Closed Consultation

A question of trust

29 March 2017

You can download this consultation paper or read it below.
The deadline for submission of responses to this consultation was 31 January 2016.
The information that appears below is for reference purposes.
Download our consultation response
Read our research findings summary
Download our research findings

Foreword from SRA Chair, Enid Rowlands

The businesses we regulate, the solicitors and others they employ play a vital role in the provision of legal services to both individual members of the public and businesses, large and small.

The legal services market is changing and we, as the largest regulator in the UK legal sector, have a part to play in that. We regulate solicitors, staff who work in law firms and the firms themselves. It is important that while we ensure that firms can grow, innovate and provide a range of competitive services to those who need them, we keep a sharp focus on the professional principles that underpin the sector and the work of everyone in it.

As the legal market develops and grows, the public protection offered by the fundamentals, the standards that are at the heart of everything professionals do, have never been so important.

Each and every person who goes to a law firm places trust in the solicitors and staff that they see. That trust is based on the profession's commitment to core standards and principles set out in the Legal Services Act – standards such as integrity, confidentiality and independence.

Trust is, as they say, hard won and easily lost. But how easily? And what should happen when professionals fall short of the standards we set? This consultation asks these difficult questions.

As a regulator, we have to ask and answer these tough questions every day. We are asking lawyers and the public to consider what matters, what action we should take when things go wrong and what factors we should be taking into account. We will use your views to develop our reference framework, providing clarity and consistency across all our work.

Please do let us know what you think, by responding to this consultation or by spending a few minutes on our survey on our website. It asks you to vote on real life scenarios and the results feed into this consultation.

I look forward to hearing your views. Thank you for taking an interest in our work.

Enid Rowlands
SRA Chair

Professional standards and values: what should happen when things go wrong

Background

The SRA is the independent regulator of solicitors and law firms in England and Wales, protecting the public and supporting the rule of law and the administration of justice. We do this by overseeing all education and training requirements necessary to practise as a solicitor, licensing individuals and firms to practise, setting the standards of the profession and regulating and enforcing compliance against these standards.
We regulate nearly 170,000 individual solicitors and over 10,000 businesses providing legal services in England and Wales. While the vast majority of those we regulate are qualified as solicitors, we also oversee the thousands of non-solicitors who may be owners, managers, or employed by the businesses we regulate. These people are a mixture of support staff such as paralegals, non-legal staff, and other types of regulated legal services providers such as barristers, legal executives and licensed conveyancers. As a regulator, the standards we set therefore apply to those involved in the businesses we regulate throughout the legal sector, as well as to individual solicitors.
Since changes were made to the law governing how lawyers can conduct their work in 2007¹, the market for legal services continues to develop and bring positive changes for people, businesses and the wider economy. Solicitors and law firms are a major part of this market.
We are committed to regulating the way solicitors' services are provided to support the changing market, allowing new ways of working to develop, and competitive services to be provided for the people who need them. As part of that, we need to strike a balance between:
- freeing up businesses offering legal services to allow them to grow and innovate; and
- maintaining both the quality of legal services and protection for users of legal services and the wider public when things go wrong.
By users of legal services, in this context we mean anyone that receives a service from a business or individual we regulate. This could be anyone from a daughter trying to administer her deceased father's estate, to a charity wanting to employ more staff, to an international business seeking to take over one of its rivals.
The core professional principles are set out in the Legal Services Act 2007. They are:
- act with independence and integrity;
- maintain proper standards of work;
- act in the best interests of clients;
- comply with their duty to the court to act with independence and integrity; and
- keep client affairs confidential.
These principles underpin all aspects of our Code of Conduct. They describe some of the core elements of professionalism in legal services and we require all those we regulate to act in accordance with these principles. Society as a whole has to have confidence in the professionalism of those providing legal services and anything that undermines that confidence is an issue for us all.
A driving aim behind our current programme of reform is clarity around, and a sharp focus on, professional standards. With an increasing emphasis on standards, real transparency is required around what action we would take when they are not met.

The need for consistency, proportionality and transparency in decision-making

In accordance with the better regulation principles, we aim to demonstrate consistency and proportionality in our decision-making and to be open with both the public and the profession about what we think is serious in relation to the conduct of the individuals we regulate. This provides clarity for solicitors and firms about what is expected of them and also enables the public to hold the profession to account more easily. This continued drive for greater clarity in our work is in line with our May 2014 Policy Statement.
In mid-2012 the SRA commissioned a Comparative Case Review of how we dealt with disciplinary cases. The resulting report highlighted that there, '...was evidence of disproportionality at three stages of the regulatory process, namely: at the point at which a case is raised or a complaint is registered against a solicitor or a firm; in the process of investigating that complaint; and at the point at which an outcome is determined and a sanction imposed'. Transparency around the standards expected of the profession is an important component in providing assurance that our decision-making is consistent and is rooted in a framework tested with the public and the profession.

Our processes – what happens to concerns about those we regulate?

Around 1,000 reports of concerns about solicitors or staff working in the firms we regulate come in to us every month. Sources include members of the public, colleagues or employers of the people being reported to us and, of course, concerns we identify ourselves when looking at firms, or the information those we regulate submit to us. We assess how serious the issue is, looking at factors such as the number of people affected, whether it was a 'one off' or part of a pattern, and the nature of the departure from our standards. Some reports of concerns are closed down at the initial stages of our procedures and the information kept on file, while the potentially more serious matters go to our supervision team for formal investigation.
There is a range of possible outcomes from our investigations, from taking no action through to regulatory engagement with a firm, imposing a fine or referral of the most serious issues to the Solicitors Disciplinary Tribunal.

What kind of concerns do we receive?

We regulate a diverse range of people and businesses and we receive a wide variety of reports about their behaviour, ranging from the very serious to the seemingly less so. Some issues relate directly to the work of a regulated individual and some are about actions in their personal life. Examples of the types of reports we receive include:
- someone complaining that her solicitor swears and is rude;
- a trainee solicitor caught fare dodging on the tube after a night out with friends;
- a law firm employee taking money out of the client account (money belonging to clients not the firm) to pay staff wages; and
- a solicitor with a high profile community role allegedly sending, unsolicited, explicit photos of himself to staff and others.

What's new? – Our plans for assessing how serious the concerns reported to us are

Our research shows that there are widely differing views on what is serious and what should be done in response to any particular issue. Every person has their own value set and makes their decisions accordingly. For example, for some people, things that happen in a solicitor's private life are not relevant to their role as a lawyer. Conversely, others think that bad behaviour outside the workplace undermines public confidence in the profession.
For us, this presents two issues. One is that the decisions we make will seem wrong to many people, and the second is that we must ensure that our own decision-making is consistent and in line with a validated regulatory position.
In order to tackle these issues we are putting in place a new reference framework to be used as a consistent starting point for making decisions (please see annex one for an initial draft). This reference framework will ensure our staff have a shared understanding of what we see as serious breaches of our standards. We will use it to decide on the relative seriousness of a concern, and the appropriate outcome.
The development of this emerging framework will be informed through a wide-ranging programme of consultation with the public, consumers, and the profession. We have already run a survey of a sample of the profession and used the data received to help us develop the framework set out at annex one, as well as undertaking a series of scenario-based voting exercises with staff and Board members at the SRA.
The framework will underpin any decisions we take about concerns, from the authorisation of a new solicitor entering the profession right through to enforcement action against an existing firm or referral of an individual to the Solicitors Disciplinary Tribunal. Once completed, the framework will provide a clear, over-arching statement of what we consider to be serious. It will take into account factors such as the conduct of an individual, the intention behind their actions and any harm caused. It will set out a clear view on regulated individuals' behaviour and the action we are likely to take in different circumstances. It means that:
- the public will know what will happen if they complain to us;
- those we regulate will know what we expect and what will happen when things go wrong; and
- we will have a clear view on a common set of standards and our response to breaches of them.
The professional principles in the Legal Services Act 2007 underpin all aspects of our code. They describe some of the core elements of professionalism in legal services and we require all those we regulate to act in accordance with these principles. We have used these principles to provide the structure for our framework and propose to use them in other key elements of our work (such as our handbook) as we continue our regulatory reform programme. The fourth principle – 'comply with their duty to the court to act with independence and integrity' highlights the constitutional role of solicitors, and therefore also the public interest role of the SRA. Issues relating to the rule of law and administration of justice are key to professionalism and to the standards expected of solicitors.
Maintaining standards while reducing regulation places more responsibility on the individual. For the purposes of this piece of work we have therefore focused on individuals, but will consider in future how the framework may apply to firms and how individuals may be responsible for a firm's actions. We have populated some parts of the framework but not all. This is to give an illustration of the type of content we anticipate. We expect to add to the contents of the framework in light of feedback to this consultation and its accompanying survey. In the following paragraphs we outline a number of questions we are seeking views on. These should be read alongside the draft framework at annex one.

Our questions

Intent

We have grouped the motivation or culpability of individuals or firms who fail to meet rules or obligations into three broad categories.

'No intent' describes acts or omissions which occur as a result of a mistake or accident or were otherwise unintended.
'Lack of knowledge or recklessness' describes acts or omissions where the person or firm should reasonably have known about and/or taken into account a rule or professional obligation, but did not do so. Acts or omissions are more serious if they are persistent or repeated.
'Intent' describes breaches where a person or firm deliberately or knowingly acts contrary to their professional or regulatory obligations. Acts or omissions are more serious if they are persistent or repeated.

Question 1a

Are these three categories clear?

Question 1b

If the categories of intent are not clear, how could they be improved?

Question 2a

Should 'lack of knowledge' be considered separately from 'recklessness'?

Question 2b

If 'lack of knowledge' should be considered separately from 'recklessness', which is the more serious?

Question 3

Do you have any further comments on 'intent'?

Harm

The specialised knowledge held by professionals means their relationship with those seeking their services will usually be unequal². Clients must be able to trust that their legal advisers are acting honestly and independently, in their clients' best interests, at the same time as providing a competent service. Dishonesty or other abuses of trust may damage an individual client's confidence in their solicitor or firm and can also damage public confidence in the profession. Case law³ and guidance issued by Solicitors Disciplinary Tribunal⁴ identifies damage to confidence in the profession as the most serious harm that can be caused.

Regulated individuals have a duty to maintain the rule of law and to act honestly. Criminal convictions are likely to undermine public trust in the profession, whether or not they relate to professional practice.

Question 4

Do you think criminal convictions (excluding minor motor offences), should be treated as matters of concern whether or not they relate to the regulated person's professional work?

We are not always concerned about the conduct of the individuals we regulate in their private lives. However some actions, even though they do not relate to professional practice or result in a conviction, may damage public confidence in the profession. Such situations arise, for example, where a regulated person publishes views or opinions that are offensive to groups protected by the Equality Act 2010; or which publicly demonstrate a lack of honesty or trustworthiness. In such cases, it would be appropriate for us to consider these matters more closely.

Question 5

Do you think that in considering complaints or making other decisions the SRA should include events that occur in an individual's private life, outside professional practice, that breach the professional principles?

The seriousness of events generally increases in proportion to the harm caused by an act or a failure to act. Harm is often seen primarily in financial terms or in damage to the reputation of or trust in the profession. We also regard a breach of clients' rights and dignity, and particularly their rights under the European Convention on Human Rights (for example the right to non-discriminatory treatment, or to private and family life) as 'harm' even where there is no financial impact on the client. However, the consequence of poor quality work is not necessarily only financial loss or inconvenience as a result of delay, but may also result in loss of legal rights. Such losses of legal rights are not limited to data protection and equality issues.

Question 6

Do you think breaches of clients' rights to rights to privacy, dignity and non-discriminatory treatment should be treated as causing harm in themselves, even where there is no financial impact on the client?

Potential harm

In some cases no harm has actually occurred, although the event – the act or failure to act – has the potential to cause harm. This might be because the conduct is identified quickly and harm prevented, or it could simply be luck that no harm arises. Where harm has not yet occurred we have categorised the offence as being one level lower than where it has. This is intended to take into account the risk of harm that the event causes to others, while also recognising the actual impact of the act or failure to act.

Question 7

Do you think actions that have not resulted in harm, but have the potential to do so, should be treated as less serious than the same actions where harm has arisen?

Question 8

Do you think actions that have not resulted in harm because they were identified early (e.g. by regulatory action), but had the potential to do so, should be treated as less serious than the same actions where detection only happened after harm had arisen?

Impact of conduct on third parties

In assessing the harm to clients or others as a result of an individual's conduct we should consider both the seriousness of the harm and its impact on the client. For example, in considering actions that lead to financial loss to a client or other party we would consider the conduct increasingly serious as the amount of money involved rose. However, we should also consider the impact of the financial loss on the client(s). The loss of relatively small sums of money could have a significant impact on small firms or individual private clients.

Question 9

Do you think that when we make decisions we should consider the impact of an individual's conduct on clients or other parties, as well as the nature and scale of the offence?

Other factors

As part of our consultation we will also be exploring other factors that may be taken into account by our decision-makers, such as the relative seniority of a solicitor or law firm employee, the motivation behind an action, remediation, and repetition or risk of repetition of behaviour.

Vulnerable clients

As discussed, there is normally an imbalance in knowledge between a professional and their client. The solicitor, for example, has a wealth of professional knowledge and the client – the person asking for help – does not have that expertise. This makes many clients, particularly those who rarely use legal services, vulnerable to receiving poor service, being misled or being financially disadvantaged. Some clients have particularly high levels of vulnerability because, for example:

they are recently bereaved or face a stressful situation, for example involving sensitive family matters;
they are suffering ill health; or
the outcome may have a significant impact on them, such as loss of liberty or deportation.

Some clients may also be vulnerable as a result of physical or mental disabilities, difficulty in understanding written English, or because of their age or lack of maturity. Results from our survey showed that solicitors tend to regard abuse of the elderly or mentally ill as particularly serious.

Clients who are vulnerable as a result of their personal circumstances may not only have difficulty judging the quality of legal advice but also how appropriate their lawyers' actions might be. This means that they may be vulnerable to different types of misconduct, such as having their private personal health details shared or some form of inappropriate personal relationship.

Question 10

Should we view breaches as more serious where they involve vulnerable clients?

Question 11

Should we distinguish between levels of vulnerability resulting from:

lack of legal knowledge or experience of legal services, and
vulnerability arising from personal circumstances, including mental or physical ill-health or disability?

Question 12a

Are harm, intent and vulnerability the right factors for us to be taking into account?

Question 12b

Are there any other factors you consider should be included?

General

Question 13

We have focused on the professional principles set out in the Legal Services Act 2007. Do you think that we have covered the right issues and given clear examples?

Annex 1: reference framework

Please note that we have populated some of the boxes to give an illustration of the type of content that we anticipate. The final reference framework will be completed using consultation and survey feedback.

Principle 1a – Independence

	Rule of law and proper administration of justice	Independent advice	Conflicts of interest
Level 1 (example outcome: no action)
Level 2 (example outcome: engagement)
Level 3 (example outcome: warning/ rebuke)		Enabling an unregulated entity to control a regulated firm
Level 4 (example outcome: low level fine)	Entering into a business partnership or other arrangement with a person with a criminal conviction relating to financial or other dishonesty	Giving advice when compromised by knowledge of case from another source Acceding to client pressure in interpreting the law, or providing advice on appropriate action	Conflict of interest between clients where no harm arises to either client
Level 5 (example outcome: large fine/suspension)	Not acting on knowledge of criminal behaviour Entering into a business partnership or other arrangement with a person with a criminal conviction relating to financial or other dishonesty resulting in money laundering or other offences		Conflict of interest between clients where one client is disadvantaged Conflict of interest between client and solicitor
Level 6 (example outcome: strike off)	Engaging in or enabling bribery or corruption	Using client account to offer a personal banking facility to clients	Conflict of interest between client and solicitor where solicitor has financial or other interest in the outcome

Principle 1b: Integrity

	Honesty in all dealings with clients, colleagues and employers	Fairness and non-discrimination	Compliance with the law	Public confidence in the profession
Level 1 (example outcome: no action)			Parking/ driving with fixed penalty notices	Conduct in private life (not public)
Level 2 (example outcome: engagement)	Errors in billing client
Level 3 (example outcome: warning/rebuke)	Accounting mistake – wrong funds in client account Incorrect interest paid	Discrimination against client or colleague to groups protected by Equality Act Bullying junior staff	Cautions and penalty notices except those relating to dishonesty	Personal conduct with lack of honesty/integrity or disregard for welfare of others, which is made public
Level 4 (example outcome:low level fine)	Failure to redeem mortgage or pay stamp duty land tax Misleading/dishonest marketing or advertising Misleading client for personal benefit	Use of language in public that is offensive to groups protected by Equality Act Use of discriminatory language to client/ colleague Tribunal finding of sexual harassment or similar	Cautions and penalty notices relating to dishonesty	Publishing material showing lack of honesty/integrity or serious disregard for welfare of others
Level 5 (example outcome: large fine/suspension)	Lying or omitting information on (non-legal) documents Client funds used to meet other obligations – repaid Misleading SRA, a lender, HMRC, or any other party	Discrimination against client or colleague to groups protected by Equality Act	Convictions other than those relating to dishonesty	Dishonesty or fraud while serving in a position of trust outside professional practice
Level 6(example outcome: strike off)	Misuse of client funds		Convictions resulting in imprisonment or a suspended sentence Convictions involving fraud, bribery, dishonesty or which are motivated by discrimination

Principle 2: Proper standards of work

	Competence in all aspects of work	Dealing with complaints	Co-operating with the SRA and other regulators and complying with rules and requirements.
Level 1 (example outcome: no action)
Level 2 (example outcome: engagement)	Fail to supervise or manage staff Failure to manage workload Inadequate document management or record keeping	No complaints systems or procedure	Practising without a current practising certificate Failure to maintain indemnity insurance
Level 3 (example outcome: warning/ rebuke)	Significant delays in progressing cases		Failure to provide SRA with required information
Level 4 (example outcome: low level fine)	Incompetent advice leading to financial loss to client Working outside limits of knowledge Breach of undertaking	Misleading clients in response to complaints Failing to respond to complaints from clients	Failure to comply with account rules
Level 5 (example outcome: large fine/suspension)	Firm is financially unstable	Obstructing investigation of complaint to SRA, or other regulator	Providing false or misleading information to regulator
Level 6 (example outcome: strike off)

Principle 3: Acting in the best interests of clients

	Acting in the best interests of each client	Acting with clients' consent and in accordance with their instructions	Communication and actions take into account clients' needs and circumstances
Level 1 (example outcome: no action)
Level 2 (example outcome: engagement)			Being impolite and inconsiderate of clients' needs Communicating in overly complicated language
Level 3 (example outcome: warning/ rebuke)	Failure to raise concerns about standards of practice	Putting undue pressure on clients to take particular action	Not keeping clients informed of progress of case Providing inadequate information about fees
Level 4 (example outcome: low level fine)	Using professional contact with clients to develop personal relationships (including with vulnerable clients)	Not following clients' instructions	Directing obscene/offensive language
Level 5 (example outcome: large fine/suspension)	Deliberate over charging client	Lying to/misleading clients
Level 6 (example outcome: strike off)	Financial dishonesty involving vulnerable client

Principle 4: Acting with independence before any court

	Honesty in all dealings with the court, litigants and other participants	Compliance with court rules and procedures	Abuse of court processes
Level 1 (example outcome: no action)
Level 2 (example outcome: engagement)
Level 3 (example outcome: warning/rebuke)			Bringing cases without legal merit
Level 4 (example outcome: low level fine)		Failure to comply with rules (e.g. disclosure rules)	Failing to consider duty to court when following client's instructions to pursue aggressive or speculative litigation
Level 5 (example outcome: large fine/suspension)	Knowingly allow misleading/false information to be presented to court Present dishonest evidence/lie to court	Contempt of court	Bringing cases with the primary purpose of incurring unmanageable costs for client's commercial rival Using the threat of litigation to obtain settlement on cases that have no real merit Encouraging or enabling clients to incur costs disproportionate to the value of the case
Level 6 (example outcome: strike off)	Financial dishonesty involving vulnerable client

Principle 5: Confidentiality

	Protection of information from improper disclosure or use when it is stored, used or transmitted	Disclosure of confidential information about clients
Level 1 (example outcome: no action)
Level 2 (example outcome: engagement)	Failure to dispose of information securely (e.g. from computer hard drive before disposal of computer)	Accidental disclosure (e.g. wrongly addressed email) Loss through error (e.g. leaving briefcase in taxi)
Level 3 (example outcome: warning/ rebuke)	Inadequate or outdated security system
Level 4 (example outcome: low level fine)	Disposal of confidential records in ordinary waste/public place Inadequate or outdated security system resulting in cyber-crime or serious security breach	Papers used/ left where accessible to others
Level 5 (example outcome: large fine/suspension)		Disclosure of client data to third party
Level 6 (example outcome: strike off)		Disclosure of client data to third party

Notes

These changes were made by the Legal Services Act 2007
But not always: a large corporation might be a sophisticated purchaser of legal services where issues of information asymmetry do not apply and, in addition, perfectly competent to ensure their own "protection" (although even sophisticated consumers may require that regulation ensures, for example, that solicitors have been properly trained). For further discussion see our policy statement Approach to Regulation and its Reform 7 May 2014.
Bolton v The Law Society [1994] 1 WLR 512.
'In assessing seriousness the most important factors will be (1) the culpability for the misconduct in question and (2) the harm caused by the misconduct. Such harm is not measured wholly, or even primarily, by financial loss caused to any individual or entity. A factor of the greatest importance is the impact of the misconduct upon the standing and reputation of the profession as a whole.' Solicitors Disciplinary Tribunal Guidance Note on Sanctions (3rd Edition), December 2014 at para 6.

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