LSB looks to beef up regulatory response to misuse of NDAs

Hill: Upholding public confidence

The need for a “strengthened and harmonised regulatory approach” to tackle the misuse of non-disclosure agreements (NDAs) is being probed by the Legal Services Board.

A call for evidence by the oversight regulator, issued today, will support an investigation into how regulation might help address the problem by supporting lawyers “to better meet their professional ethical obligations”.

The LSB said that while the majority of NDAs were lawful and used legitimately to protect the confidentiality of sensitive business ideas and information, “concerns are mounting about their misuse to conceal wrongdoing”.

It was the #MeToo movement and particularly their use by disgraced movie mogul Harvey Weinstein to silence his victims that brought them to the fore, but the LSB noted that media coverage has highlighted patterns of misuse to conceal unlawful activity in sectors such as the arts, further education, policing and advertising.

“In these cases, legal professionals can be called upon to draft, enforce or otherwise advise on what amount to illegitimate and/or unethical NDAs. Vulnerable individuals who are the targets of discrimination, harassment or abuse may be asked or coerced through an imbalance of power to sign them.

“We consider that there is an active question to be addressed about the professional ethical conduct of legal professionals who assist, enable or facilitate such misuse of NDAs, and whether existing regulatory arrangements are sufficient to address this.”

It gave a series of examples of where use of an NDA was not clearly prohibited by law but might be considered to be unethical.

These included NDAs that “perpetuate systemic imbalances of power, particularly in scenarios where the individual who is being asked to sign is made to feel that they do not have an alternative”; and NDAs that “indirectly encourage or at least facilitate further criminal or inappropriate acts” by protecting an individual who goes on to commit them.

The LSB said it would go on to explore how frontline regulation could be strengthened to set “clearer expectations” for the conduct of lawyers involved in preparing NDAs, support them in meeting their professional ethical obligations “and ultimately supervise and enforce adherence to those obligations where needed”.

Examples of “regulatory levers” the LSB could recommend include changes to codes of conduct, improved education and training, setting reporting requirements and for regulators to utilise monitoring and supervision to support this.

To date, the Solicitors Regulation Authority is the only legal regulator to have take steps to address the misuse of NDAs and the LSB said “there may be benefits in pursuing a sector-wide approach”.

LSB chief executive Matthew Hill said: “We’re interested in hearing from anyone with a view on this topic – whether the real experience of people who have been subject to misuse of NDAs, practitioners in this or related fields, regulators, representative bodies and others – to help identify solutions that uphold public confidence.’

The call for evidence runs to 14 July.

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