HOLP/HOFAIN CLC PRACTICES: A

REGULATORY

PERSPECTIVE

OVERVIEW:

1. The HOLP/HOFA roles were first introduced as part of

the CLC’s regulation of Alternative Business Structures

(‘ABS’);

2. HOLP’s and HOFA’s play critical roles in CLC practices,

acting as a conduit for regulatory concerns and

enabling regulatory compliance;

3. The CLC currently licenses 73 ABS practices in England

and Wales;

4. My perspective as a RSM and structure of the

presentation.

CLC’S REGULATORY APPROACH:

1. Proportionate approach, risk based and outcomes-focused.

2. In the current climate the CLC is striving to support practices as much as possible and is adopting a sensible and measured approach to monitoring;

3. Example of guidance relating to checking clients’ ID without meeting face to face as part of the coronavirus resources which have been published on the website.

4. In terms of the HOLP and HOFA roles the Licensed Body Code provides for a set of principles for both roles but specific requirements of responsibility only in relation to the HOLP.

HOLP: PRINCIPLES• Source: Licensed Body Code (Regulatory arrangements specific)

Understand the regulatory responsibilities of the body.

Act upon regulatory concerns raised by staff and also report to the CLC any governance concerns including improper influence.

Keep up to date with legislative and regulatory requirements through CPD.

You ensure AP’s employed by the body are “fit and proper”.

HOLP – KEY RESPONSIBILITIES

• A. The HOLP is required to:

Ensure compliance of the Licensed Body

Ensure Authorised Person’s and non AP’s are in compliance

Reporting any breach to the CLC promptly

Ensure the CLC is notified promptly of any circumstance under the CLC Notification

Code

Ensure persons with or who will have a material interest are

aware of duty to notify

HOLP: GOOD PRACTICE

1. Regular file audits of fee earners within the practice;

2. Identifying trends from a diverse range of sources: audits, complaints or breaches;

3. Ensuring that training needs are identified quickly and effectively;

4. Automated systems to facilitate reporting of breaches;

5. An ‘open door’ policy to ensure staff feel able to raise issues;

6. Regular training to refresh staff’s awareness of the CLC codes;

7. Stay on top of the retention of files in accordance with the CLC Transaction Files Code;

HOFA – KEY PRINCIPLES

• The HOFA is required to:

Protect client money and assets at all times;You understand the regulatory responsibilities of the body;

HOFA: IN PRACTICE

1. Involved in the monthly (or more frequent) bank reconciliations and able to answer any questions which are raised about transactions;

2. Develops a policy for ensuring that aged balances do not accrue and build up;

3. Report any breaches of the accounts code to the CLC without delay;

4. Remedy any breaches of the CLC Accounts Rules promptly;

5. Carries out file and ledger reviews consistently to be able to identify problems early and to identify trends;

6. Monitors, reviews and manages risk to the compliance with the CLC’s accounts rules;

7. Daily checks for overdrawn ledgers;

8. Regular review of fraud prevention measures (eg authorisation for payments).

CASE STUDY

• During a targeted CLC inspection of a practice in 2017, it was found that

significant sums of money had been transferred from a Client Account to

the Office Account, in several transactions, without justification.

• It was also found that the reconciliation of two client accounts produced

differences of approximately £90,000. Approximately half of this figure

could not be accounted for or justified during the inspection.

• The HOFA raised the transfers with the Director on numerous occasions but

these breaches were not remedied. The HOFA did not have access to the

bank accounts for monitoring or transferring funds.

• Inspection report: The report found numerous breaches of the code

including Principles 2 and 3 of the Licensed Body Code.

• Outcome: An action plan was created to resolve these breaches but in the

longer term they were not remedied. Ultimately the CLC made the decision

to intervene into the practice.

OTHER CONSIDERATIONS

• 1. The licensed body being without a HOLP or HOFA

constitutes a risk to the provision of legal services. A

replacement must be sought within 28 days;

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