Will your staff have confidence in your compliance officers?

Posted by Brian Rogers, regulatory director and head of content and thought leadership at Riliance, now part of Legal Futures Associate The Access Group

Rogers: Managing and reporting breaches will be much more complicated

The introduction of the SRA Standards and Regulations on 25 November 2019 will see new issues coming into focus for you and your firms over the reporting of serious breaches to the SRA.

Requirement 7.7 for solicitors states: “You report promptly to the SRA or another approved regulator, as appropriate, any facts or matters that you reasonably believe are capable of amounting to a serious breach of their regulatory requirements by any person regulated by them (including you).”

Requirement 7.8 for solicitors states: “Notwithstanding 7.7, you inform the SRA promptly of any facts or matters that you reasonably believe should be brought to its attention in order that it may investigate whether a serious breach of its regulatory arrangements has occurred or otherwise exercise its regulatory powers.”

Requirement 7.10 for solicitors states: “Any obligation under this section or otherwise to notify or provide information to the SRA will be satisfied if you provide information to your firm’s COLP or COFA, as and where appropriate, on the understanding that they will do so.”

Requirements 3.9 and 3.10 for firms mirror 7.7 and 7.8 above.

One issue arises where a breach cannot be determined one way or another and you may be obliged to report it to the SRA so it can investigate and make a determination. What benchmark(s) will you adopt to ensure you comply with Requirement 7.8?

A second issue is where an employee reports what they believe to be something that falls within the above Requirements. They need to know they have complied personally with their reporting duties – the SRA has confirmed that an employee will only have complied with 7.10 if they reasonably believe the COLP/COFA will make a report to the SRA and therefore do not do so themselves.

This will put employees in an unenviable position. By reporting matters directly to the SRA, because they don’t believe their COLP/COFA will do so, they may face the wrath of their firm; alternatively they might face the wrath of the SRA if they didn’t report, as was the case in the Emily Scott case, who was struck off for failing to report at the time the issues arose.

So, what should you think about doing to address the above issues?

First, train all your staff on how to identify a breach and how to assess its seriousness. We have webinars and courses in our online training library.

Then, review your firm’s reporting and communication lines so employees can report breaches as and when appropriate.

Review also your firm’s processes for assessing the seriousness of breaches, and agree benchmarks where you would want to report breaches to the SRA so it can determine seriousness.

You must give employees the confidence that, if they report something to the COLP/COFA, it will be dealt with appropriately; this may include a discussion with the person reporting if it is felt that it is not a reportable matter.

Where an employee still believes a matter should be reported to the SRA (even if it to just cover their backs to stop an Emily Scott scenario arising), allow them to do so without any repercussions. (In any event, you have an obligation under the new regime not to subject any person to detrimental treatment for making or proposing to make a report.)

The management and reporting of breaches after 25 November will be much more complicated so you need to plan now for how it will impact on you and your firm.

Acts/omissions that could lead to a claim for negligence

Another area that you will need to review is how you deal with self-interest conflicts arising out of identified acts/or omissions that could lead to a claim for negligence.

The Howell Jones case has set a clear precedent, that in such circumstances you should advise the client to seek separate independent legal advice and that you can no longer act for them.

Professional indemnity insurers have taken the view that you should not continue to act in such circumstances, but that it is a final decision for you and your firm to make.

This is an interesting position to take as it could potentially leave your firm exposed if you decided to continue acting. For example, the insurer could reserve its position because you went against its advice even though it said it was your decision to make!

If the Emily Scott precedent remains in place beyond 25 November, the SRA’s position in the case will conflict with its own Standards, in that 7.11 states: “You are honest and open with clients if things go wrong, and if a client suffers loss or harm as a result you put matters right (if possible) and explain fully and promptly what has happened and the likely impact.”

There clearly needs to be some clarity from the SRA on this issue, and this may come after a meeting the Law Society is apparently holding in November to determine what guidance it will provide to the profession.


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