Yearly Archives: 2013

SRA issues guidance on Cloud Computing

The SRA has issued guidance to law firms on the use of cloud computing.

The guide aims to assist firms to understand their obligations when it comes to exercising due diligence in controlling the risks of such outsourcing systems and ensuring that Outcome 7.10 of the SRA Code of Conduct as well as data protection requirements are met.

The SRA’s new guide Silver Linings: cloud computing, law firms and risk can be accessed here.

SRA Guidance – Silver Linings: cloud computing, law firms and risk

SRA updates Risk Outlook

The SRA has updated its Risk Outlook, adding to the issues identified when the Outlook was first published in July.

The Outlook is the SRA’s assessment of the most significant risks that the Authority anticipated having to manage over the coming 12 months. The Authority promised to publish regular updates and additional risk assessments throughout the year.

This has now been carried out, with the Outlook update produced alongside other documents on subjects such as group contagion and financial stability.

Those wanting to download any of these publications should visit the Risk resources page.

Go to the Risk resources page

SRA issues warning notice to PI firms

The Solicitors Regulation Authority (SRA) has issued a warning note for firms involved in personal injury work based on its experiences of how firms have reacted to the first six months of the ban on the payment of referral fees.

And the Authority is urging firms who have re-arranged their business models to adhere to the rules not to forget about all other sections of the Handbook. The SRA has seen numerous examples of firms making changes that, while compliant with the two new Outcomes that deal with the ban, potentially breach other parts of the Code of Conduct.

A warning note has therefore been prepared and published on the SRA’s website. Firms are encouraged to read the warning note.

Richard Collins, SRA Executive Director, said: “Firms have done a lot to ensure they comply with the ban, but this does not in any way reduce the need for firms to continue to ensure compliance with the other Principles and Outcomes in the Code of Conduct. Worryingly, we are beginning to see some examples of firms that – in their desire to maintain a volume of new clients in a manner compliant with the referral fee ban – have not paid sufficient attention to compliance with the broader, and longstanding, regulatory requirements regarding referrals.”

Examples of the type of issues this has raised include:
agreeing with an introducer to deduct money from clients’ damages
inappropriate outsourcing of work to introducers
referrals to other service providers which are not in the best interests of clients
failure to advise clients properly about the costs and how their claim should be funded
lack of transparency about the arrangement

The SRA continues to take a measured approach to enforcing the ban. Its enforcement strategy focuses on active supervision, so where there are concerns, it engages with firms to ensure compliance is achieved.

Where there are significant concerns, the SRA is talking to firms to help them put things right. It is also working very closely with partners such as the Ministry of Justice and the Financial Conduct Authority, sharing information and raising issues as they emerge.

Richard Collins said: “We decided that a measured approach as firms got to grips with the ban was the best way forward. We are taking a more proportionate and constructive approach to enforcing the ban wherever possible.

“Of course we will take formal enforcement action against any firm flagrantly breaching the rules. Those unwilling to change their practices and who fail to co-operate will face action.”

SRA releases version 8 of the Handbook

The eighth version of the Handbook was published on 1 October 2013.

The changes contained in Version 8 came into effect on 1 October 2013 (unless otherwise stated below) and the key changes are summarised in these Release notes. The notes give a brief update only and you will need to refer to the Handbook itself for full details. Any sets of rules or regulations not referred to below remain substantially unchanged in this version.

There are five groups of changes contained in Version 8:

  • The SRA Indemnity Insurance Rules 2013 – 14. (For further information see below.)
  • The new SRA Quality Assurance Scheme for Advocates (Crime) Regulations 2013, implementing the new SRA quality assurance scheme for criminal advocates, which came into effect on 30 September 2013. Consequential amendments are made to the SRA Higher Rights of Audience Regulations 2011, with one minor change to the SRA Practice Framework Rules 2011. The SRA Quality Assurance Scheme for Advocates (Crime) Notification Regulations 2012 are repealed.
  • Changes to the SRA Authorisation Rules, SRA Practising Regulations and SRA Accounts Rules to implement the proposals in the Red Tape Initiative – Second Phase. Broadly, these amendments remove the duty of the COLP/COFA in a “traditional” law firm to report non-material breaches of the rules, and simplify the practising certificate renewal process following certain events, such as the imposition of disciplinary sanctions.
  • The SRA Overseas Rules 2013 introduce a new section to the SRA Handbook containing new overseas provisions. Consequential amendments have been made to a number of other sets of rules, in particular the SRA Principles, SRA Code of Conduct (which now includes a new Chapter 13A dealing with practice overseas), and the definitions relating to overseas practice in the Glossary. It should be noted that certain consequential amendments to the SRA Authorisation Rules and SRA Practice Framework Rules, which implement the notification and reporting requirements for the new ‘overseas practice’ vehicle, will come into effect from 1 October 2014. Given their delayed implementation, these amendments will be included in a future version of the Handbook, but are effected by the SRA Amendment to Regulatory Arrangements (Overseas Rules) Rules 2013 (PDF 13 pages, 117K).
  • A set of miscellaneous amendments. Broadly, these seek to achieve general clarification; better alignment of certain provisions with the Legal Services Act (e.g. the changes to the SRA Disciplinary Procedure Rules); the correction of minor mistakes; and the updating of terminology and references (e.g. to reflect the changes to the names of the Legal Services Commission and the Criminal Records Bureau to the Legal Aid Agency and the Disclosure and Barring Service respectively).
  • The SRA Suitability Test is updated in line with changes to the Rehabilitation of Offenders Act 1974 (Exceptions) Order 1975 which introduced ‘protected’ convictions and cautions.

SRA Principles 2011

The application provisions of the SRA Principles to overseas practice have been amended as a result of the introduction of the new SRA Overseas Rules. Broadly, where a firm or individual is practising overseas (as defined), the Overseas Principles set out in the Overseas Rules will apply.

SRA Code of Conduct 2011

The outcomes which referred to overseas practice have been removed, and a new Chapter 13A, with a new set of outcomes, added in order to cover the conduct requirements when a regulated individual or entity is practising temporarily overseas. This ensures, amongst other things, that the European Cross-border Rules, and any other rules that apply in the jurisdiction in which the legal service is being supplied, also apply to temporary practice. The new definition of “established” in the Glossary explains the distinction between temporary and permanent practice overseas.

SRA Accounts Rules 2013

Amendments have been made throughout the rules following the abolition of the Legal Services Commission and its replacement by the Legal Aid Agency.

An amendment has been made to guidance note (i) to rule 6 as a result of the second phase of the Red Tape Initiative to reflect the removal of the obligation of a COFA of a recognised body/recognised sole practitioner to report non-material breaches to the SRA.

Following changes to the regulation of overseas practice, a number of definitions have been changed in Part 7 of the rules for clarification, in line with amendments to the SRA Handbook Glossary. “Client account (overseas practice)” has been replaced by “client account (overseas)”, “client money (overseas practice)” by “client money (overseas)”, “firm (overseas practice)” by “firm (overseas)” and “manager (overseas practice)” with “manager (overseas)”. In addition, and again for clarification, two references to “overseas practice” have been replaced by “practice from an office outside England and Wales”.

SRA Practice Framework Rules 2011

The rules have been updated with consequential amendments flowing from the new overseas provisions and QASA provisions, see above.

SRA Authorisation Rules for Legal Services Bodies and Licensable Bodies 2011

Rule 8.5 has been amended to limit the reporting responsibilities of COLPs and COFAs in recognised bodies.

A new rule 8.11 introduces an obligation on an authorised body entering the Cessation Period not to undertake legal activities, save as required to discharge obligations within the scope of existing instructions, or which is necessary in connection with the discharge of such obligations.

Rule 21 has been expanded to clarify the effective date of a licensed body’s authorisation to better reflect the LSA.

Amendments have been made to Rule 34 to clarify the matters that need to be recorded on the register of authorised bodies, for public access, in accordance with the LSB regulation in this area.

For changes in relation to the new overseas provisions, see above.

Guidance notes have been augmented in line with these changes.

SRA Practising Regulations 2011

There have been changes to regulation 3 to remove unnecessary regulation. These are, firstly, limiting the need to disclose insolvency matters under regulation 3.1(k). And, secondly, the removal of the requirement to apply six weeks in advance for a replacement practising certificate, or for renewal of registration in the register of European lawyers, in cases where regulation 3 applies.

Regulation 4.8 has been amended to limit the reporting responsibilities of COLPs and COFAs in recognised bodies.

A new regulation 4.15 introduces an obligation on a recognised sole practitioner’s firm entering the Cessation Period not to undertake legal activities, save as required to discharge obligations within the scope of existing instructions, or which is necessary in connection with the discharge of such obligations.

Guidance notes have been augmented in line with these changes.

SRA Indemnity Insurance Rules 2013

Changes to the Qualifying Insurer’s Agreement and the SRA Indemnity Insurance Rules (including the Minimum Terms and Conditions for compulsory professional indemnity insurance) have been made to implement the third stage of the SRA’s Financial Protection Review.

The principal changes are as follows.

Change of name

The name of the agreement has been changed from the Qualifying Insurer’s Agreement (QIA) to the Participating Insurer’s Agreement (PIA). This reflects the fact that in order to be eligible to be a “participating insurer” an insurer must be an “authorised insurer” as defined by section 87(1A) of the Solicitors Act 1974. The SRA does not impose any additional qualifying criteria.

The term “qualifying insurers” has been replaced by “participating insurers” but policies governed by the agreement are still referred to as “qualifying insurance”.

Appropriate changes have been made in the agreement, the SRA Indemnity Insurance Rules and the Glossary.

Closure of the ARP

The assigned risks pool (ARP) has closed from 30 September 2013, save in respect of prior year obligations and any applicable run-off cover. Such obligations will continue pursuant to the terms of the QIA applicable to the relevant indemnity period.

The provisions relating to the ARP have therefore been removed from the PIA and the SRA Indemnity Insurance Rules. Changes have been made in the SRA Indemnity Insurance Rules (rules 9 to12, 14, 15 and Appendix 2).

Backdating of Cover

Participating insurers that agree to insure a firm that is in the Extended Indemnity Period (EIP) or Cessation Period (CP) with another insurer are required to backdate cover to the commencement of the EIP.

Variable Renewal Dates

Participating insurers are permitted to issue policies of qualifying insurance incepting on or after 1 October 2013 with end dates other than 30 September. Participating insurers are entitled to issue such policies with policy periods of any length (though all policies must still provide for coverage during the EIP and CP).

Variations

Due to the introduction of variable renewal dates, amendments have been made to ensure that any variation to the PIA and MTC introduced must be made to any policy on renewal or extension, and must not be delayed for a period of longer than 12 months.

Reporting

To ensure that the SRA is fully apprised of firms that have entered the EIP and CP, the reporting obligations applicable to both participating insurers and firms have been expanded. Changes have been made to rule 17 of the SRA Indemnity Insurance Rules.

SRA Disciplinary Procedure Rules 2011

Section 99 of the Legal Services Act 2007 refers to a list of activities that a person can be disqualified from. Introducing “disqualify”, “disqualified” and “disqualification” as defined terms in the Rules will avoid any confusion. The words “licensed body”, which appear within section 99 of the Legal Services Act 2007, have been removed (in most cases) from the Rules to eliminate duplication and avoid any confusion about the meaning of “licensed body” as in section 99 it means any licensed body and not just a body licensed by the SRA.

SRA Overseas Rules 2013

The SRA Overseas Rules (together with Chapter 13A and the new definitions in the Glossary) create a new regime for international practice by SRA regulated individuals and entities. The Overseas Rules apply to regulated individuals established outside England and Wales and to regulated entities which have established operations under their control outside England and Wales.

These Overseas Rules replace the SRA Principles and SRA Code of Conduct for circumstances in which individuals or entities are ‘practising overseas’ (as defined in the additions to the Glossary). Instead they apply a set of ‘Overseas Principles’ which are designed to be proportionate and outcomes focused. The Rules also explain the circumstances in which the full Handbook may apply to an Overseas Practice and what might happen if there were to be a conflict with local rules. The Overseas Rules also contain the full reporting and notification requirements which apply to any individual established overseas or authorised body with one or more overseas practices under its control.

SRA Handbook Glossary 2012

The changes to the SRA Indemnity Insurance Rules have necessitated:

  • the insertion of definitions of “participating insurer” and “participating insurer’s agreement”;
  • the amendment of the definitions of “ARP”, “cessation period”, “difference in conditions policy”, “extended indemnity period”, “insolvency event”, “policy”, “policy default”, “policy period”, “run-off firm”, “SIIR” and “SRA Indemnity Insurance Rules”;
  • the deletion of the definitions of “ARP default premium”, “ARP policy”, “ARP premium”, “ARP run-off policy”, “ARP run-off premium”, “eligible firm”, “firm in default”, “period of default”, “qualifying insurer”, “qualifying insurer’s agreement”, “special measures” and “successor firm”.

The new overseas provisions have introduced a number of new definitions and necessitated amendments to existing ones – see “connected practice”, “established”, “overseas practice”, “practice”, “practising overseas”, “regulated individual”, “responsible authorised body”, “separate business”, “SRA Overseas Rules”, and “temporary practice overseas”. For consequential changes to SRA Accounts Rules definitions in the Glossary, see the Accounts Rules entry above.

The definitions of “appointed person”, “employee”, “employer”, “private legal practice” and “private practice” have been amended to reflect the fact that the Legal Services Commission has become the Legal Aid Agency.

The definition of “related authorised body” has been amended to ensure that the provisions which came into effect on 1 April 2013 permitting a COLP/COFA to be in a related authorised body are fully effective for recognised sole practitioners.

The new SRA Quality Assurance Scheme for Advocates (Crime) Regulations 2013 have necessitated:

  • the insertion of definitions for “accreditation”, “CAEF”, “full accreditation”, “provisional accreditation”, “QASA”, “re-accreditation”, and “SRA QASA Regulations”;
  • the amendment of the definitions of “criminal advocacy” and “you”.

SRA examines firms’ financial data

The Solicitors Regulation Authority (SRA) has started to evaluate the data on firms’ finances following a substantial fact-finding exercise.

As part of its programme of work designed to help firms struggling in tough economic times, the SRA contacted around 2,000 practices asking for key financial information. The Authority hopes to add to its picture of issues affecting firms so it can target resources through its financial stability programme.

Data requested focused on such things as net profit (at the last financial year end), total borrowings, and highest and lowest bank balances for each of the last three months. Firms included in the survey included those working in areas that are experiencing particular economic pressures, such as personal injury or legal aid, and around 500 ‘high impact’ firms, those which would have a significant impact on the regulatory objectives if they were to fail.

A number of these firms (around 700) were already being actively supervised by the SRA. For the remaining 1,300, emails were sent to the firms’ COLP (Compliance Officer for Legal Practice) at the beginning of August.

Mike Haley, SRA Director of Supervision, said: “We contacted these firms not because we know they are experiencing financial difficulties, but to build our understanding of the current position so that we can target our resources at those who most need our help. Engaging with firms at the earliest opportunity is the best thing to do, and this will allow us to know where we need to do this.

“We’ve already had numerous examples of better outcomes for firms and clients when firms in financial difficulty have come to us. By surveying firms in this way, we are able to make our approach even more risk-based, and hopefully avoid the disruption caused by intervention.”

Of the 1,300 emailed, around 1,000 firms (77 per cent) supplied the requested information or applied for an extension by the 3 September deadline. Of the firms that responded, around 50 per cent did not score at all on any of the financial indicators, suggesting there is no evidence of financial difficulty requiring engagement at this stage.

Those firms that are demonstrating indicators of financial difficulty will be contacted as part of supervisory engagement and according to the level of risk they pose. Those firms that have failed to provide the requested information will be encouraged to provide it before potential enforcement action is initiated.

Mike Haley added: “We rely on firms to look for help as soon as possible, such as talking to us through our Supervision function or seeking other forms of assistance, such as professional advice or contacting their Law Society Regional Manager. Sadly, some firms refuse to acknowledge that they are in financial trouble until it is too late, which causes problems for clients, and can also lead to investigations into conduct.”

The SRA has created dedicated web pages for firms as part of Chapter 7 of the Handbook to help keep a tab on finances, including a list of good and bad behaviours. The pages can be found here:

Go to the Financial Advice pages

Firms need own credit licence

Solicitors’ firms may need to seek their own consumer credit licence from the Financial Conduct Authority (FCA) if they want to continue with consumer credit activities, the Solicitors Regulation Authority (SRA) has advised.

The FCA will take over the regulation of consumer credit activity from the Office of Fair Trading (OFT) on 1 April next year. The group licence under which SRA-regulated firms currently operate will cease to have effect from that date.

Currently, the Law Society Group Licence allows firms regulated by the SRA to carry out certain consumer credit activities under the group licence conditions without the need to apply to the OFT. The FCA will not be continuing the group licence regime, so SRA-regulated firms wishing to continue in these activities, like debt collecting, may need to be licensed by the FCA, paying authorisation fees and regulatory fees

Firms that have their own OFT consumer credit licence already will need to apply for interim permission. The application process for this began on 1 September 2013.

Only firms with a current OFT consumer credit licence will be eligible to apply for the interim permission. Firms carrying consumer credit activities without this permission after 31 March 2014 will be committing a criminal offence and a breach of FCA regulations.

Agnieszka Scott, SRA Director of Policy and Strategy, said: “Firms will need to consider how the removal of the group licence regime is going to affect them and how they manage their business going forward. Firms may wish to apply for an individual OFT consumer credit licence to enable them to meet the criteria for the interim permission process, or they will need to consider the criteria set out in the Financial Services and Markets Act 2000 and are exempt from FCA authorisation.

“To help firms we have published some more information and links on our website. We will shortly be publishing a “questions and answers” section to help firms making decisions. We will keep our website up-to-date with links to the FCA website and publish any further information we obtain.”

The changes were consulted on by both HM Treasury and FCA during 2013 with the legislative changes being made in July 2013. The FCA has committed to publishing a detailed consultation, setting out its rules and guidance for regulating consumer credit activities later this year.

Forms and guidance on how to apply can be found on the FCA’s website here:

Go to the FCA website

Law Society unveils a new quality standard for wills and estate administration

The Law Society has launched its first recognised quality standard for wills and estate administration.

The Wills and Inheritance Quality Scheme (WIQS), which will open for applications on 31 October, is aimed at SRA-regulated practices that offer will drafting, probate, and estate administration services. Accreditation will provide these firms with the opportunity to demonstrate to consumers and key stakeholders their commitment to the highest standards of client service.

Applicants will undergo a rigorous assessment, and will be required to undertake compulsory training, self-reporting, random audits, and annual reviews in order to maintain the new status.

At the heart of the scheme will be the first Law Society Protocol for wills and estate administration. This provides practical guidelines and recommended best practice at all key stages of the wills and probate process.

Law Society president Lucy Scott-Moncrieff said:

‘The aim of the scheme is to reinforce set standards of practice and client care when providing will drafting, probate and estate administration services. At the heart of this and other Law Society accreditations is consumer reassurance, demonstrating a commitment to putting their needs first and delivering the highest levels of service.

‘It is a common consumer misconception that only solicitors prepare wills, but there are many other service providers in today’s market. As the law currently stands anyone can set themselves up as a ‘will writer’. For consumers to make informed choices, it is important that they are able to distinguish between those that are unregulated, uninsured and untrained, and our members’ practices that specialise in this area and offer a quality service.’

Lucy Scott-Moncrieff added:

‘This exacting scheme assures consumers who wish to prepare a will or to manage the administration of their estate, two of the biggest decisions of most people’s lives, that not only are they using a regulated solicitor’s firm but one specifically endorsed for high standards in this area.’

She explained that the Law Society had campaigned to change the law so that only properly trained, regulated and insured persons would be authorised to write wills.

‘We argued that all those providing wills services should be trained to the same level and subject to uniform regulatory requirements. The Legal Services Board’s Consumer Panel threw its weight behind the Society’s campaign, however the Lord Chancellor announced earlier in the spring that the government would not change the law. For consumer protection this means that the only prudent choice is to instruct a solicitor to prepare your will.

‘All solicitors receive training in will drafting and the overwhelming majority of solicitors who undertake this work are highly experienced lawyers who can provide a comprehensive service to suit the individual needs of their clients. Moreover, the breadth of their training enables solicitors to consider the full range of issues that may affect consumers and advise on all options, including tax and family law matters. The needs of consumers will vary according to their individual circumstances and solicitors are well placed to advise them.’

The scheme will be promoted to consumers from January 2014.

SRA Chief Executive reiterates referral fee approach

Solicitors Regulation Authority (SRA) Chief Executive Antony Townsend has reiterated that the Authority has taken an understanding approach to enforcing the ban on the payment of referral fees in personal injury cases.

Mr Townsend was speaking at the Legal Futures conference, The LEX Factor, at Bishopsgate in London on 6 June. And he told delegates that the SRA was continuing to take a measured approach as firms get to grips with the ban.

The ban, which came into force on 1 April as part of the Legal Aid Sentencing and Punishment of Offenders Act 2012) (LASPO), prohibits the payment of referral fees in personal injury cases. It has been introduced by the Government amid concerns of the high cost of civil litigation, rising insurance premiums, increasing numbers of claims and the perception of a “compensation culture”, where people are encouraged to claim for minor or even fictitious injuries.

Antony Townsend said: “It is clearly very early days in terms of enforcement; we’re only nine weeks into the ban. And while there are those that may like to have seen hundreds of firms thrown instantly before the SDT on 1 April, we are taking a more proportionate and constructive approach to enforcing the ban wherever possible.

“Our enforcement strategy is focused on active supervision. Where we have concerns, we are engaging with firms to ensure compliance is achieved.

“Where we have significant concerns, we are talking to firms to help them put things right. We are also working very closely with our partners such as the Ministry of Justice and the Financial Conduct Authority, providing information to each other and raising issues as they emerge.

“Of course we will take formal enforcement action against any firm flagrantly breaching the rules. Those unwilling to change their practices and who fail to co-operate will face action.”

The SRA has made a raft of resources on referral fees available to firms. These pages will continue to be updated as new material becomes available. The SRA has also published an enforcement strategy for the referral fee ban.

To deal with the new legislation, the SRA has added two new mandatory Outcomes to the Code of Conduct, which will be found in Chapter 6 and Chapter 9 respectively, and which state that “you are not paid a prohibited referral fee” and that “you do not pay a prohibited referral fee”. On top of the two new outcomes, the Code of Conduct will seek to define referral fees, while Indicative Behaviours illustrate how the outcomes can be achieved, avoiding the need to include detailed prescriptive rules.

Antony Townsend’s speech to the The LEX Factor – Legal Futures conference on 6 June 2013

 

When can a firm act for both buyer and seller in a conveyancing transaction

The SRA have issued new guidance on when a firm can act for both buyer and seller in a conveyancing transaction.

To achieve Outcome 3.5 of the Code, you must not act for two or more clients in a related matter if there is a conflict, or a significant risk of a conflict, between the interests of those clients. This does not necessarily prevent you from acting for both parties in a conveyancing transaction. However, conveyancing is an area in which there is a high risk of a conflict arising during the course of the transaction. For this reason, Indicative Behaviour 3.14 states that this is the sort of behaviour which tends to show that you have failed to achieve the outcome.

As a general rule, you are likely to fail to achieve the outcome if you routinely act for both parties in conveyancing transactions, but there may be cases where it is appropriate to do so. In reaching your decision, you will not only need to assess the risk of a conflict arising during the course of the transaction, but also have regard to other factors which could compromise your ability to act in the best interests of each client (Principle 4) or your independence (Principle 3). For example:

  • the complexity of the matter
  • the likelihood of negotiations having to take place
  • the bargaining power of the respective parties
  • any particular vulnerability of either party
  • the disruption and additional costs to the parties should you have to cease acting, and
  • the length of the conveyancing chain involved

It is important to bear in mind that if you do act, this should be because of a benefit to the clients, rather than the benefit to you.

To achieve Outcome 3.1, you should have in place an effective system to identify and assess potential conflicts of interest. This could include, for example, listing the factors which should be considered and possible safeguards. For example:

  • that the clients are represented by two different fee earners within the firm;
  • that the parties are informed in writing of the risks and potential consequences (in terms of inconvenience, delay and possible additional costs) should the firm have to cease acting
  • that the factors you considered in reaching your decision to act for both parties are recorded
  • that you obtain the informed consent of both clients in writing before proceeding.
  • The last two will assist you in demonstrating compliance with the outcomes.

Bear in mind that if you will also be acting for the buyer’s lender, you will need to consider any specific requirements of the lender (for example, in the CML handbook). See also Indicative Behaviour 3.7.

SRA warns of non-compliance trap in tough financial times

The Solicitors Regulation Authority (SRA) has warned law firms of the temptation of straying from the compliance path as the tough economic climate continues.

SRA Chief Executive Antony Townsend has told delegates at the “Compliance and the role of the COLP and COFA ? six months on” (CLT Conference) of the link between difficult financial conditions and higher rates of regulatory breaches. The conference, held at the Holborn Bars De Vere Hotel in London, heard that there is a clear link between the good times for legal services and levels of compliance, but when market conditions are more testing, the statistics change.

Antony Townsend said: “When market conditions are tough and financial problems begin to bite, individuals who are usually principled and ethical can succumb to pressures and temptations, getting drawn into schemes and poor practices that put their clients, their businesses and their future at risk. The large majority of legal professionals act scrupulously even when the going is tough. In the last week I have seen an example of an individual who, despite having to close a firm in distressing circumstances, has acted with the highest standards in her clients’ interests, and co-operated fully with the SRA.

“But some will succumb, and this is a real concern for us. If the firms who give in to these pressures act in a way that is not in the interests of their clients, then these clients are put at risk, confidence in the sector is undermined and the cost of protecting clients and the public goes up.”

A combination of, among other things, a poor economic climate, budget cuts in the public sector and legislative changes have led to significant financial problems for numerous firms.

Antony Townsend said: “These pressures create not only economic challenges for firms, but also particular pressures upon those working in compliance – COLPs and COFAs – and upon the SRA, as a regulator. The challenge for us is how to use our limited resources to have the most impact in mitigating these problems.

“Targeting bad practices that put clients at risk and undermine public confidence is therefore an immediate priority for us.”

The SRA has brought together all its advice to firms on managing finances – including responsibilities outlined in the Handbook and a series of good and poor behaviours against which to measure practice – on its website. This resource can be accessed here:

More on financial stability

A copy of the speech is available here:

Read the speech