What does this mean for your law firm?
In summary, four key things are necessary to prepare your firm:
1 – The new Code of Conduct means training your staff on what is changing and how this affects their practice.
2 – Solicitor Accounts Rules – new simpler rules mean more training.
3 – Revising your firm’s practice manual, policies and procedures.
4 – Revising your firm’s quality manual (if you have one such as ISO 9001 or Lexcel).
The Solicitors Regulation Authority (SRA) aim to simplify the current SRA Handbook 2011 with the changes but, as ever, changes mean you need to review what you are currently doing and how it is done to manage the risks arising. For medium and larger firms, this project will last some months.
What are the major changes?
The current 10 SRA Principles are to be reduced to six. The principles remain the fundamental core that every solicitor should work to every day and should have at the forefront of their mind. The ethos behind the change is to focus on the principles and how they affect your day-to-day tasks.
The change will introduce two codes of conduct rather than one - firstly, the Code of Conduct for Solicitors and secondly, the Code of Conduct for Firms.
Solicitors who are owners/managers of the business will be bound by both codes, but employees will be under the individual code of conduct obligations.
Is it any different?
In a word: yes! The professional obligations are put more clearly at the heart of day to day practice. Rule 7.2 of the Code of Conduct for Solicitors (aka the individual code) states:
“You are able to justify your decisions and actions in order to demonstrate compliance with your obligations under the SRA regulatory arrangements.”
The new focus is on you, I stress you, being able to justify your actions in every deal, piece of litigation and work that you do. For many solicitors, this will require a significant change in approach, as they probably think only of their professional obligations when a conflict of interest conduct point arises. Now, you must be able to “demonstrate” compliance at all times.
One useful example is the information given to clients at the outset of their matter on, say, service levels, costs and prospects of success. The Code of Conduct for Solicitors states at the new 8.6:
“You give clients information in a way they can understand. You ensure they are in a position to make informed decisions about the services they need, how their matter will be handled and the options available to them.”
Your professional obligation will be to ensure clients make an informed decision from the options available. How will you show this? And how will you make sure those you supervise achieve this?
You are responsible for others’ actions
The Code of Conduct for Firms aims to make sure that those running law firms have less room to excuse their actions (or failure to act) when dealing with the actions of colleagues. The obligations on the profession are rising. This is evidenced at proposed obligation 8.1, which states:
“If you are a manager, you are responsible for compliance by your firm with this Code. This responsibility is joint and several if you share management responsibility with other managers of the firm.”
The SRA are focusing on their ability to hold law firm managers to account, and by making the obligation “joint and several”, highlighting that the excuses “it wasn’t me” or “it was a firm decision not mine” are expressly not relevant or valid.
I recently spoke jointly with Crispin Passmore of the SRA on this topic at a Law Society event, and Crispin publicly agreed with my analysis that the ethos was key.
This ethos of collective risks is of course familiar to many older solicitors who, prior to the Limited Liability Partnerships Act 2000, were trading as a partnership under the Partnership Act 1890 which set out 127 years ago that partners had joint and several liability for the actions taken in the firm’s name.
What should we be doing?
Compliance officers of law firms and managing partners should be seeking training on the changes. Once they understand the ethos, they can then develop a plan to train their firm. The ethos is different and how the SRA will interpret matters is key, hence the need to take advice