Regulatory update - February 2021
Our latest update on compliance and regulatory issues.
We hope you are managing in national lockdown 3. The uncertainty of the length of this period of lockdown, what tiers may be introduced afterwards until the complete roll out of the vaccination programme (or as much of it as necessary to consider it safe to return to some sort of normality) and the extra work / home schooling / health / financial /career pressures can lead to additional risks, so please take care and ask for assistance if needed.
Following the publication of the UK Government guidance on the lockdown announced on 4 January 2021, the Law Society issued its interpretation of the guidance and how it affects law firms and solicitors (including sole practitioners and freelance solicitors) in England and Wales, which includes confirmation that solicitors who need to travel internationally for work or who need to stay in overnight accommodation for work purposes can do so, and can visit clients in their offices or at home (if necessary) provided they follow COVID-secure guidance, but where possible, meetings with clients should be virtual. House moves are allowed, although there recently have been discussions as to whether this will continue. Our Weightmans Coronavirus Hub contains information on a wide range of issues and is updated regularly.
The updated LSAG anti-money laundering guidance in relation to the 5th AML Directive that came into force in January 2020 was finally published on 20 January 2021 albeit in draft and subject to HM Treasury approval) and runs to 212 pages and the SRA Sectoral Risk Assessment was published on 28 January. If your firm comes within the AML regulations, (and more will now do so following the widening of the definition of ‘tax adviser’) you will need to read the documents, review your firm-wide risk assessment and update, where relevant, your AML policies and procedures. You should also, if you have not yet done so, carry out the independent AML audit required by Regulation 21 MLR 2017. If you need assistance with your firm-wide risk assessment, policies or the requirement to conduct an independent audit, please get in touch.
Personal injury claims reforms
Unsurprisingly, other than in relation to the length, the whiplash reforms are to be delayed by another month, until May, having initially been planned to come into force April 2020 and then postponed to April 2021. Whether this one month delay is sufficient to put in place whatever steps are required to implement the new portal for road traffic accident claims remains to be seen.
SRA transparency rules
As we reported earlier, compliance with the transparency rules continues to be a concern for the SRA. Engaging with firms that are not compliant has moved on and it’s been reported that the first fines have been issued to firms who failed to comply, the highest being £2000 plus £300 costs, for failing to publish mandatory details about costs, service information and complaints procedure on their websites, and one firm also failed to display the SRA’s digital badge. The SRA confirmed that it will be carrying out further exercises throughout 2021 to check individual firms are complying with the rules and warned that firms need to act now. If you need any assistance, please get in touch.
Now that the UK has left the EU, the SRA and Law Society are producing and updating guidance to reflect the position from 1 January 2021 for firms and individuals on the raft of changes to the way many work. We would also refer you to Weightmans Brexit Hub which is updated regularly.
Dishonesty and exceptional circumstances
In two recent Solicitors Disciplinary Tribunal (SDT) decisions, junior solicitors who were found to be dishonest fell into the small category of exceptional circumstances where dishonesty did not lead to strike off.
In one, the solicitor had a panic attack after being told she had missed an Employment Tribunal (ET) hearing and tried to destroy evidence that she had been notified about it. She told her supervisor within a short period of time about the hearing, but not the document, and emailed the ET to apologise, saying they had not been notified of the hearing. The supervisor found the document in the bin later that day. The SDT said it could not be sure that the solicitor, who was diagnosed as being on the autism spectrum after the incident, knew what she was doing at the time. It took into account that the dishonest conduct consisted of two misleading accounts which took place within 40 minutes of one another and said “The tribunal was mindful that whilst inevitably a serious matter, the dishonest account was not sustained and could not be described as calculated… this 40 minutes was an aberration from the personal and professional standards and conduct of the respondent.” She was suspended for six months, restrictions were placed on her return to practice and she was ordered to pay £2000 costs.
In the other case, a solicitor who admitted dishonestly amending an email to cover a mistake was suspended for six months after it was accepted by the SDT that her case fell into the ‘small residual category’ where striking off would be a disproportionate sanction. The SRA accepted that she acted in a ‘moment of panic’ in trying unsuccessfully to conceal the error from her client, she was not guilty of a pre-meditated attempt at deception but made a momentary wrong decision which she self-reported a day later. The tribunal heard that when considering the nature, scope and extent of the dishonesty, ‘this was as inept an example as it could be and more akin to the "dog ate my homework" excuse than a calculated plot to conceal dishonesty of a protracted and ongoing nature’. It was submitted she had learned from her mistake and was not a threat to the public or to the honour of the profession.
Dishonesty – strike off
A solicitor who was dishonest about her disciplinary record when she joined her new firm has been struck off. When she joined the firm she completed a new employee questionnaire and replied ‘no’ to the question whether she had been the subject of any investigation. The SDT heard that she had been under investigation by the SRA for more than six months and had sent a partial copy of a file to the SRA just two days before completing the questionnaire. She admitted other breaches, including holding client money outside of the client account and lacking integrity in doing so. She agreed that she should be struck off and to pay just over £7000 costs.
In a rare decision the SDT ordered the SRA to pay towards a solicitor’s costs after ruling that many of the allegations made against him were brought based on ‘errors and misunderstandings’, and unnecessarily forcing him into a full hearing for a sanction that could have been dealt with internally by the SRA. While some misconduct was found, a number of other allegations were found not to have been properly brought and were based on a series of mistakes. The SDT imposed a £2,000 fine with £5,000 costs and ordered the SRA to pay £27,000 towards his costs.
Taking advantage and own interest conflict
The SDT has struck off a former partner who had ‘clearly taken advantage’ of his future daughter-in-law in a property purchase. He had agreed to buy her flat intending to use his pension funds, but failed to complete the purchase to avoid the £28,000 tax liability and took possession of the property and made a profit from renting it out for four years. The tribunal concluded that he acted with ‘deliberated and blatant self-interest’, took advantage of a family member for financial gain and, instead of showing insight or remorse, he sought to justify his actions as being in her best interests. He denied acting dishonestly but the tribunal found the allegation of dishonesty proved. He was struck off and ordered to pay £11,000 costs.
Recently we have been advising firms on a range of issues, including:
- Responding to a SRA investigation
- COLP/MLCO applications to cover maternity leave
- Independent AML audits
- Risk and compliance health check, including fee earner and COLP questionnaire
- Reviewing and updating retainer documents
If we can help in any way, please get in touch.