Charities and internal investigations
This blog first appeared on Ark Group's website on 26 November 2018.
The Legal Services Board has now approved a comprehensive re-draft of the SRA Handbook. These new rules will be known as the SRA Standards and Regulations. These are due to replace the SRA Handbook at a date yet to be fixed between April and June 2019. Five of the key changes are summarised below.
The SRA has recognised that the current Handbook is long, complex and costly to apply. The new Standards and Regulations have been streamlined and consolidated with a view to making them more user-friendly.
The Principles have been reduced in number from 10 to 7. The need to act with honesty is now a stand-alone Principle, in addition to the need to act with integrity. Four Principles have been removed, in order to ensure that the Principles are universal in application and to avoid duplication.
The Code of Conduct is now divided into a Code for Solicitors, Registered European Lawyers (RELs) and Registered Foreign Lawyers (RFLs) and a Code for Firms (which includes requirements for COLPs and COFAs). The Code for Solicitors, RELs and RFLs describes the “standards of professionalism” expected by the SRA, whereas the Code for Firms describes the expected “standards and business controls”. The structure of these new Codes makes more explicit the approach of the SRA which is to focus on the behaviour of individuals and the systems and culture of firms.
There is a marked simplification of the current structure, which has 5 Sections, each containing Chapters dealing with particular regulatory issues, within which there were mandatory Outcomes and non-mandatory Indicative Behaviours. The two separate Codes now simply provide a set of requirements. This is aimed at ensuring that the core standards are maintained, while allowing for flexibility of application.
Solicitors will be able to provide “reserved legal activities”, in certain circumstances, on a freelance basis to the public, without being authorised as recognised sole practitioners. (There are six specific reserved legal activities, such as conveyancing, advocacy and acting in litigation, that can currently only be carried out by a regulated individual, such as a solicitor or barrister, working in a law firm approved by a legal regulator.)
These freelancers would not be able to hold client money or employ people and would need adequate and appropriate indemnity insurance. This change is aimed at “opening up” the legal services market, allowing solicitors to work in more flexible ways and clients to access legal services without the extra costs imposed by a firm. This has been described as the “uberisaton” of solicitors.
Solicitors will also be able to provide non-reserved activities, such as general legal or employment advice, outside of a law firm. This change removes the current disadvantage which solicitors face, in that they can only provide non-reserved activities within an SRA-regulated firm, whereas non-solicitors are free to provide these activities wherever they please.
The SRA Transparency Rules, which will come into force on 6 December 2018, are another controversial addition. The new rules warrant an entire article, but in brief they require SRA authorised firms and in-house solicitors to publish, clearly and prominently on their websites, price information in relation to certain types of legal service. Details of complaints handling procedures, including details about how and when a complaint can be made to the Legal Ombudsman and SRA must also be published, as must regulatory information such as the body’s SRA number.
The current Handbook requires all regulated entities and in-house legal departments to employ a solicitor who is “qualified to supervise”, meaning that they have been admitted for at least three years and have completed at least 12 hours of management training. The rule is aimed at preventing someone from practising alone until they have been qualified for three years, although they do not actually need to have been practising in this time: just authorised to practice.
This rule was confusing and widely misunderstood, and so this has been removed. In its place will be a rule requiring any SRA authorised firm or recognised sole practitioner to have at least one manager or employee who has practised as an authorised person for three years. That person will be responsible for supervision. In addition, solicitors will not be able to practise on their own, providing reserved legal services to the public, until they have three years of experience.
The quite prescriptive Accounts Rules have been whittled down to 7 pages. As would be expected, the key requirements remain but these have been significantly simplified. For example, there are two very brief paragraphs relating to the payment of interest, a subject which previously covered several pages of rules and guidance notes.
The definition of client money has also been changed so that firms will be able to accept money for billed fees and professional disbursements for which the firm as liable as their own, and pay them into office rather than client account. Firms can choose to continue to operate their client account as they currently do, but firms which do not wish to operate a client account will not need one provided the only client money they hold is in relation to billed fees and disbursements for expenses that have incurred on their client’s behalf.
The new SRA Handbook is not a radical departure from the previous Handbook in terms of the requirements placed on solicitors and law firms. However, there is a marked change in terms of simplification and increased flexibility. This is no longer regulation by numbers, and a greater degree of discretion and judgment will be needed to determine how best to meet our regulatory requirements.
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