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Making ready

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  • Paul Bennett

The Solicitors Regulation Authority has now submitted its proposed Handbook reforms to the Legal Services Board. Paul Bennett looks at the changes in the new versions, and what you need to do now to get prepared

In 2019, we are set to see significant reform of the regulatory landscape for solicitors and law firms. The 2011 reform programme has been streamlined. Every person working in a firm needs to know about this, and every policy, procedure and system needs reviewing.

Flexibility for solicitors should never come at the expense of protection for consumers

Christina Blacklaws

In the January 2018 edition of Managing for Success, I wrote about how we as managers should be preparing for the Solicitors Regulation Authority (SRA) reform programme. In June, the SRA published its final proposed principles, codes of conduct and accounts rules, after considering the responses to its consultation, ‘Looking to the future: phase two of our Handbook reforms’. In August, it submitted the new, post-consultation rules to the Legal Services Board (LSB) for approval. A decision is expected by 5 November, and the SRA intends to introduce the changes in April 2019. The Law Society has an ongoing campaign objecting to the regulatory reform programme, believing it will undermine the status of solicitors and fails to protect the public interest.

SRA Principles [2019]

Theses are intended as core tenets of ethical behaviour. Solicitors (individually and as managers) will need to make judgements against these, in a move away from tick-box compliance and towards exercising professional judgement.

The Principles as proposed in the consultation included principle 4, ‘act with honesty and with integrity’. This has now been revised to two principles, ‘with honesty’ and ‘with integrity’. This reflects the case law before the Solicitors Disciplinary Tribunal, High Court and Court of Appeal under the SRA Principles 2011 regarding the meaning of ‘integrity’ and ‘honesty’. The case law found that the concepts are distinct, with integrity being a wider concept, as noted by Lord Justice Jackson in the Court of Appeal: ‘Integrity is a more nebulous concept than honesty. Hence it is less easy to define, as a number of judges have noted’ (Wingate & others v SRA [2018] EWCA Civ 366).

New SRA Codes of Conduct

The new SRA Code of Conduct for Solicitors, RELs and RFLs [2019] and SRA Code of Conduct for Firms [2019] will form the basis of the proposed new regime. As managers, we will need to apply both, whereas for non-managers, the code for solicitors will be the dominant code. Practically, this means that solicitors with management responsibility will need to be trained differently from those without. Managers will need training on the application of both codes, as they will be operating under both on a day-to-day basis.

Managers will need training on the application of both codes, as they will be operating under both on a day-to-day basis

A key new concept in both codes is ‘competence’. Solicitors must ensure that they are competent, and firms and managers, that staff are competent. These obligations mean firms must assess and monitor all personnel (including partners). This is a subtle change which will be alien to many law firms, but it fits with the continuing competence framework which replaced the continuing professional development model of training from 1 November 2016. This makes the 2016 change more important. Firms must have in place effective supervision of all staff (including partners) and document this assessment of competence.

Freelance solicitors

The most controversial aspect of the proposed reforms is the concept of the ‘freelance solicitor’: an independent solicitor not working through a firm (so not a partnership, limited liability partnership or limited company). Freelance solicitors will not be required to have professional indemnity insurance (PII) to the same level of cover, so consumers using them will have less protection.

The aim is to create a new, lower-cost option for consumers, so they can choose to instruct a professional with lower overheads. The solicitor adopting this business model will be subject to different rules to reflect the type of work they do, and will not operate a client account (which remains the most common disciplinary theme). The Law Society has opposed the SRA proposals and has written to the LSB asking it to reject the changes and the concepts involved. On 14 August, the Law Society, through its President Christina Blacklaws stated: ‘We urge the LSB – as the oversight regulator – to reject the SRA’s ill-conceived scheme to create a dangerously complex marketplace for legal services. Flexibility for solicitors should never come at the expense of protection for consumers.’

For us as managers and as firms, the freelance solicitor option represents more competition, with less PII cover and a further risk to the retention of good staff and partners. However, the flexibility of the concept may be attractive to many solicitors who otherwise might have thought of setting up as a sole practitioner.

Looking ahead

I urge all solicitors to read the SRA’s post-consultation rules and assess what systems, process and supervision you will need in order to comply. Have a plan, but do not implement it yet, as the LSB may yet make changes or reject elements.

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