Monday, December 22, 2014

Article: How well does your conflicts system work?

Conflicts management ranked as a key investment priority in our 2014 law firm risk surveys. Intellectual Asset Management (IAM) features an interesting article by Frank Maher is a partner in Legal Risk LLP. "How well does your conflicts system work?" --
  • "In the course of acting as a solicitor for law firms for over 30 years – both defending professional indemnity claims and advising on professional regulation – the author has encountered many issues arising from conflicts of interest; much pain has been endured by those who fell foul of the rules. When conflicts issues go wrong, they can be among the most damaging to a firm’s reputation – and reputation is the only thing we have to sell. Problems in practice fall into several categories, including:
    • the conflict checking system failing to pick up the existence of a conflict, or significant risk of one, at all;
    • acting for two or more clients, such as joint venture partners or husband and wife, and failing to spot either that their interests conflict at the outset or that they may do so further down the line;
    • failing to spot when a conflict does arise in the future, as may happen when acting for lender and borrower, in some cases because the problem has unfolded gradually;
    • taking on a small matter which precludes the firm from acting on something more substantial later;
    • allowing a large client to impose its terms of business (or ‘outside counsel guidelines’) which impose more extensive duties than would apply at law and under the conduct rules;
    • establishing systems which check for client conflicts, but fail to check at all for own interest conflicts, such as personal appointments as trustee or director;
    • failing to spot that the solicitor’s own interests may conflict – perhaps the volume of work from one client, such as an insurer, and the desire not to offend it or appear uncommercial blinds the solicitor to the risk of conflict with the insured; and
    • relying on information barriers when they are either not appropriate at all (because at most they may protect confidential information, but will not cure a conflict), or inadequate for the purpose they seek to achieve.
See the complete article for additional detail and analysis.

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