Compliance-Based Entity Regulation 

Submission From the federation of Ontario law associations 


The submission to the task force from the Federation can be found at this link.  

The Law Society of Upper Canada has begun a consultation and process to study whether and how to shift its regulatory focus toward a compliance based and/or entity basis under the guise of promoting better legal practices.  


Excerpted from the Law Society's Consultation Paper, which can be accessed here, a description of the terms, "Compliance-based" and "Entity" regulation are provided here:


WHAT IS COMPLIANCE-BASED REGULATION?


“Compliance-based regulation” emphasizes a proactive approach in which the regulator identifies practice management principles and establishes goals, expectations and tools to assist lawyers and paralegals in demonstrating compliance with these principles in practice. This approach recognizes the increased importance of the practice environment in influencing professional conduct and how practice systems can help to guide and direct conduct to meet appropriate professional standards. Lawyers and paralegals would report on their compliance with these expectations, and would have autonomy in deciding how to meet them. Practitioners would also have flexibility in deciding which policies and procedures should be adopted in order to achieve effective and compliant practice management.


WHAT IS ENTITY REGULATION?


“Entity regulation” refers to the regulation of the business entity through which lawyers and/or paralegals provide services, and may include sole proprietors. For example, a law firm would be an entity. Entity regulation recognizes that many professional decisions that were once made by an individual lawyer or partner are increasingly determined by law firm policies and procedures and firm decision-making processes. The environment in which a lawyer works plays an increasingly significant role in determining an individual’s professional conduct. Practice environment can also be an important influence on the professional conduct of paralegals, although paralegal firms tend to be smaller than many law firms.


HOW DO COMPLIANCE-BASED REGULATION AND ENTITY REGULATION FIT TOGETHER?


“Compliance-based entity regulation” refers to the proactive regulation of the practice entity through which professional legal services are delivered. As noted in the Treasurer’s June 2015 Report to Convocation, which established the Task Force, compliance-based regulation has generally been implemented together with entity regulation. The reason for this is that practice management principles relate to the practice, or entity, as a whole, and not only to the individual practitioner. Other Ontario regulators, including the Ontario Securities Commission and the Chartered Professional Accountants of Ontario, have already moved in this direction, regulating the entity, or practice structure, and introducing proactive requirements for regulated professionals.


WOULD COMPLIANCE-BASED REGULATION AND ENTITY REGULATION HAVE TO BE IMPLEMENTED TOGETHER? 


These two initiatives do not necessarily have to be implemented together, but proactive regulation may be more effective if the business entity is also involved. To ensure compliance with these principles by the entity as a whole, the Task Force believes there is merit to considering the regulation of the practice itself, in addition to the individual practitioner. 



CONSULTATION PROCESS:


The Law Society is asking for submissions from the profession by March 31, 2016 so that it can consider whether and how to implement compliance-based and / or entity regulation.  The Federation of Ontario Law Associations is intent on being an active participant in these discussions and is presently putting together a response to the consultation.  


Compliance Based Entity Regulation 

Submissions From Local & County Law Associations can be linked here:


Thunder Bay Law Association Submission 

Waterloo Region Law Association Submission

County Carleton Law Association Submission



Media & Commentary Regarding Compliance-Based Entity Regulation


Entity Regulation Encouraged to Boost Diversity - September 25, 2017 - Law Times


LSUC Adopts entity regulation recommendations - May 30, 2016 - Law Times


Change in regulations could trigger shift for lawyers - January 25, 2016 - Law Times


Entity regulation - whaaaaat? - October 5, 2015 - Canadian Lawyer Magazine


Regulatory reform explored as compliance-based approach considered - June 6, 2015 - Law Times