Law Times

LAW TIMES 16 COVERING ONTARIO'S LEGAL SCENE | APRIL 1, 2019 www.lawtimesnews.com Task force is in very early stage of deliberations Compliance-based regulation debate continues BY JULIUS MELNITZER For Law Times B encher candidates and vot- ers could be forgiven if they're somewhat confused about the issues surrounding the work of the Law Society of On- tario's Compliance-Based Entity Regulation Task Force. Entity regulation refers to the regulation of the business entity through which lawyers and paralegals practise law or provide legal services. Com- pliance-based regulation is a proactive approach in which the regulator identifies practice management principles and es- tablishes tools to assist practi- tioners in adhering to the prin- ciples in the most efficient way. Despite the suggestion in the task force's title that the two go hand in hand, they don't: Entity regulation can exist without be- ing compliance based, and com- pliance-based regulation can exist independently of whether regulation is entity based. "The problem is that the discussion of entity regulation remains caught up with com- pliance-based regulation," says Joe Groia of Toronto's Groia & Company PC, a bencher run- ning for re-election and a former member of the task force. Yet the distinction is critical to the way bencher candidates and voters perceive the issue. While all of the candidates in- terviewed by Law Times for this article favoured entity-based regulation, controversy around compliance-based regulation continues to fester. To put things in context, Ontario's late to the party. Nova Scotia already espouses entity regulation, and Quebec has ad- opted a similar regime, while British Columbia, Alberta, Sas- katchewan and Manitoba seem to be making quicker progress to its adoption. But it was only in 2015 that the misnamed task force was established in Ontario to make recommendations "for the pro- active regulation of entities or organization through which lawyers and paralegals provide legal services." By the time the task force reported to Convocation in May 2016, it had figured out that "compliance-based regula- tion and entity regulation do not have to be implemented together." Now steeped in that epiphany, the task force recom- mended that the LSO "seek an amendment to the Law Society Act to permit law society regu- lation of entities through which lawyers provide legal services." The attorney general is still con- sidering the request. Meanwhile, the task force also recommend- ed the continued development "of a regulatory framework for consideration by Convocation based on the principles of com- pliance-based regulation." But Groia, for his part, is "far from believing" that there is any merit in compliance-based reg- ulation at all. "The compliance-based as- pect is motherhood and apple pie and is not more than what we're doing already," he says. As Groia sees it, through a combination of peer pressure, firm culture and back office sys- tems, entities "that amount to more than a bunch of individu- als doing their own thing" have a business and professional inter- est in making sure that "people do what they're supposed to do" in terms of regulatory compli- ance. "Once we engage entity- based regulation, we don't need the continuing kind of proac- tive regulation that compliance- based regulation envisions, something that's counterin- tuitive in a real firm setting," he says. "The mere fact that the entity is being regulated will create the environment that fosters com- pliance." In other words, for larger firms, Groia espouses a system of internal compliance, one akin to that which exists among in- vestment advisors, for example, who operate on an internal com- pliance model. "My hope is that once we get entity-based regulation, no lawyer in a firm of any size will have contact with the LSO un- less there's a complaint," he says. "That is the template in the capi- tal markets model where I come from." Still, Groia recognizes that the peer pressure and support systems that exist in larger firms don't necessarily exist among sole practitioners or very small entities. "What we need there, how- ever, is not a full-blown compli- ance-based system but rather a stronger continuing practice development program coupled with a process that has the pri- vate sector providing back office support that takes away the bur- den of things like trust account- ing and bookkeeping from the lawyers," he says. Ross Earnshaw, a chairman of the task force and bencher who is not seeking re-election, says, "When we embarked on this initiative, in retrospect and out of naivete, we had not yet un- derstood that entity regulation and compliance-based regula- tion were two concepts that were distinct and severable." For his part, Earnshaw is careful to point out that the task force is in a very early stage of de- liberations on the issue of com- pliance-based regulation. "We certainly haven't come to a landing on that and some live questions remain to be an- swered," says Earnshaw, a part- ner and litigator in the Waterloo Region and Hamilton, Ont. of- fices of Gowing WLG. "What makes things more difficult is that there is no uniform appli- cation of the concept in those jurisdictions that have dealt with the issue." Jon Rosenthal, a Toronto- based criminal defence lawyer and bencher who is seeking re-election, also has his doubts about compliance-based regula- tion. "I'm not convinced that it will do what it's intended to do," he says. "I'm all for having some pro- active programs that ensure lawyers don't end up before the discipline committee, but I think we should be very careful about imposing new regulations on the profession — whether it's on entities or on individual law- yers." As Rosenthal see it, increas- ing the regulatory burden even- tually becomes an access to jus- tice issue. "Small law firms will have to spend a lot of money, and that will affect their ability to service certain members of the public," he says. "So, I'd want to see strong evidence that compliance-based regulation will protect the public interest, and I'm not sure we're there." Andrew Spurgeon, a per- sonal injury lawyer and partner at Ross & McBride LLP in Ham- ilton, is also a bencher standing for re-election. He leans to some sort of com- pliance-based regulation. "My intuitive sense is that operations that have one or two or three lawyers don't have the risk management structure that compliance-based regulation would create," he says. "But it's important to avoid heavy-handed regulation and concentrate on facilitating better compliance through measures that are less expensive than the system we have now." LT Joseph Groia says he is 'far from believing' that there is any merit in compliance- based regulation at all. "I'm not convinced that it will do what it's intended to do." Jon Rosenthal BENCHER ELECTION ATTENTION! ONTARIO LAWYERS & PARALEGALS The Law Society of Ontario Bencher Elections Start: APRIL 15, 2019 STOP! THINK! CONSIDER! SAY "NO" TO THE MANDATED STATEMENT OF PRINCIPLES BEFORE YOU VOTE, VISIT: www.stopsop.ca for more info about the Stop SOP slate of Candidates Untitled-13 1 2019-02-26 3:41 PM

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