Hot off the press….
The SRA will be checking your website….are you ready?!
The SRA announced in August that it has plans to check ALL law firm websites for compliance with its Transparency rules. Remember, whatever services you offer, you need to publish details of your complaints procedure and a copy of the SRA’s clickable logo on your website. We are aware that the SRA is being rather picky about wording of specific points (for example, they were unhappy that a link on a firm’s website complaints policy went to the main www.sra.org.uk website rather than to a specific page on that site). If you have a website and offer services such as conveyancing, probate, immigration, employment tribunals or motoring offences you have to publish details about these services, pricing information and information about who delivers them. They will be cross referencing their findings against the self-declarations made by firms stating they were fully compliant. We published a free 16 point checklist for law firm websites last year. If you would like to talk to us about a website audit or some support in this area please get in touch.
Checking 9,000 websites is a massive undertaking for the SRA. Recent experience has shown us that similar bulk exercises can result in the ‘feedback’ from the SRA being a bit hit and miss. Don’t be afraid to ask for specific details of any alleged non-compliance (the rules and the SRA’s own guidance and interpretation of them is not always clear even to us and this is our bread and butter!) Politely push back if you feel you are actually compliant. It is worth remembering that some of the more junior team members at the SRA can sometimes conflate mandatory requirements with best practice.
Letters from the SRA are being sent to some firms asking them to check and confirm turnover information. If you receive this letter, please ensure you follow the instructions so that they can calculate the correct periodic fee.
One year to complain to the Legal Ombudsman and then your client’s time is up! The Legal Services Board (LSB) has, after “very extensive debate” backed a reduction in the time for complaining to the Legal Ombudsman from six years to just one. It has agreed that complaints should be dismissed where there has been “no significant loss” or where there has been undue delay in complaining. These are huge changes. Whilst it’s frustrating that these problems have only seemingly been addressed after ten years of complaints handling by the Legal Ombudsman because it cannot cope operationally with its workload rather than because it’s the right thing to do as a matter of policy progress is progress! Anyway, it’s good news and we will take it. No date that we can see yet as to when circa 9k law firms will each need to change every reference to complaints time limits in terms and on websites…. Will keep you posted.
It wouldn’t be a an update without a bit of AML news so here we go…..
The LSAG guidance was ****formally approved by the Treasury in July. ****This approval gives the guidance “full standing” which means that when judging whether a law firm or legal professional has committed an offence by not following the regulations the Courts (both criminal and civil) will have to decide whether the guidance has been followed. The approval also means that firms must consider it when deciding how to apply the regulations. This is particularly important for policies, and procedures, internal controls, training and enhanced due diligence for politically exposed persons or PEPs. The Treasury also made some amendments to the final version. Most were minor, but there was a more significant change around the verification of the identities of beneficial owners. The strong indication is that firms are now expected to effectively apply the same standards to verifying ID for ultimate beneficial owners as you would apply to a natural person client i.e. independently verified documents confirming name, date of birth and address. While a common approach, that is not the implication from the Regulations and had not been the previous position under earlier iterations of the Treasury approved guidance. However, it’s difficult to argue now with Treasury approved guidance. Regulation 37 on the face of it does permit some significant discretion in the context of simplified due diligence which may be of assistance routinely acting for low risk clients, though again the Treasury approved guidance seems to restrict firms beyond what the Regulations require by suggesting that simplified due diligence is only appropriate for a very limited sub-set of entities i.e. others subject to the AML regs (or equivalent overseas), listed businesses, law firms and public authorities (6.20). The changes are proving controversial and there’s every chance they will be revisited soon. However in the meantime it’s sensible to review your approach and we’ll certainly be discussing these changes further with each of our retainer clients subject to the Regulations in coming weeks.
Another major change to watch out for was the UK adopting the UK’s list of high risk jurisdictions for money laundering, instead of the EU’s list. That’s a change we might have expected following Brexit. If you list these countries in your onboarding documents or similarly, now is a good time to review the most up to date list to check that all is in good shape.
The Law Society have published a helpful summary of the key changes to the guidance.
New rules and guidance from SRA
The regulator has been busy this quarter and here is our guide on what they’ve been up to at the Cube:
- The SRA plans to issue further guidance on when litigators are allowed to label letters as ‘private and confidential’ and/or ‘without prejudice’. This follows letters being sent to a Mr Neidle by lawyers (Osborne Clarke) for former Chancellor Nadeem Zahawi which accused him of libel. Osborne Clarke asserted that the letters were confidential and warned of “serious consequences” if he published them. Mr Neidle published the letters and wrote to the SRA saying it was “plainly incorrect as a matter of law” that calling letters ‘confidential’ or ‘without prejudice’ meant they could not be published in these circumstances. In response, Juliet Oliver, General Counsel for the SRA, said that they “plan (amongst other things) specifically to address the practice of labelling correspondence as ‘private and confidential’ and/or ‘without prejudice’, and to address the conditions under which doing so may be a breach of our requirements.” This could represent quite a shift in expectations for what is a fairly common practice engaged by some lawyers. We will keep you posted.
- 117 ongoing investigations and 251 reports made to the SRA since 2018 regarding alleged sexual misconduct. This is compared to just 30 in the preceding five years. This increase in reports and ****investigations has resulted in the SRA publishing new ****guidance on sexual misconduct within law firms setting out their expectations for both firms and individuals. This new guidance addresses one of the recurring issues in many of these cases which is how far a solicitor’s regulatory obligations extend to both their professional and private lives. Paul Philip, the Chief Executive of the SRA, emphasised the regulator’s view that it was “common sense” that upholding the principle of acting with integrity could reach into a solicitor’s private life. Consequently, the SRA has also updated its guidance on acting with integrity. There have also separately been reports that the SRA’s view in the future will be that suspension, strike off or equivalent will be the starting point in cases concerning sexual misconduct, discrimination or harassment – not a lesser sanction such as a financial penalty.
- New guidance on Convictions arising from matters of principle or social conscience. This guidance includes a really interesting case study which appear to be based on a real life case whereby a trainee solicitor was arrested for their part in unlawful climate protests. The SRA appears to have taken no action against the individual for lying down in the middle of a busy road and receiving a conviction for obstructing a public highway. It’s interesting to think that if the individual’s behaviour had at any time involved anything dishonesty, they likely would have been struck off. Deliberately committing a criminal offence is tolerated in the right circumstances it seems but lying about it would end the career.
- The SRA has published new guidance on undertakings given by, or on behalf of, incorporated practices. The purpose of this guidance is to explain your obligations when undertakings are provided by, or on behalf of, incorporated practices. This is because a Supreme Court decision has confirmed that the courts have no jurisdiction to enforce undertakings against incorporated practices. However, an incorporated practice could still face regulatory proceedings as there might have been a breach of the rules.
- Guidance on Accepting instructions from vulnerable clients or third parties acting on their behalf has been published to help highlight issues to consider when acting for such clients such as determining capacity.
- The SRA have updated their guidance on Confidentiality of client information.
Have your say on…….
Proposed increases to fines for individual solicitors.
The SRA has announced a second consultation on its proposed financial penalties framework. It has successfully secured an increase in its fining powers to £25,000 and the the new Economic Crime & Corporate Transparency Bill would increase that power to unlimited fine if the misconduct related to rules about or other impacted upon the the prevention or detection of “economic crime”. The regulator is seeking views on proposals to:
- clarify which behaviours are suitable for a fine
- taking the means of both firms and individuals into account when setting a fine
- raising the maximum fine it will impose on a firm to 5% of turnover
- the introduction of a fixed penalties scheme for a limited number of low-level breaches of the rules.
The SRA appears to be keen to increase how often it issues fines and the size of the fines. We’re likely to see many more fines in coming years direct from the SRA than we have to date.
What’s the latest in the disciplinary decision world?
Unwanted and offensive messages
- A former IT service desk analyst at Pinsent Masons has been banned from working in the legal industry for sending “offensive” messages to a colleague. He sent a number of messages to another member of staff using the firm’s communication systems which contained offensive language directed to the recipient. An important reminder that the SRA’s Standards and Regulations apply to all those who work in a law firm whether legally qualified or not! If you would like your staff to have more awareness of this then please get in touch about our courses.
- A former partner at Capsticks has agreed with the SRA that he will remove himself from the Roll of Solicitors for three years and accepted a rebuke. He sent numerous inappropriate and unwanted messages that were capable of being interpreted as sexual in nature to a junior colleague (of whom he was line manager) over a period of months. In addition, he made inappropriate comments about her sex life, her becoming pregnant and taking maternity leave.
When does delay amount to manifest incompetence?
- A decade according to a recent Tribunal case! A manifestly incompetent **solicitor did not touch probate file for a decade. We have not seen a case of manifest incompetence on this scale for a while! The solicitor admitted that he failed to progress three probate matters over several years, one of them an estate worth £4 million! The SDT imposed a fine of £16,000 for multiple breaches over several years.
- If you don’t think a decade is long enough to fulfil client instructions, our next case can beat that as this solicitor took 13 years to apply to restore a company to the companies register! She was fined £2,000 for the repeated delay in following client’s instructions.
A former Partner at Gateley has been suspended from the profession for 12 months after he accepted a £2,500 gift from a client into his personal bank account without declaring it to the firm in contravention of their policy which required written records to be kept of gifts worth more than £250. In addition to accepting the gift, the partner emailed the client requesting a further benefit for introducing them to a business partner. The SRA said that an employed solicitor, approaching a client for payment over and above that already agreed with his firm, would damage the public’s trust in the profession.
The serious consequences of acting dishonestly
- A solicitor who confirmed that two affidavits had been signed and sworn in her presence, when they had not been, has been struck off.
- An experienced chartered executive with over 20 years experience has been banned from working in legal practice by the SRA after backdating a client’s signature on two separate occasions.
- **Falsifying signatures on witness statements** will also get you disqualified from holding roles in a licensed body.
More regulatory action following AML visits by the SRA
A £2,000 fine plus costs for failing to have an AML firm-wide risk assessment in place following a declaration to the SRA that it did have one. This firm also failed to have compliant AML policies, controls and procedures and failed over several transactions to conduct adequate monitoring.
Important information about these updates
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