Solicitors "should seek contractual assurances" from unregulated firms

Law Society: Support for solicitors being rolled out

Solicitors working for unregulated entities under the new rules coming into force in November should seek contractual assurances from their employers that their professional obligations cannot be overridden, the Law Society has advised.

It warned that junior solicitors may face “particular pressures when dealing with the ethical challenges” that arise in these new environments.

Under the Solicitors Regulation Authority’s (SRA) new Standards & Regulations rulebook, from 25 November solicitors will be allowed to carry out non-reserved legal work directly to the public from within a business not regulated by a legal services regulator.

In a practice note published yesterday as it begins to roll out support for solicitors to get to grips with the rules, the Law Society considered the ethical challenges of such arrangements, saying that in a similar way to in-house solicitors, “a situation may arise where your employer’s commercial objectives compete with your professional obligations”.

The note said: “For example, there could be a conflict if you are required to process a high number of claims or undertake particularly complex work and you are not able to provide an adequate standard of service to clients; or if your employer wants a particular outcome or course of action that you consider not to be in the client’s best interests.”

This made it important for such solicitors to set “clear expectations with their employer and/or line manager concerning their own professional obligations; in particular the fact that these obligations cannot be overridden and must be maintained even when there is tension from other business demands”.

While recognising that it may not always be possible, the society suggested inserting a clause into the solicitor’s employment contract outlining that their overriding obligation is to comply with their duties as a solicitor and that their employer would not put them in conflict with this.

“Alternatively, it could be set out in an internal memorandum with your employer or line manager.”

The note stressed that solicitors working for unregulated entitles would still be subject to key requirements like managing conflicts of interest, confidentiality and disclosure, and would have to ensure compliance with rules on marketing and complaints handling.

It remained unclear whether legal professional privilege would apply to advice given by solicitors providing legal services to the public from unregulated businesses, the society said.

“The SRA has advised that this is a matter of law and therefore it will not provide guidance on this issue. You will need to assess the level of protection your client has and advise them about whether this is appropriate.”

The note said the SRA was still considering whether solicitors working for unregulated entities would be subject to the same anti-money laundering obligations as legal professionals who handle certain regulated activities.

There is no minimum practising experience required to work as a solicitor for an unregulated entity, and the Law Society said junior solicitors “may face particular pressures when dealing with the ethical challenges that arise in this environment, but will still be accountable to the SRA for any errors”.

It suggested that solicitors work with their employer to ensure “appropriate support networks are in place”, including access to training and advice from experienced solicitors.

“For example, if there is no one in the firm that can provide appropriate support, your employer may engage an external law firm to provide ad hoc support and advice on particularly complicated legal issues or engage an external experienced solicitor to mentor solicitors below three years post-qualification experience.”

Other risks for solicitors were being responsible to the SRA for work they supervised or undertaken as a team.

“This means you may be responsible for work undertaken by non-regulated professionals within your organisation.

“Given your responsibility for ensuring compliance with your regulatory obligations, you may want to put in place some measures to ensure you have sufficient oversight of work that you are responsible for.”

Unregulated businesses will not be subject to the same stringent rules for holding client money as solicitor firms.

“For example, issues may arise when a client payment is made into a general office account. In certain situations, for example if the office account is overdrawn, the bank may not permit the business to withdraw the money again if the client is due a partial or full refund.

“You may wish to discuss with your organisation how client money is to be sufficiently protected.”

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