Regulatory update - December 2018
Welcome to the final regulatory update for 2018. Where has the year gone?! This will actually be the last update I will write for a year as I am very…
Welcome to the final regulatory update for 2018. Where has the year gone?! This will actually be the last update I will write for a year as I am very proud to be taking on the role of Manchester Law Society President for 2019. But don’t worry, with such a busy regulatory year ahead, my colleagues will be co-writing the monthly update so we will continue to keep you up to date with developments.
Here is an update from the past month or so:
Price transparency & digital badge confirmation
It has now been confirmed that the SRA’s new transparency rules are set to come into effect on 6 December, not 2 December as I reported (based on information we had been given by the SRA) last month.
This also coincides with the date by which firms must make their complaints procedure available online and the availability of the SRA digital badge. It is hoped that the use of the badge will highlight the fact that the firm is regulated and the protection that this regulation brings to website visitors. The digital badge is expected to become a mandatory requirement by Spring 2019.
Legal Services Board approves new SRA Handbook in full
In spite of strong opposition from the Law Society and Legal Services Consumer Panel, the Legal Services Board (LSB) has now approved in full the proposed new SRA Handbook. As you may know from previous updates, the intention is to introduce a new set of principles, two new codes of conduct (one for solicitors and the other for firms), new SRA Accounts Rules and overall a reduced in size Handbook focussing much more on ethics and less on prescriptive rules.
The LSB’s approval also included the controversial proposal allowing solicitors to provide unreserved legal services to the public from unregulated businesses. The LSB acknowledged that this change presents “some risk to the regulatory objectives”, as there will be fewer consumer protections for clients of such services as well as “potentially contributing to greater complexity for consumers”. However, the LSB’s view is that the benefits of the proposal outweigh the risks with reference to the regulatory objectives and public interest as a whole.
In its submission to the LSB in response to such objections, the SRA contended that the new transparency rules (as mentioned above) would help to ensure that consumers do have the correct information and support to help them make informed decisions regarding providers of legal services.
The SRA provided assurances regarding the monitoring and evaluation of the impact of these changes upon consumers which the LSB admitted had a significant impact upon their full approval of the new Handbook. It does of course remain to be seen what those monitoring and evaluation processes will entail.
Another controversial change ushered in by the new Handbook is the facilitation of freelancers to provide reserved legal services without being authorised as an entity. They will need three years’ experience, as well as adequate professional indemnity insurance for all their legal work. However, they will not be able to hold client money or employ people.
The Compli team will be on the road next year providing face to face training and workshops on the new Codes, what it means for you and your staff so do get in touch if you wish to discuss how we can help embed the new handbook, ethics and principles in your firm.
High Court overturns SDT decisions in stress cases
Last month, the High Court ruled that Sovani James, Peter Naylor and Esteddar Macgregor should be struck off the roll. In doing so they overturned the SDT’s decision to impose suspended sentences on the three individuals for their admitted dishonesty. In giving his judgment, Lord Justice Flaux stated that “Pressure of work or of working conditions cannot ever justify dishonesty by a solicitor” and pressure of work even considered in conjunction with stress or depression could not amount to the exceptional circumstances required to avoid a strike off”. These high profile cases have received widespread attention across the legal profession and has highlighted issues faced by solicitors working in high pressured environments, especially with reference to mental health and has raised concerns regarding wellbeing within the profession.
Technical Notice of the implications of a ‘no deal’ Brexit
Dare I say the word “Brexit”?! The government has published a ‘Technical Note’ covering how professions and services will be regulated in the event of a ‘no deal’ Brexit, including plans for the legal sector. This notice does not however attempt to deal with the issues surrounding European lawyer’s right to practice in the UK following our exit from the EU. In October the SRA released a statement in respect of the notice, stating their commitment to working with the government to understand the impacts of Brexit and ensure that any regulatory changes are managed “as smoothly and effectively as possible”.
The SRA has also attempted to summarise the impact of a ‘no deal’ EU exit upon the circa 700 RELs (Registered European Lawyers) whom they regulate. I won’t set this out here but those affected will no doubt be able to locate the summary on the SRA website.
The SRA has also warned the Department for International Trade against agreeing to ‘mutual recognition’ of overseas legal qualifications in its post Brexit trade negotiations. In their response to the department’s consultation on its approach to Free Trade Agreements, the SRA stated that recognition of professional qualifications should be assessed on a case by case basis rather than based on reciprocity and that this would be essential in protecting consumer interests. The regulator stressed a need to balance the advantages of an open and competitive legal services market with the needs for legal practitioners to be sufficiently competent to practice as a solicitor in England and Wales. They suggested a test based upon the sufficient similarity in content and standard of overseas qualifications.
Lawyers in firing line of Home Office’s serious crime strategy
In their launch of the serious and organised crime strategy the Home Office has set its sights on lawyers as “key facilitators” of serious organised crime and “important part” of the remedy. The strategy recognises that professionals such as lawyers and accountants are instrumental in the prevention of organised crime but may be complicit, negligent or unwittingly enabling the facilitation of money laundering practices. The Home Office has pledged to work together with HM Treasury to better understand the role of professionals in integrating illicit funds into the UK and global banking systems and developing effective interventions.
Speaking to The Guardian the Security and Economic Crime Minister (Ben Wallace) restated the Home Office’s commitment to prosecuting proactive professional enablers and described them as being “at the front of our queue as much as the actual nominals of the organised crime groups” and that the department would do everything in its power to bring prosecutions against such individuals.
Also, at the Law Society’s AML and Financial Crime Conference, Executive Director of the SRA, Crispin Passmore (who also recently announced that he will be leaving the SRA at the end of the year) warned that firms can expect no let up in scrutiny on this issue from the regulator and announced that next year the SRA will concentrate on trust and company issues as well as conveyancing. He warned: 'It's not enough just to tick the [compliance] boxes: we're looking at you really knowing who your client is, where their money comes from and that you understand the risk.'
SRA will not to appeal Leigh Day decision
The SRA’s chief executive, Paul Philip, has confirmed that it will not appeal the dismissal of its prosecution of Leigh Day. In doing so, Philip refused to reveal how much the SRA had spent in bringing the case before the SDT and subsequently appealing to the High Court. This action constitutes the longest and most expensive prosecution ever undertaken by the regulator, with the High Court noting that costs had become “simply enormous – deep into seven figures”. A detailed assessment of the Leigh Day’s costs in the appeal has yet to be conducted.
Increase in SDT hearings expected in 2019
The SDT is expecting an increase in disciplinary hearings in 2019 following a surge in sexual misconduct allegations against solicitors. In its application to the LSB for an increased budget for 2019, the SDT confirms that the SRA has identified a “significantly increased forecast” of cases likely to go to the SDT, going from 138 to 180 next year plus an additional 25 relating to sexual harassment. This follows on from the #MeToo campaign and the related issue of NDAs. Phil Allen, Partner in Weightmans’ Manchester office employment team says “We are seeing a notable increase in the willingness of employees to come forward with harassment allegations, including historic issues or those which may in the past have not been raised formally. This does present a challenge for law firms, in common with all employers, where things which may have once been overlooked or addressed informally now need to be formally addressed. It is more important than it has ever been for such complaints to be dealt with sensitivity and appropriately – following the right process is key (whatever the outcome).” This increase in sexual harassment allegations is clearly concerning and as we are fast approaching Christmas party season, this will hopefully serve as a timely reminder!
Barrister reprimanded and fined for drunken behaviour at Bar Mess event
And if the warning above isn’t enough, a barrister, Robert Kearney, has been fined £1,000 and reprimanded for his drunken behaviour towards a pupil at a Bar Mess event. The tribunal found that he sat uncomfortably close to one of the pupils who he had never met before, put an arm round him and engaged in “excessively physical and unwanted contact”. He was also found to have made statements or directed questions to the pupil which were “uncomfortable, hostile and intimidating”.
Swearing at the SRA leads to strike off
And finally, Luke Stephen Venton, aged 39, has had his career ended by the SDT after being struck off for venting his anger at the SRA in a foul-mouthed email attack on his regulator. Having been given a fine and rebuke for convictions for drink-driving, possession of cannabis and possession of a knife in a public place and for failing to inform the SRA of the first two convictions, he told the SRA “You can stick your adjudication invoice up you’re [sic] ****.” The rants and swearing continued (I am not going to repeat them here!) and extended also to former employers in what the SDT described as an ‘offensive, insulting and threatening’ way, causing harm to the recipients. The SDT determined that the seriousness of the misconduct was at the highest level, such that a lesser sanction than strike-off was inappropriate.
Clearly not the way to talk to your regulator!
That just leaves me to wish you all a very happy and peaceful Christmas.