According to the SRA, the approach of the new Standards and Regulations due to come into force in November 2019 is marked by “stripping away outdated and unnecessary rules and giving solicitors more flexibility to design and deliver their services around their clients”. Indeed, the SRA says that it has removed “many prescriptive rules” in order to “reduce the burden on solicitors and law firms and enable them greater freedom and flexibility to use their professional judgement in considering how they apply and maintain the required standards.”
In this article, Helen Evans and Clare Dixon of 4 New Square review whether the new principles, codes of conduct and disciplinary procedure rules wholeheartedly reflect a relaxation of the SRA’s grip, or whether competing forces are apparent. They also consider whether one of the unintended consequence of some of the liberalisation is to introduce a two-tier regulatory system for solicitors practising within regulated entities (such as firms) and those outside that structure. Finally, they reflect on the likely impact of the new rules and relaxed burden of proof on the troublesome issues of dishonesty and lack of integrity- an issue that the Divisional Court was still picking apart as recently as last week in the matter of SRA v Siaw.
The reduced principles- down in number from 10 to 7 as noted by Jamie Smith QC and Miles Harris in their overview- are the first evidence of the SRA’s desire to shorten and simplify the rules. But matters are not as straightforward as they first appear:
- The fact that several old principles are no longer there that does not mean they have disappeared entirely: they can still be found in the main body of the two separate Codes of Conduct now applying to individuals and solicitors’ practices;
- There is a striking incidence of one former single principle being divided into two new principles: namely, the separate requirements that solicitors act honestly and with integrity. This change reflects the trouble that both the SDT and the courts have had in identifying and applying the difference between the two concepts, apparent prior to the Court of Appeal’s judgment in Wingate v SRA but still in evidence in this month’s hearing in SRA v Siaw (where, very unusually, the Divisional Court ended up substituting findings of dishonesty for the SDT’s finding of lack of integrity).  It seems to us that these difficulties differentiating dishonesty and lack of integrity are likely to be compounded by the fact that charges now only need to be proved to the civil rather than criminal standard of proof (as we explain later).
The Codes of Conduct: a two tier system?
There are now two Codes of Conduct, one for individuals and one for firms. They are briefer, and have been shorn of their pages of indicative behaviours. Their stated aim is to allow solicitors to exercise their own judgment about applying the standards to the situation they are in and deciding on a course of action.
However, brevity does not necessarily carry with it less regulation. Firms are subject to two layers of regulation, with the SRA making clear that it could take action not just against managers and compliance officers but also against employees for breaches of the SRA Code of Conduct for Firms. This (combined with rule 1.2 of the new disciplinary rules, to which we return below) is a significant clarification of the SRA’s regulatory reach against employees in particular. Under the old regime, the SRA was often reliant on s. 43 of the Solicitors Act 1974, which only applied in circumstances where an employee had been convicted of a criminal offence or had occasioned or been a party to an act or default in relation to a legal practice of such a nature that it was undesirable for him to be involved in legal practice. More recent cases had started to test out the broadening of the SRA’s regulatory reach brought in by the Legal Services Act 2007 but the most common way to proceed remained under s. 43 of the 1974 Act. The new regulations are likely to have the effect of broadening out yet further the scope of regulatory cases brought against employees.
The new regulation applying to firms also stretches beyond the conduct of their legal work and extends to their business models. The Code of Conduct for Firms requires practices to monitor their financial stability and viability, exposing those involved in running firms to disciplinary action for lacking business acumen.
By contrast to the double layer of regulation for firms, the new reforms open up the legal market to freelancers. Such freelancers are free from the regulation applying to firms, and are also not required to take out professional indemnity insurance that meets the Minimum Terms and Conditions applicable to firms. Their insurance merely has to be “adequate and appropriate”. These moves were contentious and were strongly opposed by the Law Society on consumer protection grounds.
We are doubtful that the public will understand, or appreciate the significance of, the different regulatory burdens on firms and freelancers.
The new disciplinary rules
The new SRA Regulatory and Disciplinary Rules (“the disciplinary rules”) govern how the SRA will investigate and take disciplinary and regulatory action. These new rules are supported by the SRA enforcement strategy which was introduced in February 2019 with the intention of providing “greater clarity on [the SRA’s] approach to cases of potential misconduct” (“the Enforcement Strategy”). Such clarity will be all the more important now that the codes of conduct for solicitors and firms are less detailed and prescriptive.
The standard of proof
Alongside the new disciplinary regulations, the SDT is also changing its rules (with effect from 25 November 2019) so that it will decide cases on the civil standard of proof. This change brings the SRA and SDT into line with other legal services regulators including the Bar Standards Board. Rightly or wrongly, concern has been raised as to whether a lowering of the burden is likely to result in more disciplinary actions against solicitors being pursued by the SRA (or more charges of dishonesty being made out). This remains to be seen. However, if it is does, it may lead to commercial pressure being put on professional indemnity insurers to include cover for defence costs in respect of SRA disciplinary action even though such cover is not required by the minimum terms.
As referred to above rule 1.2 expressly provides for non-solicitors to be caught by the SRA’s disciplinary rules where an allegation is made which “raises a question that the person” meets one of the following descriptions:
- Rule 1.2(c), “is a manager or employee of an authorised body and is responsible for a serious breach by the body of any regulatory obligation placed on it by the SRA’s regulatory arrangements”. An authorised body is either a body or a sole practitioner which has been authorised to practice by the SRA. Managers or employees of authorised bodies however do not themselves need to be solicitors and often will not be. However, they can by subject to disciplinary action where they are responsible for a serious breach by that authorised body.
- Rule 1.2(d), “is not a solicitor and has been convicted of a criminal offence, or been involved in conduct related to the provision of legal services, of a nature that indicates it would be undesirable for them to be involved in legal practice”. This largely replicates s. 43 of then Solicitors Act 1974 (which we described as a blunt implement above).
- Rule 1.2(f) “has otherwise engaged in conduct that indicates they should be made subject to a decision under rule 3.1”. This rule applies to any “person” whether they are a solicitor or not. Rule 3.1 sets out the powers of the SRA where an allegation has been found to be proved and grants the SRA a range of disciplinary options (from a reprimand to a referral to the SDT). This is a widely drawn catch-all bringing in anyone who is thought to be in breach of the Standards and Regulations but who does not fall into one of the pre-determined categories, and renders the purpose of those categories somewhat questionable. It also demonstrates a significant clarification of the extension of reach of the SRA against non-solicitor employees of law firms .
The Enforcement Strategy
It is beyond the remit of this note to go through the Enforcement Strategy in detail. Interestingly however it returns to the issue of the reporting obligations of solicitors and firms which follows on from the SRA’s February 2019 consultation on “Reporting Concerns”. The Enforcement Strategy emphasises that where a “serious breach is indicated” firms should engage with the SRA at an early stage even if they are planning to carry out their own internal investigation and states, that whilst deciding whether to report is a matter of judgment, if there is uncertainty “you should err on the side of caution and make a report”. The Enforcement Strategy also deals with the position of individuals and states that it is sufficient for an individual to report to a firm’s compliance officer “on the understanding that they will do so”. However, where an individual is not satisfied that the compliance officer will take the same view (and so make the report to the SRA) then the individual should report themselves. Therefore, reporting internally is not sufficient to constitute compliance with the duty to report unless it is coupled with a belief that the internal report will result in the SRA being notified.
The emphasis on the need to report to the SRA demonstrates that while the new regulatory approach permits solicitors some more freedom to decide how to comply with their professional obligations, that freedom has its limits. Indeed, the SRA has in fact extended its disciplinary reach by means of the SDT’s rules imposing a lower burden of proof and by means of the new Code and disciplinary regulations expressly carving out a wider scope for disciplining those involved in law firms.
© Helen Evans and Clare Dixon. The authors assume no responsibility to any party in respect of this article. Specific legal advice tailored to specific problems should always be obtained.
About the authors
Helen Evans (2001) is recognised in the directories as a leading junior in professional negligence, professional discipline and insurance. In May 2019 she was named by Who’s Who Legal as one of the two most highly regarded juniors in the professional negligence field. She regularly appears before the legal and accountancy regulators and is on the Bar Standards Board’s Panel of Prosecuting Counsel. She is the co-author of the solicitors and barristers negligence chapters in Jackson & Powell on Professional Liability.
Clare Dixon (2002) is rated as a leading junior for professional negligence and insurance. She is shortlisted by Chambers & Partners for ‘Professional Negligence Junior of the Year’ 2019 and described by the Legal 500 as being “firm, incisive and having the ear of the court’. Clare regularly advises on regulatory issues and appears before professional disciplinary tribunals.
 As Jamie Smith and Miles Harris noted at https://4ns-old.localhost/publications/introduction-to-the-sras-2019-standards-and-regulations/
 In this latter case, a solicitor was found by the SDT to have acted without integrity but not dishonestly in carrying out legal work “off the books” of his firm. The Divisional Court handed down its judgment on 18 October 2019: see  EWHC 2737 (Admin),
 Rule 10.2 of the Authorisation of Individuals Regulations permit sole freelance solicitors with more than 3 years’ practising experience to offer reserved legal services without being authorised as a recognised sole practice.
 SRA News Release 20.3.19
 See the Legal Services Act 2007