A blog article originally published by the Legal Compliance Association in May 2017
The in-house legal sector is coming in from the cold. No longer are you in a long-distance relationship with your regulator. You make up a significant percentage of the solicitors’ profession and the SRA wants – needs – to know you better and to deliver proportionate regulation to you. In turn they want assurances that you consider compliance and risk management and demonstrate that you act ethically.
I was pleased to chair Ark’s annual In-House Conference earlier this month. If you were one of the delegates who attended, thank you for coming along and contributing. I hope you enjoyed the day.
Risk, compliance and ethics were recurring themes during the day. My own session included several navel-gazing questions around the theme of whether the in-house lawyer was prepared for any conversation that the SRA may want to have with them. In other words, how comfortable would you be if the SRA decided to visit you in the near future? How would the conversation progress?
What follows are some observations and thoughts to help with your analysis of your position.
Have you considered whether you pose a risk to the regulator?
Currently the SRA’s preferred style of working is as a risk-based regulator. Anything which poses a risk to them in their role as an approved regulator, working to promote the regulatory objectives in the Legal Services Act 2007, is of concern. They are also interested in the profession’s reputation, and of course the interests of clients and the wider consumer base. They expect you to be risk aware and risk-averse. Your private practice colleagues are very familiar with risk assessment, mitigation and management. Are you?
Another way of thinking about this is as follows. What’s the worst thing that I could read about your employer’s business and what would be the pinch points with your employment as a lawyer in that business? You may remember the adverse publicity that surrounded a certain pay day loan company’s dealings with what was viewed as vulnerable customers, and the implications which misleading publicity had for in-house lawyers. The message from the regulator was clear: you are expected to challenge certain behaviours and there may be disciplinary consequences if you turn a blind eye. A warning notice was issued to that effect.
In other words, the regulator expects you to manage risks associated with your practice regardless of what or where that practice may be.
How will you demonstrate compliance?
Or to be more precise, notwithstanding the fact that you are not working in a SRA-authorised law firm, the SRA expects you to comply with certain regulatory compliance duties simply because you are a regulated individual. Here, we are talking about the need to assess the SRA Handbook and have the evidence to demonstrate that you comply with the systems, policies and procedures which apply to you.
For example, the SRA Code of Conduct requires you to have systems and controls to manage conflicts of interest, both of the personal kind and those which arise where you have two clients (and yes, this does arise in in-house practice), and also to have systems to manage the risk of breaching confidentiality duties. What would you show to the SRA if they asked for evidence of these?
Perhaps the most onerous compliance requirement at the moment is the restriction on practice set out in the SRA Practice Framework Rules. Whereas private practitioners can fling open their doors every day and are free to accept instructions from a wide client base (subject to conflict checks and similar, of course), you are very limited in who can receive your legal services. Your employer is entitled as of right, but anyone or anybody else is regarded as a third party and the ability to act for them is limited to the concessions allowed in the Practice Framework Rules. Have you checked these lately?
Back to basics in terms of professional ethics
Above all else you are a solicitor, and with the practising certificate comes the expectation that you will act ethically. This does not create a problem if this is in line with what your employer is expecting of you, but there are going to be difficult but necessary conversations if there are tensions between your professional ethics and the employment contract.
Have you considered the SRA Principles recently? Can you demonstrate that you act with independence and integrity? Can you demonstrate that if there is a conflict between acting in your client’s (employer’s) best interests and upholding the rule of law, it’s the latter duty which has priority? Do you maintain trust in the profession at all times?
Are you competent?
The SRA has replaced the need to acquire 16 hours of continuing professional development training each year with the requirement to maintain competence as a solicitor. Competence is regarded as being “the ability to perform the roles and tasks required by one’s job to the expected standard”. In future, you will be signing a statement confirming your continuing competency as a condition of renewing your practising certificate. What steps are you taking to maintain the expected standards?
Are you ready for the future?
The SRA changed its style of regulation with the launch of the SRA Handbook in 2011. The honeymoon period is over and we are expected to understand the current regulatory psyche.
It’s also important to be ready for change and the SRA is overhauling the Handbook with a view to a major relaunch in 2018. Whilst the current version of the Handbook is a little bit of a mismatch with the in-house sector, the new version is intended to be an improvement. The SRA have been doing their research and their intention is that the revised rules and regulations will be a closer fit with what you are doing and will address the perceived risks associated with your type of practice.
It looks likely that we will have redefined Principles which will be less about business operations and more about fundamental ethical behaviours. We may also have two versions of the Code of Conduct; one for individual solicitors regardless of where or how they practice and the other which applies exclusively to SRA-authorised firms. We are also expecting redrafted Accounts Rules. Crucially for in-house practice we are also looking at a relaxation of the current practice restrictions so that in some circumstances, and subject to certain conditions, solicitors will be able to provide unreserved legal activities to members of the public without needing to work in a SRA-authorised law firm. Are you keeping up-to-date with the regulatory change timetable?