Regulation and Reputation

It can’t have come as a big surprise that an overwhelming majority of the public supports an independent regulator of solicitors. A ComRes poll published last week showed 82% backing for solicitors being independently regulated. This will bolster the Solicitors Regulation Authority’s (SRA’s) ongoing bid for independence which, its Chief Executive says, will make regulation cheaper and fairer.

People would trust an independent regulator more than one linked to the professional body. Under the current regime, the SRA is funded by the Law Society, the body that represents lawyers and law firms. Currently some 40% of the annual fees paid for a practising certificate issued by the SRA goes to the Law Society.

Other professions are already regulated by independent disciplinary bodies – eg the General Medical Council (GMC) deals with complaints against medics and is independent of the British Medical Association (BMA). Medical professionals pay fees to the GMC but paid membership to the BMA is voluntary.

Similar principles apply among accountants and actuaries where the Financial Reporting Council is their independent disciplinary body in the UK.  Its disciplinary schemes operate independently of the various professional bodies it covers, such as the Institute of Chartered Accountants in England and Wales, the Chartered Institute of Management Accountants, and the Institute and Faculty of Actuaries.

It is said that an independent complaints and disciplinary body would result in more lawyers and firms being referred, whether by the public or other members of the profession.

The SRA has authority to issue warnings and levy fines of up to £2,000 but alleged misconduct assessed to be of risk to the public is referred to the independent Solicitors Disciplinary Tribunal (SDT). The SDT can impose greater penalties such as suspension, striking off and fines on which there is no limit.

In the fourth quarter of 2014, the last year for which records of complaints against solicitors are publicly available, the SRA carried out 3,259 risk assessments, including self-referrals, of which 42% warranted further action.

In the whole of 2014, the SRA referred 168 matters to the SDT. The SDT made 103 orders, 50 relating to solicitors being struck off, 14 to suspensions and 10 to fines, one of £75,000 being the highest recorded to date.

The SRA itself has been pushing for some time to increase the level of fines it can impose on solicitors and law firms beyond the current £2,000 limit which, it argues, is lamentably inconsequential for top-ranked law firms with annual turnovers in excess of a £1 billion. This level contrasts starkly with fines it can impose on Alternative Business Structures and their members – up to £250 million and £50 million respectively.

However it is the reputational impact that can cause the most lasting and public damage. Gone are the days when partnerships comprised partners who knew each other well and could consequently keep any issues among themselves. Firms now have a regulatory responsibility to investigate causes for concern and to report such matters swiftly and comprehensively.  The traditional “no comment” to inevitable media enquiries is unlikely to contain such a story.

The first question for any law firm then is whether they will publicly stand behind the partner or seek to gently distance themselves from errant behaviour.  Is the matter explainable as a breach of policies or trust where the firm can demonstrate it was a victim too?  Was trust in a client instruction misplaced?

In some cases, an issue emanates from a wider “corporate” failing: poor oversight, incorrect advice albeit innocently given and signed off by COLPs or COFAs, not just the individual in the spotlight. Reputationally, these are more tricky scenarios requiring nuanced responses in which to convey lessons have been learned, processes tightened and that similar problems will not arise in future.

There is no ‘one size fits all’ approach. An incident involving partner fraud is a very different scenario to a client matter that simply didn’t tick all the right boxes.  For a local law firm a breach may be reputationally and financially devastating which a larger City firm could weather more easily.

The key PR-wise is to plan ahead as far as possible taking into account all relevant audiences and media arenas and a realistic view of how serious the outcome could get.

  • Don’t forget your fellow partners and employees are your biggest asset – give them the tools to manage negative enquiries and sources to whom they can defer.
  • Do ensure clients don’t learn about a problem through the media.
  • Don’t give too involved a response to a speculative media enquiry or too clipped a response to an important well-informed journalist’s questioning.
  • Don’t ignore social media complaints – mud can stick before a regulatory decision is known.
  • Do show loyalty to employees whose conduct is being overblown by an overzealous complainant.

At Bell Yard we have assisted a number of law firms where partners and/or firms face investigation and disciplinary action.  If the SRA continues along its chosen path, more firms may find themselves under regulatory and media scrutiny for which timely and experienced advice and support is invaluable.


12 February 2016

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