The Solicitors Regulation Authority (SRA) has finally issued guidance to those it regulates on dealing with the coronavirus, stressing it will be “pragmatic” when taking action over rule breaches related to the pandemic.
The regulator said it expected firms to have “appropriate contingency plans in place for disruption”, but recognised the exceptional circumstances solicitors faced.
“We must all remain pragmatic,” it said. “We will take a proportionate approach: this includes our approach to enforcement. If we do receive complaints, we would take into account mitigating circumstances, as set out in our enforcement strategy.
“This includes focusing on serious misconduct, and clearly distinguishing between people who are trying to do the right thing, and those who are not.
“We would recommend that if you do face compliance difficulties linked to the virus, you should clearly document the approach you have taken.”
For example, if there were good reasons for a reporting accounting missing the deadline for their report, “we would be very unlikely to take action”.
Solicitors acting in connection with the execution of wills were among the justice system ‘keyworkers’ identified by the Ministry of Justice, and the SRA said that if they could not get access to a client because of the health risks, they could use electronic means so long as they could be sure there was no undue influence and the client has capacity.
If firms could not witness the will in the client’s presence, the regulator suggested asking whether the client has neighbours who could execute at a distance or whether it was possible to execute electronically.
“Some firms have suggested amending the attestation clause to cater for current circumstances – before doing so you should check legal requirements with regard to attestation clauses.”
In its advice on client due diligence (CDD) and ID checks, the SRA said not meeting a client in person was identified in the Money Laundering Regulations as a risk factor, and so this would normally – but not always – warrant enhanced due diligence (EDD).
“CDD is also about assessing the purpose and intended nature of a business relationship. If anything about the client’s instructions strikes you as high risk then, again, you should consider conducting further EDD.”
But if a solicitor cannot adequately establish and verify a client’s identity, then they should not proceed with the transaction.
On training, the SRA said it was still considering what to do about the need for supervised assessment for the legal practice course or completing the professional skills course in time for trainees to qualify in September.
But there was “already flexibility” in other areas of the training rules. “For instance, trainees must be ‘appropriately supervised’ but we would accept firms putting in place sensible arrangements to do this remotely. Qualifying law degree and graduate diploma in law students must be assessed, but we do not specify the form that the assessments must take.”
Bar Standards Board last week made clear that following government or Public Health England guidance was not a breach of its Handbook; the SRA has not made a similar statement.
In a blog on what the SRA should be thinking about, former SRA executive director Crispin Passmore said it should be assisting firms moving to remote working, rather than just leaving it to the market.
“Coming at this with a history of pushing market based regulation, I see SRA liberal and de-regulatory approach to regulation as entirely consistent with intervention in current circumstances.”
He said the SRA “urgently needs to test whether any of its requirements or expectations are putting an unbearable burden on law firms to the extent that they might damage supply”.
This did not mean it should give solicitors a free pass. “But as we head towards a new indemnity insurance year, should they be relaxing the hugely expensive and inflexible minimum terms and conditions?”
Writing before the SRA published its guidance, he said: “They might be clear about their approach to confidentiality and data protection risks and subsequent approach to enforcement where remote working is a response to this health crisis, learning from the ICO.
“They might think about what returns and information are required from law firms and solicitors over the next six months, in the same way that the FCA has for results over the next two weeks. The SRA might offer guidance to supervisors, trainees and apprentices about effective supervision under forced remote working, like BACP.
“Perhaps it will even get to the point of financing much of the next practice fee and 2020/21 budget through reserves, rather than sucking cash out of the market at this point.”
Mr Passmore argued that a “truly market approach tackles real risks” – there was little point in upholding and enforcing standards designed for a different world if the effect was the collapse of supply to people when they were most likely to need legal advice and assistance.
“There is no need to prop up particular business models – those firms that have the strongest balance sheet, most robust cash flows and smartest delivery mechanisms for this changed world will no doubt respond best over the next two years.
“The SRA is a good organisation with great people, but right now it has to make sure it is not pouring oil on to fires. It might even stand with law firms as they struggle for survival.”