Into the breach

All solicitors, registered European lawyers (RELs), registered foreign lawyers (RFLs), compliance officers for legal practice (COLPs) and compliance officers for finance and administration (COFAs) are required to report serious breaches to the Solicitors Regulation Authority (SRA). Here, I will revisit why the reporting obligations are framed as they are, the SRA enforcement strategy, whether an investigation should happen before a report is made and what to do if a reporting solicitor doesn’t agree with the COLP or COFA.

Reporting obligations

Since 25 November 2019, there have been two SRA Codes of Conduct contained within the SRA Standards and Regulations (STARs), both with an obligation to report to the SRA.

Code for Solicitors, RELs and RFLs

The Code for Solicitors, RELs and RFLs sets out the following:

7.7 “You report promptly to the SRA or another approved regulator, as appropriate, any facts or matters that you reasonably believe are capable of amounting to a serious breach of their regulatory arrangements by any person regulated by them (including you).

7.8 Notwithstanding paragraph 7.7, you inform the SRA promptly of any facts or matters that you reasonably believe should be brought to its attention in order that it may investigate whether a serious breach of its regulatory arrangements has occurred or otherwise exercise its regulatory powers.

7.9 You do not subject any person to detrimental treatment for making or proposing to make a report or providing or proposing to provide information based on a reasonably held belief under paras 7.7 or 7.8 above, or paras 3.9, 3.10, 9.1(d) or (e) or 9.2(b) or (c) of the SRA Code of Conduct for Firms, irrespective of whether the SRA or another approved regulator subsequently investigates or takes any action in relation to the facts or matters in question.”

Further, para 7.12 sets out the following: “Any obligation under this section or otherwise to notify, or provide information to, the SRA will be satisfied if you provide information to your firm’s COLP or COFA, as and where appropriate, on the understanding that they will do so.”

Code for firms

Under the Code for Firms the reporting obligation rule is found at paragraph 9.1(d) and (e):

“If you are a COLP you must take all reasonable steps to:

(d) ensure that a prompt report is made to the SRA of any facts or matters that you reasonably believe are capable of amounting to a serious breach of the terms and conditions of your firm’s authorisation, or the SRA’s regulatory arrangements which apply to your firm, managers or employees;

(e) notwithstanding sub-paragraph (d), you ensure that the SRA is informed promptly of any facts or matters that you reasonably believe should be brought to its attention in order that it may investigate whether a serious breach of its regulatory arrangements has occurred or otherwise exercise its regulatory powers, save in relation to the matters which are the responsibility of the COFA as set out in paragraph 9.2 below.”

COFA reporting obligations are concerned with breaches of the SRA Accounts Rules.

The shift in reporting

The 2011 Code of Conduct (outcome 10.4) required solicitors to report promptly serious misconduct by any person or firm authorised by the SRA, or any employee, manager or owner of any such firm. There has therefore been a shift from reporting serious misconduct to reporting facts or matters that you reasonably believe can amount to a serious breach found in the 2019 codes.

So why the change? During 2018 the SRA consulted on the current rule setting out that the profession’s understanding of when the duty to report was triggered differed from its own view. In particular, the SRA identified that some firms thought they didn’t need to report concerns until an internal investigation had occurred and a determination as to whether serious misconduct had taken place was reached.

In the consultation response, the SRA said the reason for the shift in the rule was to reflect that, as a regulator, it expects to receive information at an early stage where something may result in regulatory action.

The SRA says it does not want to receive reports or allegations that are unmeritorious or frivolous, but it does want to know if a serious breach of its standards or regulations has occurred.

What is a serious breach?

The reporting obligation is to report serious breaches.

So how is serious defined? Well, it isn’t. However, the SRA enforcement strategy sets out how the SRA uses their enforcement powers and provides useful insight into what factors the SRA take into account when determining whether something is serious enough to warrant action. It is these criteria that solicitors, COLPs and COFAs must consider when determining whether something should be reported.

SRA enforcement strategy

The enforcement strategy was last updated on 15 February 2023. It is subject to change, so firms, and COLPs / COFAs in particular, need to ensure they are aware of the content of the current version.

The SRA enforcement strategy outlines that the following factors affect the SRA’s view of whether facts or matters are serious:

1. The nature of the allegation. Some allegations are more serious than others – for example, abuse of trust, taking unfair advantage, misuse of client money, sexual or violent misconduct, dishonesty or criminal behaviour. The SRA considers both information security and protection of confidential information of high importance to the public as well.
2. Intent / motivation. The SRA says it distinguishes between people who are trying to do the right thing and those who do not – if there is a genuine mistake, it will generally not act. However, lack of knowledge of the required standards is no defence and conduct that demonstrates lack of honesty or integrity will be treated seriously. When considering intent and motivation, the regulator will look at whether the conduct was planned, premeditated, persistent or repeated and whether any benefit or advantage was gained from the conduct. Any concealment of the conduct will also be a factor.
3. Harm and impact. The SRA will look at the number of victims, the level of financial loss and any physical or mental harm. It may act even where no harm has materialised, or it may not act where harm has arisen due to a genuine mistake / other mitigating factors. The SRA will always take action to maintain public confidence and where harm is caused the seriousness of the conduct can lead to a more serious outcome.
4. Vulnerability. The SRA says that vulnerability is not ‘static’ and can be short-lived or permanent. The SRA will treat any conduct where a solicitor took advantage of a person’s vulnerability, or where the impact of the conduct was more harmful because of the vulnerability of the person, very seriously.
5. Role, experience and seniority. A person’s inexperience or junior role in a firm may impact their ability to take appropriate action. Conversely, those who are experienced or have a senior role are expected to act with a higher level of insight, foresight, knowledge and good judgement.
6. Regulatory history and patterns of behaviour. Where there is a repeat allegation or a general pattern of misconduct, the SRA is likely to treat this as serious and take action. The SRA will consult its own records and any findings made by the Solicitors Disciplinary Tribunal or other tribunals or courts.
7. Remediation. The SRA will consider the risk of future harm and in doing so will look at the length of time since the conduct and any remedial action taken. It will also consider if the report was made in good time and the firm had good engagement with the SRA. However, these mitigating factors are not necessarily available where the misconduct is one of dishonesty or lack of integrity.
8. Criminal convictions. Where a serious criminal conviction has occurred, it will be treated seriously. This includes convictions for any dishonesty offence, violence, sexual misconduct, offences against children, drink driving and so on. If the conviction is for a lower-level offence, such as minor motor infractions, then it will be regarded less seriously.

Not all of these factors need be present for the SRA to act.

Conduct in private life

In its enforcement strategy, the SRA set out that the SRA Principles always apply, including in respect of activity outside legal practice, such as in a person’s private life. The SRA will be concerned with conduct outside the workplace if it impacts the delivery of legal services. The SRA sets out that: “the closer any behaviour is to professional activities, or a reflection of how a solicitor might behave in a professional context, the more seriously we are likely to view it.” It is interested in matters that could damage public confidence, such as dishonesty or discriminatory conduct.

Investigating and reporting

One of the trickiest aspects of the reporting obligation is whether to report first and then investigate, or investigate first and then report.

To help you consider when to report, it’s worth looking at the SRA reporting concerns consultation on the rule change and the SRA enforcement strategy.

SRA reporting concerns consultation

In the consultation, the SRA set out:

“ … it is important for us, as the regulator, to receive information at an early stage where this may result in us taking regulatory action.”

“ … we require reporting of facts or matters which could comprise a serious breach, rather than allegations identifying specific and conclusively determined breaches.”

“ … it is our job to investigate those concerns that are capable, if proven, of amounting to a serious breach of our requirements. Early reporting is important because it allows us to do so; and although a firm itself, having identified a breach may be best placed to gather evidence, this will not always be the case – for example where this sits in another firm or with a client.”

“This is not to suggest that firms shouldn’t investigate matters nor that compliance officers shouldn’t exercise their judgement in deciding whether a potential breach has occurred – indeed we want to encourage firms to resolve and remedy issues locally where they can. However, we are keen for firms to engage with us at an early stage in their internal investigative process and to keep us updated on progress and outcomes. In these circumstances, we are likely to be happy for the firm to conclude their investigation and to provide us with a copy of their report and findings. However, we may, on occasion wish to investigate a matter (or an aspect of a matter) ourselves – for example because our focus is different, or because we need to gather evidence from elsewhere”.

Enforcement

The enforcement strategy has a section setting out when a report should be made. In this, the SRA says that “prompt reporting is important”. They want firms to investigate the issues themselves, but where a serious breach is indicated, they are keen to hear about the matter early on to determine if they want to investigate the matter.

The SRA stresses that it expects early engagement so it can spot trends and patterns.

The role of COLP / COFA

As set out above, an individual discharges their reporting obligation if they inform the COLP or COFA of the fact or matter that may amount to a serious breach of the regulatory arrangements, on the understanding that the COLP or COFA will make a report.

However, what if the person reporting and the COLP or COFA don’t agree? The SRA enforcement strategy addresses this: “We would not require or expect the individual to check whether a report has subsequently been made, in those circumstances [where a report is made internally to the COLP / COFA]. However, if you believe a report should be made under our standards or requirements, you should be prepared to make a report yourself if you are not satisfied that they will take the same view. As the compliance officer, you may wish to explain to the relevant individual why you do not consider that the threshold for reporting has been met. This will help them to understand if there are reasons they might not have been aware of why a report is not required, and can help the firm to develop good practice in this area.”

If there is disagreement, then independent legal advice may need to be taken. Whatever decision is taken it should be documented.

New rule – more reports?

In May 2023 a new wellbeing rule was implemented into the Code of Conduct for Solicitors, RELs and RFLs: “You treat colleagues fairly and with respect. You do not bully or harass them or discriminate unfairly against them. If you are a manager you challenge behaviour that does not meet this standard.”

Note that manager here means partner where the firm is a partnership.

And in the Code for Firms: “You treat those who work for and with you fairly and with respect, and do not bully or harass them or discriminate unfairly against them. You require your employees to meet this standard.”

These new rules mean that, in addition to the COLP reporting sub-standard behaviour, the requirements for managers / partners who fail to appropriately challenge the behaviour of others may result in more reports.