rule changes, tribunal trends, new guidance, deadlines – tick

☕ Grab a cuppa and get yourself comfortable as it’s been a fairly busy few months for the SRA and we have a few important things to share with you…..

🔥Hot topics

⚠💻Website Compliance 💻⚠ We have noticed a SHARP rise in law firms having their websites audited 🔎 by the SRA recently, with many falling foul of what some might describe (not us of course) as an increasingly picky approach in particular to the pricing information. There seems to be a zero tolerance approach to inviting the client to contact for more complex matters or for points of detail – they seem to be of the view that the complete picture should be available up front on the website. Do please take the time to ensure your website is compliant and refresh yourself with the SRA’s Transparency Rules. We’ve previously provided a free checklist which hopefully remains helpful. If you would like a quote for a website audit, please reply to this update email & we will be in touch. For those of you lucky enough to already be on a retainer with us, we are working feverishly behind the scenes to carry out renewed website checks on all retainer clients to ensure previous action points have been followed up and all is in keeping with the latest points the SRA seems to be focusing on. Your main point of contact will be in touch to discuss once we have completed yours.

📜Practicing Certificate Renewals if you haven’t already done so, please don’t forget that practising certificate and registration renewals will take place from 1 to 31 October 2023 inclusive. Don’t miss the deadline!!

🔍The SRA & the Legal Services Board (LSB) have jointly published research looking into the cost of professional indemnity insurance (PII) for law firms, and what factors drive differences in premium levels. The research found that the average PII premium is now equivalent to 5% of a law firm’s annual turnover, but one fifth of firms are paying premiums equivalent to 10% or more. Of those paying more than 10%, the majority (90%) are small firms, with practices that mainly operate in conveyancing paying twice the level of (PII) premium than others. However, rather disappointingly when SRA Chief Exec Paul Philip was asked about this hot topic at the recent SRA COLP COFA conference he broadly indicated his view that for the most part this problem did not fall within the regulator’s remit (despite writing the minimum terms policy…).

📋 Annual assessment of continuing competence 2023. This report from the SRA outlines their findings into how solicitors should keep their skills and knowledge up to date and how firms make sure they are competent to provide the legal services they offer. With this in mind, don’t forget that every solicitor is required by the SRA to declare towards the end of each practising year (so by 31 October) that they have fulfilled their CPD duties. This deadline is looming, make sure you and your firm have completed this. It seems that this will be an area of focus for the SRA in the coming months and year so if your firm is not hot on its record keeping consider it an area to focus on. Do you and your staff need a quick and easy reminder on what you actually need to do? No problem:

To comply with the SRA’s Code of Conduct for Solicitors, RELs and RFLs, all solicitors must maintain their competence to carry out their role. This means they must keep their professional knowledge and skills up to date. In practice this means that solicitors need to do 3 things:

  1. *Plan: at the start of a new practising year think about your legal knowledge, risk & compliance knowledge and soft skills such as time and people management and what you would need to do before 31 October to keep your knowledge and skills in good shape. Don’t panic – you’re only aiming for the not so lofty bar of being ‘competent’. It shouldn’t be too tough. You can take a look at the SRA’s definition of a competent solicitor here:*
  2. Do: before 31 October do your best to complete the tasks you’ve set for yourself and any other CPD you have done along the way. Remember that this is not just formal training sessions and there are no longer CPD accredited courses. So training but also writing training, reading articles, shadowing, webinars, podcasts – this can all count as CPD. Not managed to do everything you had planned at the start of the year? Don’t panic. Provided that you remain competent you can always carry it over to the next year and still make the necessary SRA declarations. However, everyone should have some sort of record of their CPD / continuing competence activities by the end of the practising year on 31 October. Record the type of activity, when you did it and how long it took.
  3. Review & reflect: on your CPD log or separately you should have a record of your review and reflections on the learning activity i.e. did it fulfil your objective in setting the task, will it be of value in your role, how good was the trainer and materials if relevant and what other reflections do you have on the task. If it was not sufficient to address the needs identified, then you should plan further activity to address the need.

*You can view a short Compliance Office video of the changes here The SRA website also has some frequently asked questions on continuing competence which you can access here:*

💷The Solicitors Regulation Authority has now taken over management of the Solicitors Indemnity Fund (SIF). The new arrangements came into place on 1st October 2023. London insurance provider Polo Works has been announced as the SRA’s expert delivery partner for managing the Solicitors Indemnity Fund (SIF).

📏 The SRA are currently consulting on potential changes to its regulatory arrangements to include authorised members of the Chartered Institute of Legal Executives (CILEX). This follows a CILEX consultation launched in August on proposals to re-delegate the regulation of its members to the SRA. Consultation is open until November 22.

📰 A report into how non-disclosure agreements (NDAs) are prepared between employers and their staff, and the role of law firms in drafting and agreeing these has been published. Among issues highlighted are the need for solicitors to be mindful of potential imbalances of power between employers and employees, and not to allow clauses to be included which might deter the reporting of inappropriate behaviour to law enforcement or regulatory bodies.

📏 🧭 New rules and guidance from SRA

The SRA has just published a plethora of new guidance and, for once, templates! Yes, that’s right – templates. Who can believe it?

  • SRA Warning notice and templates for AML Client & Matter risk assessments – for some time now we have been encouraging firms to adopt more detailed onboarding forms which go beyond a simple ‘low/medium/high’ checkbox by way of client / matter risk assessment. The SRA has been indicating for some time that it wishes to see more specifically on each file the key risks which are being checked for. We also find that in practice staff benefit from a little more prescription and support. The SRA have now published data from their latest year of rolling AML law firm audits which indicate that 51% of the client/matter risk assessments they saw were ineffective. Not sure what they mean by ineffective? Well, to help they have now published a warning notice setting out exactly what their concerns are and, unusually for the template client and matter risk assessments. The templates are much more detailed than what had been the norm to record previously and arguably quite a lot more detail than one might fairly assume from reading the the Regulations. However, it has to be said that this approach is in keeping with feedback we’ve seen on the ground from the SRA and our own templates. Do you have to adopt the SRA forms? Absolutely not. The SRA have been very clear there and frankly we’re not sure they’re perfect. We would suggest instead perhaps thinking of them more as a checklist to sense check your approach if you already have something similar in place. It would be great for this. Far better that your forms work for you in practice than shoehorning the SRA’s boilerplate into your systems unedited. Plus we know from the price transparency experience that there’s no guarantee that the SRA will not find fault with its own templates 😬
  • A PS on AML – if you are subject to the Money Laundering Regulations and have not yet had a visit from the SRA it seems that it is only a matter of time. Comments made by Paul Philip of the SRA at the recent COLP COFA conference also suggest that he is keen to expand their use of fixed penalties (which circumnavigate the usual process for issuing fines) for alleged AML breaches. If you have not had an independent audit yet or would just like to get your approach checked over please get in touch and we would be delighted to help.
  • Firm Wide Risk Assessments – this guidance has been updated and applies to all those who are subject to o the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. We are noticing many firms being rebuked/fined for not having a Firm Wide Risk Assessment in place, and some for getting into bigger trouble for saying they have one when they don’t! (See further down in the update for some examples of this.) ALL firms who are in scope of the AML regs MUST have a FWRA in place. If you need help with yours, please get in touch.
  • Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 – some new questions answered in SRA guidance on sanctions counter party checks. They are ‘advising’ a counter party check when doing conflict checks on the counter party and more in depth checks if higher risk. Guidance on AML checks on counter parties generally on here too. Many firms still consider the counter party check as standard to be disproportionate so it’s a judgement call really.
  • Immigration – The SRA have issued a warning notice for solicitors and firms who provide immigration services to their clients. Due to some recent cases, they are particularly concerned about:
    • solicitors potentially advising clients or prospective clients to falsify or fabricate information to support Home Office applications for asylum or leave to remain. I suspect anyone reading this won’t need reminding of that but just in case!
    • solicitors producing poorly drafted applications, or advising their clients to pursue totally without merit appeals of Home Office decisions through the courts.
    • Applying to appeal decisions where the case is without merit and bound to fail abuses the courts system, and does not uphold the rule of law.

😳 Tribunal trends and cases of interest

💥Conflict Of Interest

  • A solicitor has been fined £12,000 with £1,350 costs after acting for both sides in the transfer of five properties for nil consideration to a Dubai based company. Following the transfer one property was sold at auction and the proceeds of the sale were paid into a third-party bank account based in Dubai. The transferors of the properties state the transfers of the properties, and proceeds of sale, was without their knowledge or agreement. The transferors reached a settlement agreement which saw the return of the four properties but not the proceeds of the sold property.

❌💰 Anti-Money Laundering

  • A solicitor who failed to ensure his firm had in place a compliant firm-wide risk assessment and compliant Anti-money laundering (AML) policies controls and procedures (among other things) was fined £5,250 with costs of £600.
  • And here’s another one who also declared themselves to have a compliant Firm Wide Risk Assessment (FWRA) but following an SRA AML inspection was fined £2,000 for not having a compliant one.

🤦‍♀️We see so many firms falling foul of the SRA for failing to have a compliant FWRA & AML policies in place. We also see so many firms answering mandatory SRA questionnaires (particularly about this subject) arguably incorrectly & getting themselves into even more hot water!

⁉ So what should you do? Be really careful when answering mandatory SRA questionnaires or completing forms declaring yourselves to be “fully compliant” unless you are absolutely certain you are. An incomplete template IS NOT a fully compliant Firm Wide Risk Assessment . If you feel uncomfortable answering an SRA question in binary terms we always encourage sending a separate contemporaneous note to qualify your statement. If there are any future problems then you can refer back to those qualifying statements. Feel free to get in touch if you would like us to complete an AML audit to ensure you’re compliant.

❌✍ Failing to take client’s instructions

  • A solicitor was rebuked and ordered to pay £600 costs after failing to take her client’s instructions when preparing his will or obtaining confirmation that the individual who gave her instructions to prepare her client’s will had her client’s authority to do so.

❌ ⌚Time Management

  • This solicitor got himself into trouble with the SRA when he unreasonably delayed in complying with a wasted costs order made against him personally. On 14 September 2021, the court ordered the solicitor personally to pay wasted costs in the sum of £12,150.50 (the wasted costs order). He failed to pay the wasted costs order as and when it fell due and unreasonably delayed paying it until on or around 28 December 2022. He was rebuked and ordered to pay costs of £600.
  • Prior to completion this Firm provided a signed undertaking on 12 June 2017. This undertaking included specific actions where the firm was to submit the transfer of title and notification of the change against the property to HM Land Registry. Subsequently, these elements of the undertaking were not satisfied by the firm within a reasonable amount of time & the SRA fined them £1,438.10 with £300 costs.

❌💰 Money Management

  • Axiom Ince has been closed with immediate effect, this includes all 14 branches of the business. The SRA have yet to publish full details as it is an ongoing investigation but there are wide reports of a shortfall on the client account of at least £53 million.
  • A firm has been fined just over £14,000 after failing to deal with residual client money. Following an investigation, the firm accepted that from 2008 to 2021 it allowed almost £105,000 to be built up in the client account by failing to address inactive or completed matters. An SRA notice said that the firm did not have procedures in place to deal with these residual balances, and its systems did not identify receipts in the client account. The notice further stated that for 10 years, the firm allowed its client account to receive, hold and transfer funds in relation to rent and rent deposits. This breached the rule that firms may not provide a banking facility through the client account.
  • A firm has been fined £2,500 with £1,350 costs for using the client account as a banking facility and making an improper transfer of sale proceeds to an unconnected third party in a high risk jurisdiction (UAE).
  • After submitting his firm’s accountants reports late by 18 months in 2020 & then 6 months late in 2021 this solicitor had the SRA come knocking, who discovered no client account reconciliations had been produced between July 2020 and January 2023. This breach of SRA Accounts Rules 2019 led to a rebuke & £300 costs.
  • A solicitor who admitted “manifest incompetence” and that he was “a poor manager”, failing to disclose that his firm was in financial difficulty, has been suspended for 18 months. He admitted multiple breaches, including failing to notify the SRA that his firm was in ‘serious financial difficulty’ and to co-operate with its investigation, as well as “manifest incompetence”.

❌☹ Breaking the Law

  • A senior solicitor convicted of sexually assaulting two women in his local pub has been fined £25,000 by the Solicitors Disciplinary Tribunal (SDT). The solicitor, who qualified in 2008, was found guilty last year of three offences of sexual assault and handed a nine-month community order
  • This non – fee earning legal cashier was recently prosecuted for transferring money from the firm’s account into her own personal account on 5 separate occasions, totalling £4,650. She received a 12 month suspended sentence and is not allowed to be employed by any solicitor’s firm again.

❌🤐 Lies, Lies, Lies

  • A solicitor who lied to his law firm about drink-drive convictions as well as investigations into his conduct when he joined the listed law firm has been struck off.
  • An IT support worker at a major London law firm who sought to influence a coroner by sending misleading emails using his work account has been banned from the profession. He sent a number of emails from his work account to a coroner concerning a private and personal matter that was unrelated to his role at the law firm in which he worked. Throughout his correspondence, he altered his job title, including describing himself as ‘senior service desk manager’.
  • A solicitor who changed the date on a legal charge having missed the deadline for registration at Companies House has been struck off by the Solicitors Disciplinary Tribunal (SDT).

And finally… 😫😖

  • A solicitor whose misconduct “spiralled” from maladministration to using client money to pay personal expenses, and included using an ableist slur to describe a client, has been struck off.
  • A solicitor who made ‘puerile and inflammatory remarks’ in emails to another solicitor has been fined £7,500. He also contacted a school attended by children of a defendant in possession proceedings, where he was acting for the landlord. The regulator found Taylor’s conduct was serious as it ‘had the potential to cause harm to others’. He had previously been warned by the SRA in October 2018 and February 2022 for similar conduct.

📩 Get in touch

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