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Risk Alert Bulletin - November 2018

6 December 2018

Editor's notes: Is your practice ready for the Legal Practice Act?

The publication of this edition of the Bulletin will coincide with the full implementation of the Legal Practice Act 28 of 2014 ('the Act').

It is trite that the regulatory regime under which the South African legal profession operates will undergo a fundamental change under the Legal Practice Act. Every legal practitioner will be affected by the Act and the new rules for the profession to be introduced under the new legislative regulatory regime.

Some of the new concepts introduced into the Act and the rules are:

  • Aligning the legislative framework of the legal profession with constitutional imperatives;
  • Setting norms and standards for legal practitioners;
  • Regulating the professional conduct of legal practitioners to ensure accountable conduct;
  • Setting new requirements for continuing professional development (CPD); and
  • Ensuring the accountability of legal practitioners to the public.

It remains to be seen how the concept of ensuring accountability of legal practitioners to the public will affect the legal duty of practitioners and their liability for claims. Compliance with the Act and the rules will require that practitioners study the provisions of the legislation carefully and, where necessary, make changes to the manner in which their practices are structured and legal services are rendered to the public. For example, with regards to fees charged in respect of legal services, the provisions of sections 35(7) to (12) must be complied with and the agreements with clients must be documented in a written document and signed by the parties. The areas covered in the rules include:

  • Accounting;
  • The need for internal controls;
  • Reports to the Legal Practice Council in the event of non-compliance;
  • The responsibility for ensuring compliance;
  • The reporting requirements;
  • Reports of dishonest or irregular conduct; and
  • The rules applicable to investment practices.

The rules in general and the accounting and investment rules in particular must be read within the broader legislative compliance environment, including the compliance with the Financial Services and Intermediaries Act 37 of 2002 (the FAIS Act), the Financial Intelligence Centre Act 38 of 2001 and good governance practices.

Practitioners must take account of the changed legislative requirements in assessing the risk environment in which their practices are conducted. The article by Simthandile Myemane is this Bulletin explains the importance of correctly designating investment accounts in the changing regulatory environment.

Effective risk management in a law firm is often said to be a matter of the application of principles of common sense. However, there are common errors made in legal practices which could lead to professional indemnity claims against firms as demonstrated in the contribution by Marius van Staden and Stephen Leinberger. There are a number of important lessons to be learned from the cases referred to – sometimes the ‘war stories’ from the cases highlighted provide the best lessons.

It is hoped that the new regulatory regime will be positively embraced by the profession and that the dawn of the new regulatory era will usher in a new attitude to risk management in legal practices. All the articles in this edition of the Bulletin make reference to the Act.

Thomas Harban,
General Manager, AIIF

Other articles include:

  • The increased importance of correctly designating investment accounts;
  • Observations of attorneys' practice pitfalls and prevention of professional negligence claims.

Risk Alert Bulletin November 2018

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