Under investigation

Being the subject of a Solicitors Regulation Authority (SRA) investigation is difficult. Not only is it time-consuming and taxing, it can also be emotionally isolating and terrifying for individuals, particularly those who take their professional duties as a solicitor seriously.

KPIs and timelines

Few people are prepared for the length and impact of a full investigation. SRA key performance indicators (KPIs) are to assess 80% of reports within two months and conclude 93% of investigations within 12 months, rising to 95% within 18 months and 98% within 24 months. The SRA is working on a programme of continuous improvement to address ongoing issues with backlog and very old cases. As of March 2024, the SRA had reduced its backlog of cases open for more than 24 months to 99, with a target of bringing that down to 82 by June 2024.

It’s informative to run the sums on those percentages against the SRA’s 10,121 reported concerns in 2021/22 and 1,741 opened investigations:

• 80% of 10,121 is 8,097 reports assessed within two months on a rolling basis throughout the year, leaving 2,024 reported concerns outside of the KPI
• 93% of 1,741 is 1,619, leaving 122 investigations outside of the 12 months’ KPI
• 95% is 1,654, leaving 87 outside of the 18 months’ KPI
• 98% is 1,706, leaving 35 outside of the 24 months’ KPI.

It would, of course, be unrealistic for the SRA to set more ambitious KPIs given the essentially limitless complexity of the investigations it manages, the diversity of the firms and individuals within its jurisdiction and the overlap with other regimes which may have to take priority – such as criminal investigations. KPIs, as with any target, need to be achievable and there is nothing to stop them being exceeded. The SRA reports exceeding at least some of its KPIs by decent margins on a regular basis, although there remains work to be done.

Impact on firms

It’s important to understand the human impact of regulatory investigations. They routinely last 10 or 12 months but can run on for two years or longer, and anyone who works in the regulatory space will have several examples of investigations which have lasted four years or more.

However, the situation is improving and the impact of the early assessment process as well as the continuous improvement programme is starting to feed through. For those receiving a notice of the commencement of an investigation, however, the prospect that it will take even 12 months to resolve can cause a lot of anxiety and can damage careers, even where no action is ultimately taken.

Further problems are likely, including:

1. SRA investigations must be reported to insurers which can lead to problems on renewal, increased premiums or even forced closure.
2. Some panel memberships and accreditation schemes require notification of SRA investigations, and firms may find that key parts of their business are damaged because they cannot obtain or renew accreditations and memberships.
3. Other regulators may need to be informed, leading to additional time and stress involved in dealing with multiple investigations.
4. For individuals, employees will usually be informed at an early stage and the process can lead to loss of employment, inability to obtain alternative employment and limitation of career opportunities.
5. An open investigation prevents solicitors from ‘deemed approval’ under the SRA Authorisation of Firms Rules and means that any promotion opportunities to partner or compliance officer will be affected.
6. In practice, the SRA refuses to make authorisation decisions for firms or individuals while an investigation is ongoing. This can affect succession planning and career goals.

From a broader, profession-wide perspective, if the individual or firm under investigation is truly malign, it is in everyone’s interest to discover this and act swiftly. The SRA can point to cases in which it has acted with phenomenal speed, usually where there is an immediate risk, but there are also cases where, inexplicably, individuals are left in a state of professional limbo for unconscionable periods where little or no progress is made on investigations.

Reporting to the SRA

The threshold for making a report to the SRA is low. For firms self-reporting for themselves or their staff, it is usually sound risk management – looked at from the firm’s perspective – to report even low-level suspected misconduct, particularly where it involves a single employee and there are unlikely to be systemic issues.

The consequences of making a report which is not taken forward by the SRA are minimal. There may be an impact on the employer / employee relationship, but it is very unlikely to be considered actionable to make a report to a regulator in good faith.

However, not reporting something which the SRA later deems worthy of investigation can lead to allegations that the firm has not met its reporting obligations. This can lead to an investigation into the firm itself.

It is implicit within the SRA’s own statistics that there must be over-reporting on the part of the profession. Of the 10,121 reports in 2021/22, the SRA said that 25% were made by the profession. Yet investigations were commissioned in 17% of cases. Of course, that’s not a perfect comparison because there will be an inevitable time lag in receiving and assessing reports. Nevertheless, on a broad-brush basis, the implication must be that at least a quarter of reports from the profession do not result in investigations. On 2021/22 figures, that potentially means around 600 people or firms risked alienating colleagues or employees by making reports which do not require the SRA to act.

While we don’t have the detail to properly analyse these numbers, it’s an issue worth investigating. The impact of a report itself on those reported but not investigated is not likely to have been significant, but if the reports are from employers alleging serious misconduct, or if individuals have reacted badly to being informed of a report by the reporter, there could have been other consequences such as loss of employment, stress or anxiety.

It would be illuminating to know how the SRA tracks trends in reporting, particularly in relation to reports from fellow professionals. This might include types of conduct which are routinely over- or under-reported, the extent to which reports from professionals are about themselves or about other firms, and whether there is any suggestion that reports are being made tactically to seek advantage in litigation or complaints.

Practical issues

For larger firms, ongoing communication with the SRA, sensible reporting and cooperation is part of the daily bread of the compliance team. It may be helpful for them to take an occasional step back and assess how much support and information can be offered to those about whom reports are made. Many firms offer excellent support and even assist with funding legal advice to help navigate the process. Most offer some form of wellbeing support, including access to counselling if needed.

For smaller firms and individuals, dealing with the SRA can be much more daunting. There is less familiarity with the process and fewer resources to help with managing issues such as:

• who needs to be notified about an investigation
• whether it is appropriate to continue employing an individual accused of misconduct
• how best to gather and present information to assist the SRA in progressing the investigation as fast as possible, and
• whether to make admissions and the consequences of doing so or not.

The first step, as always, is to be as informed as possible. The SRA publishes a lot of information on its website about investigations. This information is largely focused internally on what the SRA does and there is less guidance on, for example, dealing with insurers and third parties.

There is no substitute for getting good quality advice, early on. Check your insurance policies to see if you are insured to obtain legal advice. All firms are advised to have legal expenses insurance in place to cover regulatory investigations for themselves and their employees. This cover is not included in standard professional indemnity insurance based on the SRA’s minimum terms, which can still be a surprise to some.

Cooperate with the SRA but don’t make admissions based on ignorance or commercial convenience. Take advice and understand whether what is being put to you is correct.

Take care of your health. The SRA has a health process which may allow for reasonable adjustments in the conduct of the investigation. Explain any health problems to the SRA and make sure that you have access to medical and emotional support as needed.

Finally, don’t try to deal with an investigation alone. Isolation and uncertainty are very damaging and having someone to talk to can be a lifeline.