New principles-based approach essential to proposal to allow solicitors to work in unregulated businesses
13 June 2017
Solicitors will be expected to comply with a reduced set of six principles in a handbook trimmed down to just 14 pages, including a new duty to ‘act with honesty’ that will complement the existing duty to act with integrity.
The new handbook will consist of two separate codes of conduct: one for firms and one for solicitors. The former will apply to all entities regulated by the SRA, and the latter will apply to all practising solicitors, whether in regulated or unregulated entities.
Paul Philip, the SRA’s chief executive, said: ‘Clear, high professional standards are at the heart of public confidence in solicitors, law firms and a modern legal sector. Our consultation confirmed that a shorter, clearer Handbook, with a sharp focus on professional standards, is the way forward. Pages and pages of complex rules hinders rather than helps compliance. It drives costs rather than good practice and consumer protection. We want to move away from ticking boxes to putting more trust in professional judgement.
‘That means we can make changes to give solicitors and firms greater flexibility. Freeing up solicitors to work where they choose is good for the profession, opening up career opportunities, and good for the public. It will help to tackle the issue that too many people and businesses simply cannot afford to access the help of a solicitor when they have a legal problem. Removing restrictions on where solicitors can work will give the public more choice, increasing access to high quality legal services at a price they can afford.’
The introduction of honesty into the handbook will bring solicitors in line with barristers, who are already bound by that principle under the Bar Standards Board’s code of conduct.
Acting dishonestly has long been a recognised regulatory breach and offending solicitors are almost automatically struck off. There is, however, no definition of the principle, leaving lawyers to rely on previous SRA practice and Solicitors Disciplinary Tribunal precedents.
The concept was recently considered by the High Court in Malins v SRA where Mr Justice Mostyn noted there was no requirement in the current code for solicitors to act with honesty.
Although Mostyn J acknowledged what he called the ‘iconic decision’ in Bolton v Law Society, he said ‘no attempt was made to explain the difference between [honesty and integrity]’. The judge, contradicting established regulatory understanding, found the two concepts meant the same thing.
Speaking on the launch of the draft handbook, Juliet Oliver, in-house counsel for the SRA, said the re-drawn principles were intended to reflect ‘universal values that everybody we regulate has at their heart, whatever they do in whatever context’.
By contrast, the code, Oliver added, ‘focused on what’s necessary in terms of professional standards in a practice environment’. This included cooperation with the regulator and proper standards of work, which have been moved out of the principles section and into the main body of the code. They remained ‘equally enforceable’, she said.
Adding honesty to the list of principles, she explained, was the regulator’s way of being ‘crystal clear that honesty is a key standard’ and ‘a fundamental tenet’ of the profession. ‘It’s important we make it very clear’ that integrity and honesty are not the same thing, she said.
Along the way, the SRA will also do away with indicative behaviours, with lawyers required to use their professional judgement as trained professionals to identify the boundary between acceptable behaviour and misconduct.
Honesty and integrity were ‘complicated issues’, said SRA policy director Crispin Passmore, ‘and reducing them to a few indicative behaviours doesn’t help’.
Instead of indicative behaviours, the regulator will be developing a toolkit of resources including decision trees and case studies to touch on complex areas where there are no obvious black-and-white answers.
‘If solicitors are in those grey areas, as long as they’re making sensible judgements, we’re not going to second guess,’ Passmore added.
‘If you’re not sure, take some advice, talk to your partners, record these decisions, call the SRA helpline, and balance the different obligations you’ve got. The profession wants a regulator that is clear about the standards, but it’s the profession that maintains these standards. These are the questions you need to ask yourself, here’s the process you should follow’.
The streamlined version of the handbook will underpin another main change to regulation: allowing solicitors working in unregulated businesses and providing legal advice in non-reserved areas to keep their title. At present, those choosing to work outside a law firm or regulated entity must come off the roll.
Earlier this spring, Passmore confirmed the regulator would be going ahead with the proposal despite concerns over ethics and potential conflicts of interest solicitors might face.
Passmore accepted the proposal has received mixed results during the consultation but said that there had been support from ‘firms that want to do things differently or want to take advantage of some of the flexibilities that exist already’.
At present, firms wanting to be exempt from certain requirements have to apply individually to the SRA for a waiver. ‘There are all sort of different ways that solicitors can practice flexibly already but it’s hugely constrained and our proposals will really give lawyers the freedom to meet that demand for legal services that isn’t being met at the moment,’ he said.
Clients, whether individual or small businesses, were already buying legal services from non-Legal Services Act regulated business, he went on; ‘all we’re doing is adding solicitors into that, along with an ethical infrastructure, professional training, and a code of conduct that solicitors will be held to account for’.
The SRA’s reasoning is that the move was good for clients but ultimately also good for solicitors. ‘If you’re an individual solicitor it increases the market for your skills and labour,’ Passmore said. ‘Where there are people outside the profession trying to steal your lunch it allows you to go out and compete with them.’
Passmore dismissed suggestions that solicitors in unregulated businesses could be under commercial pressure from their employers that could place them in breach of their regulatory obligations. They would be bound by the code for solicitors and would have to apply their professional judgement to what was asked of them as employees, he explained.
Earlier proposals that solicitors in unregulated businesses would be required to have higher professional indemnity insurance – paid for by their employer – have also been scrapped. Dissatisfied clients will be able to complain to the Legal Ombudsman, and, in more serious cases, will be able to bring a professional negligence claim.
Meanwhile, the threat of personal sanctions for misconduct will act as a regulatory stick for individual solicitors.
The SRA said it was confident the combination of these routes to redress would provide suitable protection.
This story was first published on Solicitors Journal on 13 June 2017 and is reproduced by kind permission