matter of the case or proceeding is less serious and is not dishonesty related.
8.22 The determination of the risks presented by individual persons will be based
upon an assessment of the following:
- Is there full confidence that the HoLP/HoFA has integrity and is trustworthy and honest?
- Unless there are exceptional circumstances the CLC will not be satisfied that the individual is a fit and proper person and will refuse the candidate if they have:
- convictions for offences involving dishonesty; or
- deceived or sought to deceive others, e.g. academic authorities, employers or members of the public.
- The following might satisfy the Committee of the individual’s present integrity, honesty and trustworthiness:
- if in view of the time since the behaviour occurred the individual has demonstrated a subsequent pattern of exemplary behaviour; or
- the incident was of a minor nature, as indicated by the sentence or sanction applied
- The type of evidence considered should normally include each of the following:
- at least one independent account of the event(s), including sentencing remarks where a criminal conviction is being considered;
- references from at least two independent people who know the individual well and are familiar with the matters being considered. Ideally one of the references should be provided by an Authorised Person of good standing;
- evidence of rehabilitation independently corroborated e.g. independent reports,
- references from employers, or from a professional or regulatory body; and
- the individual’s account of the events and attitude towards them
- Where a conviction or disciplinary hearing is being considered the CLC will not question or look behind the finding other than in exceptional circumstances, although material such as sentencing remarks and any explanatory statement will be considered. For example, a decision may be demonstrably wrong where later events, such as after acquired evidence or a change in the law, call the original decision into question.
- Where the matter being considered concerns academic misconduct (e.g. plagiarism) the CLC will take into account the range of academic misconduct that occurs.
- For the purposes of the assessment whether an individual is a fit and proper person to become an HoLP/HoFA , there will be particular concern where in the commission of academic misconduct the individual has committed deliberate and dishonest acts in order to achieve personal gain or advantage.
- The following factors would therefore be of particular interest to the CLC:
- the extent to which the individual was aware of the rules and procedures governing the referencing of material, or the use of group work or collaborative material;
- the extent to which the individual could reasonably have been expected to realise that the offence did not constitute legitimate academic body;
- the extent to which the individual acted with intent to deceive; and
- the degree of benefit or advantage gained as a result of the offenc
- As in the approach to consideration of criminal convictions, the assessment will not seek to re-open the investigation undertaken by the training organisation, nor will it cast doubt on the validity and appropriateness of the decision taken, providing appropriate investigation and disciplinary procedures were followed, but statements intended to explain or mitigate the conduct in issue will be considered.
- Is there full confidence that the HoLP/HoFA are willing now to comply with legal and regulatory requirements?
- Unless there are exceptional circumstances there will not be full confidence and will refuse the candidate if they:
- have been convicted of a criminal offence;
- have failed to disclose information to a regulatory body when required to do so or has provided false or misleading information;
- have been formally disciplined, sanctioned, or barred by a regulatory body; or
- have failed to comply with the reasonable requests of a regulatory body.
- It may be possible for full confidence to be established in the individual’s willingness to comply with legal and regulatory requirements if:
- in view of the time since the incident the individual is able to demonstrate that there has been a subsequent pattern of exemplary behaviour;
- a matter that was not disclosed was trivial or in view of the time when it occurred is no longer material or the breach was minor, as indicated by any sanction imposed; or
- the incident can be shown to have been the result of a genuine mistake or oversight.
- The evidence considered should normally include each of the following:
- certificates of standing or statements from the relevant regulatory body or disciplinary tribunal and any limitations on the individual’s rights to practise or freedom to act;
- the individual’s explanation for failure to comply; and
- evidence of rehabilitation independently corroborated e.g. independent reports, references from employers, or from a professional or regulatory body.
- Is there full confidence that the HoFA is able responsibly to manage financial affairs?
- Unless there are exceptional circumstances there will not be full confidence that the individual can responsibly manage financial affairs and the candidate refused if:
- the individual has been made bankrupt, has entered into an individual voluntary arrangement or has unmanageable debts arising from the individual’s recklessness,
- incompetence or dishonesty;
- the individual has deliberately sought to avoid responsibility for debts; or
- there is evidence of dishonesty in relation to the management of finances.
- The following might help to establish confidence in the individual’s ability to manage financial affairs:
- if in view of the time since the bankruptcy or occurrence of the debts there is evidence of subsequent sound financial management and conduct and that creditors have been paid;
- the individual is able to establish that he was affected by exceptional circumstances beyond his control or which he could not have reasonably foreseen.
- The type of evidence considered should normally include each of the following:
- credit check information;
- the individual’s explanation of the circumstances, corroborated where possible;
- actions taken to clear any debts.
- The Business Plan and Financial Forecasts will be reviewed to determine:
- Is there a risk that the issue of a licence to the body will diminish public confidence in the legal services profession?
- Unless there are exceptional circumstances there is a risk that public confidence in the profession will be diminished if a licence is issued to a body in which the HoLP/HoFA:
- has served a prison sentence, has remained on licence or is listed on the Sexual Offenders Register;
- has misused his position to obtain pecuniary advantage, particularly if associated with the provision of legal services;
- has been responsible for dishonest or violent behaviour;
- has been convicted of offences associated with obstructing the course of justice;
- has been convicted of a racially motivated offence; or
- has knowingly worked when his competence was impaired by alcohol or drugs;
in which case, unless the risk can be addressed to the satisfaction of the CLC, the application will be refused or will be issued subject to conditions.
- The risk might be addressed satisfactorily if:
- in view of the time since the misbehaviour occurred the individual concerned is able to demonstrate that there has been a subsequent pattern of exemplary behaviour; or
- the misbehaviour was not of a serious nature, as indicated by the sentence or sanction applied.
- The evidence provided should normally include each of the following:
- independent accounts of the convictions and behaviours that have given rise to the concerns, e.g. sentencing remarks;
- evidence of rehabilitation independently corroborated e.g. independent reports,
- references from employers, or from a professional or regulatory body.
- Proposed governance and management arrangements are not sufficiently adequate to ensure the Licensed Body meets the licensing requirements and all members of staff are aware of their licensing responsibilities.
- Proposed owner arrangements demonstrate there is a significant risk of undue or improper influence risk
- Proposed operating procedures and quality assurance systems are not sufficiently adequate to instil public confidence in the quality of services provision.
- The HoLP& HoFA are not readily provided with access to the Licensed Body’s management and staff and the CLCwhenever necessary and are not of an appropriate management level)
- Is there a risk that the issue of a licence to the body could result in harm to members of the public, the profession or the body?
- The CLC will consider there is a risk of harm to members of the public, the profession or the individual if there is evidence in respect of a HoLP/HoFA that:
- they are or have been dependent on drugs or alcohol;
- their mental health or their exposure to stressful situations can seriously impair their judgment, their ability to manage their work or their professional relationships
- they have been violent with colleagues or Clients; or
- they have experienced recurrent episodes of behaviour/dependency/illness;
- which have given cause for concern in which case, unless the risk can be addressed to the satisfaction of the CLC, the application will be refused.
- The evidence considered will normally include:
- recent and full medical reports, including psychiatric reports where relevant;
- accounts from employers and other parties; and
- a statement from the individual concerned.
8.23 Unless a HoLP or HoFA is demonstrably inappropriate for the role – for instance, the HoLP is not an Authorised Person - we are unlikely to decline an application for either of these posts. If however, a candidate is in our view insufficiently skilled given the body’s size or profile this will inform our risk assessment of the body and may result in conditions such as targeted Continuous Professional Development (CPD) requirements of the individual and/or increased supervision. It is the licensable body’s duty to ensure it has the appropriate individuals in place to ensure the regulatory requirements are met and that the rule of law is supported.
8.24 Should we decide not to approve a proposed HoLP or HoFA because the candidate is wholly unsuited for the role we will not use this decision to refuse the application itself if we are satisfied with all other elements of the application and the body subsequently nominates a more satisfactory individual for the role.
Note: the Rehabilitation of Offenders Act 1974 does not apply for a HoLP or HoFA. Spent convictions should be declared
Non-Authorised Person with Material Interest
8.25 The approach taken will be similar to that identified at 8.22 (a)-(e) and will be assessed against the quality of the body’s arrangements for regulatory compliance (including the calibre and management level of the HoLP/HoFA candidates). All other things being equal we are likely to be less stringent about adverse information provided on these individuals rather than the roles of the HoLP/HoFA. As identified at 8.22 (a)-(e) we will assess the risks posed by the information presented. This approach will also be adopted where we seek information on an associate who causes us concern. Where an associate is an employee of the body this will inform our assessment of the likelihood of improper influence. Note: the Rehabilitation of Offenders Act 1974 does not apply for those who hold a material interest. Spent convictions should be declared.
Managers
8.26 The approach taken will be similar to that identified at 8.22 (a)-(e) – 8.24. Note: the Rehabilitation of Offenders Act 1974 is not exempted for managers as it is for HoLP/HoFAs and those who hold a material interest. Spent convictions do not need to be declared.
Outcomes-focused
8.27 To protect the public, Clients and the reputation of the legal sector the grant of a licence must not compromise the Code of Conduct outcomes. The CLC determines all correctly completed licence applications it receives. We will only grant a Licensed Body licence where the assessment set out at 8.10-8.26 has satisfied us that our regulatory arrangements are/will be complied with.
8.28 The CLC Authorised Officer and their team will determine licence applications based upon an assessment of risk to the Outcomes. Where clarification of the information provided in an application is required the licensable body will be contacted. We will interview the HoLP and/or the HoFA as part of their designation, to discuss details of the application and the applicant’s proposals and to achieve clarification (or reassurance where needed). We may also require other stakeholders to attend an interview to address particular concerns.
Complex applications
8.29 In the case of a particularly complex application or where adverse information is provided the licence application will be determined by the CLC Authorised Officer in consultation with a Legal Practice Inspector (or an employee of equivalent or senior status).
8.30 Adverse information does not necessarily mean licence conditions will be imposed or the application will be refused. If adverse information is provided it will be discussed with the applicant to determine the risk posed to the Code of Conduct’s outcomes, any resource implications for the CLC and the applicant’s willingness or capacity to address the issue. We will not grant the Licensed Body licence unless we approve, either unconditionally or conditionally, each Non-Authorised Person’s material interest. Please see section 10 for information on the options available to us on provision of adverse information which could threaten delivery of the Code of Conduct’s Outcomes.
8.31 Where we are not fully satisfied with information provided but would require the body to make only minor adjustments – e.g. a slight amendment of an arrangement – we will require confirmation, which we shall verify, that the adjustment has been made before the licence is issued, rather than impose a condition upon the licence. Conditions will only be imposed where they are needed to safeguard Client interests and where the issue is such that it must be formally recognised within the licence terms.
Notification
8.32 We will notify all applicants of our licence determination within 90 days of receiving a complete application (and including the payment of all associated fees).
8.33 The CLC will determine one of the following:
- To grant a licence free of conditions; or
- To grant a licence subject to conditions (to mitigate risks posed to the Code of Conduct Outcomes);
- To refuse the application (because of the seriousness of the risk(s) posed to the Code of Conduct Outcomes).
Granting of a Licence
8.34 Where a licence is granted it will be issued as soon as is reasonably practicable. If we are satisfied that all Non-Authorised Persons material interest holders meet our approval requirements the interest will be approved without conditions and we will advise both the Licensed Body and the investor of this as soon as is reasonably practicable.
8.35 The Licence will specify its terms by way of endorsement:
- All authorisations that the CLC grants the body to carry on reserved legal activities;
- All permissions that the CLC grants the body to provide non-reserved legal activities;
- Any conditions applicable to the exercise of the authorisations and permissions.
8.36 The Licensed Body can only carry on its authorisations and permissions in its capacity as the holder of its Licence.
8.37 The Licensed Body must not carry on a reserved legal activity which is not within its authorisations.
8.38 When carrying on its authorisations, a Licensed Body must comply at all times with its conditions.
8.39 Where non-reserved services are permitted we will adopt a co-regulatory approach with the relevant Approved Regulator as per our ABS Multidisciplinary Memorandum of Understanding. Where this is not appropriate it is likely we will require the applicant to ring-fence the services for which it has authorisations and permissions.
8.40 If the application is approved, as a new licensee, we will provide you with any reasonable support or advice you require in the initial setting-up stages and for a short time.
8.41 Licences are issued for an indefinite period – other than temporary licences issued because of a change in the membership of a body - and are valid from the date of issue. Licensed Bodies will be required each year to pay the Regulatory Fee and a contribution to the CLC Compensation Fund. Should a body not provide this fee/contribution they will have invalidated the licence. Licences continue to have effect after a Licensed Body has ceased to practise.
- Licensed Body (ABS) Register
9.1 Our register of Licensed Bodies will be available on our website. This should aid public confidence in legal services providers, enabling interested parties such as the public to be able to identify licensed bodies and their owners, managersand statutory officers. The following information is held on this register:
- Name of Licensed Body
- Whether the licence is suspended or revoked and the date on which suspension or revocation took place
- Any enforcement action or sanction on the Licensed Body, its owner or any employee
- Trading name of the Licensed Body
- Previous names of the Licensed Body
- The company registration number
- The licence number of the body
- Previous licences held by the body
- The date the licence was issued
- Registered address of the Licensed Body
- Practising address(es) of the Licensed Body
- The names of the Head of Legal Practice and the Head of Finance and Administration
- The authorising body of the Head of Legal Practice
- The reserved legal activities that the body is authorised to undertake
- Any endorsements placed on the Licensed Body
9.2 We will keep the register as up to date as reasonably practicable. It will reflect any change made within 28 days.
9.3 In very exceptional circumstances the CLC may agree it is appropriate not to publish details of the beneficial owner; it is up to the individual applicant to make such a case to us. The CLC will only consider this in exceptional circumstances e.g. where a real risk of physical harm has been demonstrated.
- Adverse InformationLicence Conditions
10.1 We will assess the risk posed by an applicant body. Where risks differ, so do our requirements. If we are not satisfied that an applicant’s arrangements meet our approval requirements, but could be met through the implementation of additional safeguards, the licence will be issued with conditions. Any conditions will be noted on the licence and on the CLC’s register, in addition to any endorsements (see 8.35).
10.2 We will simultaneously issue you with a notice explaining the requirements of the condition(s), the reasons for its imposition and its duration (if time-bound). Any conditions imposed will take effect at the time the CLC directs e.g. a conditionmay take immediate effect or at a future date, or may not have effect until after any appeal in relation to it. Conditions will only be imposed where we consider that compliance with them would mean the Code of Conduct Outcomes would no longer be threatened e.g. if we are satisfied that our notified material interest approval requirements are likely not to be met by the imposition of conditions we would object to the notified interest. In contrast, the purpose of endorsements is to make it clear which legal activities a Licensed Body is authorised to undertake.
10.3 Conditions placed upon the Licensed Body may result in it incurring expenditure and can include:
| (i) a limitation of the types of non-reserved services it may provide |
