In June, the Solicitors Regulation Authority launched a consultation on proposed changes to the SRA Handbook. But are the changes the right ones? And how could they affect firms and their leaders? Paul Bennett, Melanie O’Brien, Matt Howgate and Sarah Charlton consider
In June, the Solicitors Regulation Authority (SRA) launched a consultation on proposed changes to the SRA Handbook, with the aim of it becoming ‘shorter, sharper, clearer’. Some of the so-called big ideas from the 2011 Handbook are evolved, some reversed, and some dispensed with entirely. The consultation closes on 21 September, and, if agreed, the changes should come into force in 2017.
The current focus on firm-based regulation is creating a generation of solicitors with sparse understanding of their professional and ethical obligations. The proposals focus on the individual for the first time since 2011. It is also increasingly apparent that the current regime is stifling innovation. The SRA is proposing radical change at a time when many practitioners are simply exhausted by market changes and their pace; for smaller firms, keeping staff up to date is a major challenge in terms of both logistics and money.
The SRA seems to be shifting the regulatory focus back from firms (so-called entity regulation) to individual solicitors. Law firm leaders must ensure they and their staff are ready to assume personal liability.
Two new Codes of Conduct are proposed: one for solicitors, which will apply to all solicitors; and one for firms, which will focus on the systems and controls firms must have in place. This is a neat, practical and reasonable solution to resolve the challenges that have emerged when solicitors and firms each consider the other to be responsible. For partners and managers, this could be useful, as staff will need to understand they are responsible.
Rather than abolish entity regulation, the proposals clarify responsibility. As the consultation document states (emphasis added): ‘If things do go wrong, we will take a proportionate response. But where we find that solicitors or firms have wilfully, carelessly or negligently misused their freedom, or have abused their position, that response can be robust.’
Reaffirming the personal and strict conduct and ethical obligations of solicitors refocuses everyone’s minds on the fact that this is a profession, and one at the heart of the justice system. Upholding the rule of law and the proper administration of justice means very little to a firm, but can underpin the actions of an individual solicitor, dedicated to achieving justice for clients and a fair society. As non-solicitor-owned practices mushroom, this re-statement of solicitors’ personal obligations seeks to ensure liability is clear.
The SRA’s move away from imposing defined outcomes, which are meaningless for some firms, will be welcomed. Also, a shorter and easier to understand Handbook will be much simpler to know than the current one. However, while sacrificing detail for simplicity may be superficially attractive, it will not help define a clear path through the grey areas, or indeed help in terms of enforcement.
From an enforcement perspective, where a firm has been in dispute with the SRA or has been visited by one of its forensic investigators, the current, more prescriptive rules have been a protective shield. The removal of this shield requires a maturity and restraint rarely seen from any regulator. It will not be surprising if we see a rise in public law challenges and appeals of enforcement decisions to the High Court by solicitors and firms in the immediate aftermath of the changes coming into force, while the rules are still being clarified.
Sections 91 and 92 of the Legal Services Act 2007 includes a statutory requirement for a head of legal practice and head of finance and administration, so the existing role of compliance officers cannot be abolished.
The SRA acknowledges that feedback on these roles, since their inception in January 2013, has been mixed, but, as the consultation states: ‘…the existence of the roles has also created a compliance officer community for passing on good practice and sharing knowledge.’ Although the roles cannot be removed, the SRA is seeking feedback on the duties of compliance officers and how things could change.
There is much to like in the new proposals. Simplification of the Handbook, deleting superfluous repetition and reference to obligations already contained in statute or regulation is, by itself, a welcome departure.
Unlike the content of the present Handbook, the draft codes and Accounts Rules are written in plain English, and it is likely that a person new to the profession would understand them.
All compliance officers and partners should read the consultation and think about how they would like to train staff on this issue. Do you prefer internal or external training? How is the competence to apply the codes going to be demonstrated to the SRA if the firm or one of its staff is accused of misconduct?