Law firms need an exit strategy, SRA says

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28 May 2015


SRA

SRA: firms “need to think about the impact on clients”

Law firms should ensure they have a proper exit strategy, the Solicitors Regulation Authority (SRA) has warned, after five solicitors were fined for failing to close their firms properly in the space of just nine days.

The fines imposed by the Solicitors Disciplinary Tribunal ranged from £1,000 to £5,000, but the costs the lawyers were ordered to pay were much higher.

The hearings all took place between 14 April and 23 April 2015. David Alan Eager was fined £1,000 and ordered to pay £13,000 costs. John Bryon Sampson and Angela Susan Marshall were fined £2,500 and £1,000 respectively and ordered to pay £11,000 costs.

Justin Philip Nelson was fined £2,500 and ordered to pay £5,200 costs, while Ian Robert Gannicot was fined £5,000 and ordered to pay £12,770 costs.

Gordon Ramsay, the SRA’s director of legal and enforcement, said: “Firms have professional responsibilities, and those responsibilities remain when a firm is closing down. The need to think about the impact on clients becomes more important when the firm faces closure, voluntary or otherwise.

“This is not an issue about affording run-off cover or finding a successor practice, which we know can often be a problem for those looking to close down. It is about ensuring the interests of clients and others are fully protected.”

In its guidance on closing down firms, the SRA said clients must be given “as much notice of the intended closure date as possible” to enable them to instruct another firm.

“Remember that it is for the client to decide which firm they want to take over their matter. In particular, bear in mind that you hold clients’ money in trust for them and you need their (properly informed) consent to transfer it to someone else.

“An urgent need to transfer files to another firm because of, for example, imminent insolvency, is generally evidence of failure to plan since such problems usually develop over time.”

The SRA said transferring files and money to another firm before clients had given proper consent carried “significant risks”, including breach of trust, breach of confidentiality, and could possibly cause a “serious complaint if the new firm has a conflict or the client would not want to instruct them”.

“If there is no alternative because there is a risk, for example, that an office will be repossessed and files removed by a landlord, having a new firm take the files may be the only option.

“The new firm will need to contact clients urgently and seek consent properly while taking steps, perhaps working with people from the closing firm, to identify and manage conflicts.”

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