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Regulatory update – February 2019

Welcome back to our monthly newsletter which provides you with updates on compliance and regulatory issues.

Welcome back to our monthly newsletter which provides you with updates on compliance and regulatory issues, including some recent examples of issues we have helped our clients with.

Who owns the file?

There can be confusion when a client or former client requests their file, and in the past it was common for the whole file to be provided on request. Lawyers are now more aware that the client does not own and is not entitled to all of the documents that may be on their file, but determining who owns which parts of the file can still be a source of uncertainty. The Law Society issued guidance on 16 January 2019 aimed at bringing all of the information on this subject into one document. A must read for those who consider requests for files on an increasingly regular basis! An important point made in the guidance is that documents prepared for the firm's own benefit or protection, or documents prepared as the means by which the firm discharges its function, belong to the firm. This includes file copies of letters written to the client, notes as to time taken or made for protective purposes as to advice to the client, drafts and working papers generally.

There are different considerations in relation to insolvent estates, in which issues of privilege can arise. Oliver Nelson, Partner in Weightmans’ Leeds office insolvency team says “where clients have become the subject of a bankruptcy order or, in the case of Companies or LLP’s, Liquidation or Administration, then requests may be made by the Trustee in bankruptcy, Liquidator or Administrator for the delivery up of documents from the file pursuant to the Insolvency Act. These requests will generally have to be complied with but care must be taken to ensure that only documents that are relevant to advice given to the insolvent client are released. In certain cases it will be appropriate to indicate that although you will not oppose an application to Court for delivery up, you will comply with the Order made. This will generally avoid an adverse costs order.”


The #MeToo movement of last year helped to put the use of Non-disclosure Agreements (NDAs) by law firms under the spotlight and resulted in the SRA issuing a Warning Notice in March 2018. The Law Society has followed up with guidance in January 2019. Both make essential reading at a time when law firms are facing record numbers of sexual harassment claims which are set to inundate the SDT in 2019. The latest guidance focusses on NDAs designed to prevent disclosure of conduct or other circumstances which have led to the end of a workplace relationship. It confirms that the duty to act in a client's best interests is subject to the duty to the court and to the administration of justice and, where these principles come into conflict, the principle that best serves the public interest takes precedence. A client’s best interests or desires are therefore not the paramount consideration for those preparing NDAs and it is important to remember that clauses which seek to prevent the reporting of any criminal offence are legally unenforceable and could lead to disciplinary action. Phil Allen, Partner in Weightmans’ Manchester office employment team says “Whilst confidentiality in settlement agreements will continue to be very important to most employers and employees, it is really important that appropriate exclusions to those provisions are included in all such agreements.”

Civil Liability Bill

Personal injury (PI) firms will need to take stock of the impact that the Civil Liability Bill is likely to have on their business and financial stability. Whilst likely not to come into force until April 2020, it appears that some law firms are already planning for the reforms and the PI market is beginning to contract. Leading claims management company National Accident Helpline (NAHL) has recently issued a profit warning stating “The personal injury division has seen an ongoing decline in panel law firm demand as a result of the forthcoming regulatory changes” and long-established north-west PI law firm Camps is beginning to run down its practice in favour of selling it, partly due to anticipated discounts to the value of WIP that would likely be demanded from potential buyers in light of the looming reforms.

SRA advises on Artificial Intelligence (AI)

The SRA has been largely positive about AI in a paper published on technology and legal services, the hope being that it may free up solicitors from lower-level work and help firms to reduce costs. But the SRA has warned that firms must be able to explain automated decisions and that AI systems will need to be carefully trained and monitored similar “to that of introducing and supervising a trainee”. Firms will need a “structured quality assurance programme” for their systems which should be tested before being rolled out. Whilst confirming that firms cannot outsource their responsibilities to clients by using third-party software, it also stated that regulatory action is unlikely “where the firm did everything it reasonably could to assure itself that the system was appropriate and to prevent any issues arising”. So, if you are using or thinking about using AI, the key is to ensure that you have robust testing and policies and procedures in place.

Reports from the SDT

A solicitor specialising in personal injury who “improperly attempted” to influence a doctor by attending a medical examination of his client in the role of a translator has been struck off. The SDT also found that Younus Desai had also tried to improperly influence an investigation into this behaviour conducted by the SRA, by seeking to influence his former law firm partner to provide an inaccurate account of the episode. The tribunal found this to be a dishonest attempt to conceal details of his actions.

Continuing the theme of dishonest solicitors, Bina Maistry has been struck off after it was found that she misled a judge into thinking that she was appearing in court as instructed counsel rather than acting for a client. Whilst Maistry admitted failing to correct the judge’s impression that she was counsel, she stated that it was not deliberate, she was nervous and given little time to speak and believed that the judge would have read the slip that she had passed to the usher which confirmed that she was a solicitor-advocate. The SDT found that she had acted dishonestly during the course of the hearing. There were other findings relating to Maistry’s credibility including a finding that she had falsely created attendance notes in an attempt to blame someone else for her own shortcomings.

We all know that falsifying documents and improperly influencing experts are very serious matters and I’m sure it would never cross our minds to behave in this way, so perhaps the most practical lesson we can take from these decisions is not to get swept up in the moment during hearings and allow assumptions to go uncorrected!

The case against Sandia Kumari Pamma continued the trend of mental health being a factor in disciplinary proceedings. Pamma was working as a consultant at a national law firm when she faked a sick note for her unsuspecting client in order to try to delay a hearing because she was not up to speed with the case. A psychologist determined that she had suffered from a depressive episode at the time and was not fit to work. Surprisingly, she avoided being struck off after the SDT found that her judgment had been impaired. This is one of a growing number of cases which underlines the need for firms to review their culture, policies and procedures to create a productive and healthy working environment and support for their employees.

Finally, a matter that affects us all is the need to have robust AML procedures in place. This was again demonstrated by the SDT when Khalid Mohammed Sharif was landed with an £85,000 bill for fines and costs for failing to carry out adequate client due diligence which would have identified his clients as politically exposed persons.

New SRA Standards and Regulations

We still don’t have a date for the introduction of the new SRA Standards and Regulations, but the indications are that it is likely to be in or around Summer 2019. Watch this space!

The Compli team will be on the road this year providing face to face training and workshops on the new codes and what it means for you and your staff, so do get in touch to discuss how we can help implement the new standards and regulations, ethics and principles into your practice.

Case studies/FAQs

Our clients ask us to advise on a number of interesting areas. This month, we have been involved in:

  • LASPO advice relating to reciprocal referral agreements between law firms and credit hire companies
  • Preparing an Insurance Distribution Policy & Risk Assessment
  • Responding to SRA allegations relating to client account breaches
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