Compliance updates Header Image FINAL

Rule changes

The 16th edition of the SRA Handbook went live on 1 April 2016.

The most fundamental changes relate to the end of the transitional arrangements for regulating consumer credit activities and the implementation of the new consumer credit regime.  The SRA claims to have been successful in excluding debt collecting from separate regulation under the Financial Services and Markets Act 2000 if solicitors undertake such work in the course of providing advocacy or litigation services. Other consumer credit activities have however been brought within the scope of the Part XX regime and a new definition has been added to the SRA Glossary defining “credit-related activities” for this purpose.  The definition includes activities such as entering into a regulated credit agreement as lender, credit brokering, debt adjusting, debt counselling, debt collecting, debt administration, providing credit information services and providing credit references. The SRA has published an in-depth consumer credit toolkit which should be considered very carefully by any firms which may be covered by the new regime.

In addition, changes to the SRA Handbook also removes the necessity for law firms to undertake a ‘reserved legal activity’.

There’s a more in-depth note of these changes available on the SRA website.

Latest guidance, guides and warnings

  • the SRA has published a warning to personal injury lawyers who are referred work by third parties (whether fees of any kind are paid or not).  The SRA is concerned that some firms are breaching professional rules by becoming involved in referral arrangements which are unfair or whereby clients are cold called, referral fees are paid, instructions are taken from third parties, claims are pursued without proper authority and damages cheques are sent to third parties.  The SRA stresses that firms have a duty to ensure that contracts with a referrer are fair and must cease dealing with a referrer whose arrangements are not in the client’s best interests.  Though aimed at personal injury practitioners, the guidance echoes earlier warnings by the SRA more generally about the need to ensure clients are advised independently of any third party interests;
  • the SRA has published some very helpful guidance on when disclosure of client information may be justified in the public interest and would not result in regulatory action.  Examples of possible scenarios falling into this category include where a client has indicated their intention to commit suicide or serious self harm, disclosing information in order to prevent harm to children or vulnerable adults, where the lawyer is being used to perpetuate a crime and disclosing information in order to prevent the commission of a criminal offence. The indication is that some disclosures even of this nature may still strictly speaking be considered a breach of professional rules but may well not result in any regulatory action if such a breach is justified in all the circumstances.  The guidance does not apply to privileged information where separate considerations apply.  The guidance concludes with some practical guidance on steps to be taken in such a scenario including seeking guidance from the SRA’s professional ethics team;
  • the SRA has published guidance which includes a 6-point checklist for firms approached by clients wishing to use crowd funding to pursue their legal matter;
  • the SRA has updated its longstanding guidance for European lawyers on practising in England and Wales;
  • the SRA’s latest ‘question of ethics’ conundrums include guidance on liability for undertakings given in aborted transactions and professional indemnity insurance in the context of using third party police station representatives;
  • the Law Society has published a practice note for conveyancers on the Consumer Protection Regulations;
  • the Law Society has updated its practice note for criminal practitioners on defence witness notices;
  • the Information Commissioner (ICO) has recently provided new guidance on encryption, published a brief update by way of a blog post on the current position on safe harbour and has also highlighted the reputational risks of failing to keep information safe;
  • the Office of the Public Guardian has published guidance on its approach to using client account to manage deputyship funds.

Tribunal trends and hot topics

  • tax avoidance scheme suspensions – two solicitors have been suspended for their involvement in stamp duty land tax (SDLT ) avoidance schemes. The SRA has taken the opportunity to publicise its earlier warning notice on SDLT schemes, though it appears wise to consider the principles arising from this case more broadly.  The SRA had alleged misconduct partly on the grounds that the solicitors involved themselves in schemes intended to paying tax in circumstances where the schemes were of a “dubious nature” and concerns had been raised by the HMRC.  The implications of such a serious approach being taken where avoidance schemes are ultimately considered to be ‘dubious’ are potentially far reaching;
  • disciplinary action for failure to report matters to the SRA – Legal Futures has reported on a partner being rebuked for failing to report financial problems in the firm to the SRA and on another solicitor fined for failing to report “serious misconduct” by colleagues.  Take a look at our SRA reporting checklist (PDF) – you may be surprised at the extent of the obligations under the 2011 Handbook to report matters to the SRA;
  • solicitors struck off for fabricating information – we have continued to see examples of lawyers struck off for failing to own up to a mistake and instead trying to cover it up;
  • solicitor fined for sending inappropriate text message to a client – another interesting report by Legal Futures on activity at the Tribunal;
  • identity theft and fraud – the SRA has continued to stress the risks posed by identity theft and bogus law firms and that this area remains a priority area.  To help firms in this high-risk area we have published an extract (PDF) from our updated template risk and compliance manual which provides sample firm policies which seek to implement SRA recommendations in this area.  The Law Society has also published a practice note on what to do if you fall victim to a scam as well as free online training on cyber security and other cyber security resources;
  • asylum advice – another area of keen interest currently appears to be the quality of advice provided to asylum seekers.

Key dates

In a little under 6 months time all law firms and solicitors will be required to transition to the SRA’s new approach for CPD.  To help firms transition we have published an extract from our updated template risk and compliance manual which provides a sample learning and development policy (PDF) under the new regime.  There are also some helpful tools available on the SRA website including a recent webinar and an toolkit (which includes further templates).

The SRA has confirmed that is next compliance conference will take place on 20 October 2016.

Important information about these updates

The copyright in this material belongs to the Compliance Office Ltd, a limited company, company no. 09133668, registered office: The Bristol Office, 2nd Floor 5 High Street, Westbury on Trym, Bristol, United Kingdom, BS9 3BY.  You may not distribute or commercially exploit the content and you may not transmit it or store it in any other website or similar system. The Compliance Office Ltd and its authors do not offer solicitor or legal services, are not a law firm and do not provide legal advice.  This material is general in nature and is intended to assist the reader by drawing some relevant regulatory provisions to his or her attention. The material is not exhaustive and is not a substitute for considering the relevant provisions directly or for legal advice on an individual’s specific circumstances.  In particular, it does not include every new rule change, decision, deadline, guidance or other material which may be relevant to you.  While care is taken to ensure the complete accuracy of the information as at the date of publication, this cannot be guaranteed.  The Compliance Office Ltd, its author(s) and administrators will not be liable for any loss or damage of any nature arising from the use of this material and such liability is excluded to the fullest extent permitted by law.

Call 01789 205072 | contact@complianceoffice.co.uk