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Regulatory update - September 2018

In spite of holiday season, August was a busy month at SRA HQ so here is a round-up of things you may have missed whilst away.

I hope everyone has had a good holiday. In spite of holiday season, August was a busy month at SRA HQ so here is a round-up of things you may have missed whilst away:

Update on new SRA Handbook – but it won’t be called a handbook!

The SRA has now submitted its application to the LSB for approval of its “Looking to the Future” proposals which will involve a wholesale revision of the current SRA Handbook to make it “shorter, sharper and clearer” and provide greater flexibility in how and where solicitors can practise. You could be forgiven for having missed their submission as in spite of extensive searching, my team could not find anything on the SRA’s own website about it! However, the application (on the LSB's website) does make for some interesting reading (if you are a regulatory geek like me!). The most surprising feature of the application (which includes the proposed Principles(now 7 instead of 6 as the SRA has split duties of integrity and honesty), Codes (x2, one for solicitors and another for firms), rules and also the controversial proposals to allow solicitors to practise in unregulated businesses and individual freelance solicitors to provide reserved activity without being regulated as an entity ) is that the SRA is looking for a new name for the Handbook. Its justification is that it wants to “move away from a name that suggests a stagnant rulebook” and which more accurately describes a more flexible collection of Principles, codes and rules.

It occurred to me that a Handbook that has undergone 19 versions is hardy “stagnant” and nor was it a “rulebook” – surely the SRA hasn’t forgotten that they moved away from the 2007 rulebook in 2011 when outcomes focussed regulation was introduced (although I accept that there were too many “rules” in it, many of which do not fit with the current marketplace).

The SRA is going to do some “user testing” before deciding on its new name so answers on a postcard please! I’ve checked the Thesaurus for alternatives – directory, bible, guidance but “Handbook” to me seems the most appropriate unless the SRA wants to consider my favourite - The Solicitors Enchiridion (look it up!)

In all seriousness, the Law Society continues to campaign against the more controversial proposals and Christina Blacklaws has written to the LSB (featured elsewhere in the Messenger). The deadline for comment is 4 September so if you feel strongly about the changes, do make your voice heard by writing to the LSB.

Reporting Concerns consultation

Another opportunity to make your voice heard is to respond to the SRA’s consultation recently issued on the question of what is a serious breach and when you should report such to the SRA.

The changes to the Code mentioned above require serious breaches to be reported but the SRA, in discussions with a number of firms, have said that the approach being taken by firms differ. Some will only report to the SRA once a full internal investigation has taken place and misconduct has been proven to the firm’s satisfaction whilst others report much earlier. The consultation asks for feedback on whether the current wording of the obligation to report could be made clearer and it gives 4 alternative options.

The consultation is open until 27 September so we don’t have long to respond but I encourage all COLPs and COFAs to take a look at the consultation and feed back your views. View the consultation here.

LSB approves SRA application on Pricing and Transparency

The LSB has approved the SRA’s application for firms to publish their prices for certain legal services on their website, as well as a firm’s complaints procedure, how/when to complain to LEO & SRA and the SRA’s proposed new digital badge. The consumer services covered by the new rules are residential conveyancing, probate, immigration applications and appeals (excluding asylum), advice and representation at magistrates’ courts in relation to summary-only road traffic offences and employment tribunal claims for unfair or wrongful dismissal.

Business services subject to the same rules will include advice and representation to employers in relation to defending employment tribunal claims for unfair or wrongful dismissal, debt recovery up to the value of £100,000, and advice and representation in licensing applications.

SRA Issue Updated Warning Notice on Sickness Claims

Following on from September 2017’s warning notice which was aimed at stopping solicitors from helping clients with fraudulent holiday sickness claims, the SRA have issued a further Warning Notice.

The purpose of the revised Warning Notice is to refresh and update to reflect new issues that have arisen. These include solicitors:

  • acting where they had no skill in area
  • failing to verify the source of the client referral (for example, was it from an authorised claims management company)
  • making unreasonable requests for disclosure
  • failing to advise clients about what would be expected of them when making a claim

The Warning Notice comes at an appropriate time as the holiday season is coming to an end. View a copy of the Warning Notice.

Solicitors Warned not to use Client Account as a Banking Facility

The SRA has also issued a further Warning Notice on the use of client account as a banking facility.

The Warning Notice acts as a reminder that client account should be used solely for the legal services the firm has provided and there must also be a proper connection to those services.

The SRA confirmed in the last year that they prosecuted 20 solicitors and three firms at the SDT for breaching these rules and the relevant Principles. Three solicitors were struck off and two more suspended, while the SDT also levied £763,000 of fines, including the highest fine ever of £500,000 (Locke Lord).

The Warning Notice comes amidst a clear period of intent from the SRA to show a transparent approach in cracking down on money laundering.

And speaking of Money laundering, the Law Commission has issued a consultation paper commenting on the low number of Suspicious Activity Reports being lodged by law firms and that of those, many were technical reports seeking consent to continue with a transaction.

SRA’s Risk Outlook 2018/19 issued

The SRA has issued its latest Risk Outlook. There are 10 priority risks identified most of which we have seen before but they have introduced 2 new priority risks of managing claims and cyber security.

And speaking of cyber, the National Cyber Security Centre has published its first report on the growing cyber threat to the legal sector. It gives some really useful tips on protecting your firm from common cyber threats – a must read for all those responsible for risk.

Law firm closures by SRA increase

The SRA has confirmed that the number of law firms closed by the SRA last year rose to 50 (an increase of 35%) as a result of increased accounts rule breaches and indemnity insurance. The number of solicitors struck off fell but the level of fines and suspensions remained about the same.

In its annual report to October 2017, the SRA confirmed that it received 35,000 ethics queries in 2016/17. The top five concerns were confidentiality and disclosure, the accounts rules, validity of practising certificates, retainers with clients and conflict of interest.

The top three reports of misconduct were incompetent, negligent or delayed client care, taking unfair advantage of a third party and identity theft – either of a person or a firm, including cloned websites.

The top three issues reported by solicitors were identity theft, breaches of confidentiality, and incompetent or negligent client care.

Disciplinary news

I don’t have much room for cases this month save for mentioning that the SRA has recenty made Alan Blacker (aka Lord Harley) bankrupt for unpaid costs of the disciplinary proceedings against him.

Can I also remind everyone about the SDT consultation on the burden of proof in disciplinary proceedings The deadline for responses is 8 October. We will be discussing this in our next COLP and COFA forum to be held at Weightmans’ Manchester office on 3 October. All are welcome.

PII Insurance/renewal

We are of course now in PII renewal season for many firms and sadly we have seen announced that 2 insurers, Libra and Aspen, are pulling out of the market and will not be writing any further business.

See you next month!

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