By Gideon Habel, Associate in Regulatory & Disciplinary law, Leigh Day
Plotting a careful path to manage regulatory risks before issues arise is always better than dealing with the fallout once problems arise. Your own prudent practices and Jonathan Bray’s expert advice may well be among the tools available to control the risks to you and your firm, but even best laid plans can’t always prevent problems cropping up and the SRA’s attention being drawn.
In this article, we look at some of the basics of what to look out for during an SRA investigation and the importance of seeking expert advice to guide and support you and your firm in responding to an investigation to ensure you achieve the best possible outcome should the SRA come knocking.
How do I know if the SRA is investigating?
Unfortunately, there’s no simple answer to this question. The SRA isn’t specifically obliged to tell you when it’s started an investigation so its approach varies. Sometimes, it will write formally to advise that an investigation is underway. At others, its first contact might be an informal call to arrange a visit or asking for information. It may only be later that you realise that the SRA is, in fact, formally investigating.
Given the SRA doesn’t have to tell you it has opened an investigation, it’s wise to treat any communication from the SRA as potentially related to one and take appropriate precautions, including seeking advice from expert solicitors.
How should I respond to the SRA if it starts an investigation?
The SRA Handbook requires you to cooperate with the SRA in an open and timely fashion, including when it is carrying out an investigation into you. It’s always advisable to do so, especially as failure to cooperate can itself become a disciplinary matter.
Given the stakes, it’s important to manage your relationship with the SRA constructively from the word ‘go’ – getting those communications wrong can have significant and entirely avoidable negative consequences. Anything you say, write or do during an SRA investigation could eventually be used in evidence, so proper advice, planning and preparation are essential, especially before you provide information or documentation.
Early, constructive engagement can also be an effective way to minimise the risk or severity of any enforcement action – but it’s not guaranteed to make the SRA ‘go away’. It’s still wise to take steps at the same time to prepare for the investigation and assess the situation with expert solicitors who can advise you about your duties and what steps to take to achieve the best possible outcome.
What does an SRA investigation look like?
An SRA investigation can be complex and have many different stages. This means that it won’t necessarily follow a single predictable template. Some of the more common features are as follows:
If you’re given notice of a Forensic Investigation, it’s highly likely the SRA has information it believes indicates serious misconduct or a systemic problem at the firm. A Forensic Investigations Officer (“FIO”) will visit your firm and the investigation will usually start with interviews with the Compliance Officers for Legal Practice and/or Financial Administration and a review of the firm’s accounts. The SRA doesn’t have to tell you what it’s investigating but areas of interest will usually become clear as the investigation progresses. The investigation often concludes with a formal interview where the FIO will ask questions arising from the investigation.
Once the FIO has finished investigating, she/he will generally produce a written report setting out the findings. That report will then usually form the central evidential basis for decisions on any enforcement action the SRA considers appropriate.
Section 44B Notices
A Notice under Section 44B of the Solicitors Act 1974 is one of the SRA’s most powerful investigative tools. It compels you (and your firm) to disclose any documentation or information the SRA requests in connection with an investigation into potential misconduct.
The terms of a Section 44B Notice can be wide and require that disclosure is made to the SRA within tight timescales, so ensuring you (or your firm) comply can have significant resource consequences. Satisfying a Section 44B Notice can also raise tricky issues with competing professional duties owed to clients, opponents and other third parties which require careful handling.
An invitation to an interview is usually a serious development in an SRA investigation, indicating it believes serious misconduct has taken place. The interview will usually be conducted by the investigating officer and will seek information and explanations about the matters under investigation. As anything you say in the interview might also be used in evidence against you, your firm or others, proper preparation is vital and representation at interview is highly recommended.
“Explanation With Warnings” letter (“EWW letter”)
The SRA will send an EWW letter if it concludes after its investigation that misconduct has probably taken place. The letter sets out allegations and requires written explanations from you (the “explanations” element). It also includes warnings that that any information provided in response may be used as evidence (against you or others) and that failing to respond may lead to disciplinary action (the “warnings” element).
Given your responses will inform the SRA’s decision as to whether further action is required – including potential sanctions or referral to the Solicitors Disciplinary Tribunal – it is vitally important to get those responses right. This may involve some difficult decisions about which of the allegations it’s appropriate to fight (and how) or whether it’s advisable to make early admissions.
What about the costs?
Although there are costs involved in instructing expert solicitors to help, dealing with an investigation on your own is risky if you’re not a regulatory practitioner and probably also means diverting fee-earners away from revenue generation. A sensible way to avoid having to make this difficult choice is to ensure you have Directors & Officers insurance (or similar) to cover your legal costs in the event you have to respond to an SRA investigation. Ask your insurance broker for more information.
We’ve been there; we can help
We know from experience that responding to an SRA investigation or prosecution into you or your firm can be extremely stressful. Our work defending our own firm and colleagues against the SRA’s high-profile investigation and prosecution over the last four years means we understand the complexities of the process and the importance of early and comprehensive advice and assistance to guide you through.
If you’ve been approached by the SRA, we can assist you in all aspects of your response to ensure you have the expert advice and practical support you need to allow you to put your best foot forward in handling the investigation whilst ensuring it’s ‘business as usual’ for your practice.
Gideon Habel is an Associate in Leigh Day’s Regulatory & Disciplinary team. You can contact the team confidentially by email [email protected] or by phone 020 3780 0406. Nothing in this article is intended to or should be relied on as specific legal advice. If you are subject to an SRA investigation and require advice or assistance, please contact us on the details above