The Solicitors Regulation Authority (SRA) has substantially reworked its new rule on conflicts of interest, which will come into force later this year.
The changes from the criticised draft rule published last year make it far more explicit about the provisions governing property transactions.
Legal Futures has been given advanced sight of the SRA Handbook ahead of its publication on 6 April, after it was approved at last week’s board meeting. It marks the first time all of the regulatory requirements on solicitors have been brought together in one place and runs to 563 pages.
The new Solicitors Code of Conduct is just 54 pages, however, as the SRA gears up to introduce the profession to outcomes-focused regulation (OFR). The code is prefaced by six pages detailing the 10 overarching SRA Principles against which solicitors’ conduct will be judged.
Each chapter of the code contains the mandatory outcomes the SRA expects the solicitor to achieve, and non-mandatory “indicative behaviours” (IBs) that may tend to show that the solicitor either has or has not achieved the outcomes.
The new rule on conflicts has seen the two IBs that were in the previous draft of the code – on systems for identifying and dealing with client conflicts and own-interest conflicts – become outcomes, while 14 new IBs have been added.
Under the rule, solicitors will in future be able to act in conflict cases where clients are competing for the same objective, provided that they meet certain requirements.
The SRA has said the position on acting for buyer and seller will not change under the new code but had originally removed almost all specific references to property transactions. The Law Society and others expressed considerable concern about the uncertainty this could cause and the SRA appears to have bowed to their worries by including an IB that relates to acting for lender and borrower (although in far less detail than is currently the case), while acting for both buyer and seller is an IB that may tend to show the outcomes have not been achieved.
This reverses the present position, where the rule gives express authority to act for buyer and seller in certain limited circumstances. This means it will be for solicitors to show why acting for buyer and seller in a particular case is acceptable, although at the same time it could potentially extend beyond the long-established exceptions to the ban.
The previous draft had not extended exceptions relating to acting for more than one client with a “substantial common interest” and where the clients are competing for the same objective, to situations where the sole purpose of the transaction was conveying land. However, this has now been dropped, bringing property transactions in line with all other matters.
Away from property, few of the suggestions made by the likes of the Law Society and the City of London Law Society – which has campaigned hard to reform the conflict rules – were taken on board, including the latter’s call to change the definitions of “conflict of interest” and “client conflict” to relate only to current clients.
The Handbook’s publication will come exactly six months before the introduction of alternative business structures, when it will also come into force (assuming the SRA is approved as an ABS regulator for that day). In the meantime, the SRA is to launch an intensive education campaign on OFR and the new code. None of the 10 Principles have changed since the earlier draft.