No doubt you have been eagerly waiting in edge-of-the-seat anticipation for an announcement about the new SRA Handbook.
Well, the details are out and we’ve summarised the main changes coming next year. The next 18 months is going to be a rollercoaster. First the new Money Laundering Regulations to get to grips with (still no final detail from the Treasury, despite a 26 June implementation deadline…) along with the Criminal Finances Act 2017 coming into force later this year. The new corporate offence of ‘failure to prevent facilitation of tax evasion’ is particularly worrying for law firms. We’ll be looking at this in more depth shortly.
Then well before next May we’ll all need to get our heads around the GDPR, which will affect law firms large and small. Our ‘nutshell’ guide below is essential reading if you haven’t a clue about the new data protection legislation.
If that isn’t enough to make your head spin, we also bring you the latest industry news including the dramatic conclusion to the Leigh Day hearing; Medco banning ‘shell’ companies; holiday sickness claims in the spotlight, as well as our usual selection of juicy disciplinary decisions.
As always, please get in touch if you have any comments, we would love to hear from you.
Have a great weekend!
The General Data Protection Regulation (GDPR)
With implementation less than a year away, we thought it would be useful to have an easy to follow guide on everything you need to know about the GDPR, so as promised that’s exactly what we have done. Read Lisa’s guide entitled ‘GDPR in a nutshell‘ to get up to speed on what you need to do before May 2018. A year may feel like a long time but there’s a lot to do. Watch this space for further information and guidance…
The new SRA Handbook
Following a lengthy consultation, the SRA has announced the first phase of changes to the Handbook. The revised Handbook, which will come into effect around autumn 2018, has two sets of Codes of Conduct – one for individuals and one for firms. The SRA says that ‘every solicitor will be absolutely clear about their personal obligations and responsibilities’ and firms can have ‘clarity about the systems and controls the need to provide good legal services’.
The Accounts Rules have been reduced from 41 pages to just 7 with the SRA stating that it wants a focus ‘on the protections that really matters, specifically keeping clients’ money safe’. It has however thankfully dropped the proposal to change the definition of ‘client money’ in response to serious concerns raised by the profession.
Why it matters
The SRA says that it wants to cut bureaucracy and make the Handbook simpler. Sounds great in theory. But with the move to OFR, we have seen that a lack of detailed guidance can result in meaningless high level principles and huge practical uncertainty. The regulator assures us that the rules will be complemented by online toolkits and other resources to help, but we remain to be convinced. It seems to us that this approach has the potential to confuse things even further. Can you be sure you have found all the relevant conduct information, if everything is dotted about in different places? What weight does a toolkit carry – can it be relied upon to avoid enforcement later down the line?
There are of course benefits in simplification. Getting rid of those awkward Indicative Behaviours will be a huge improvement, and the Accounts Rules were in desperate need of an overhaul.
We are also going to see consultations about reforming of the rest of the SRA Handbook over the next year or so. Everything is on the table, from authorisation to practising rules, insurance to enforcement.
Like it or lump it, we are all going to have to work with the new Handbook. That means reviewing policies and procedures and putting in place training for everyone in the firm. A job for next summer!
Solicitors will be able to practise in unregulated firms
The SRA also announced this week that, as anticipated, it is amending the Practice Framework Rules to allow solicitors to provide (unreserved) legal services through unregulated businesses. The current rules prohibit solicitors from using their professional title to provide legal services, except through an SRA-regulated body or sole practice.
The SRA believe this fundamental change will help address access to legal services, and will increase competition in the legal services market. The regulator viewed last December’s Competition and Markets Authority’s report on legal services as vindication for this approach.
Why it matters
Concerns have been voiced that these changes will undermine public protection and the solicitor ‘brand’, with the potential to cause huge damage to the public’s trust in the legal system. Clients will not have the benefit of the Compensation Fund if things go wrong, PII coverage will be weaker, and confusion will be inevitable. We will have fully-regulated solicitors and those who are sort-of-regulated-but-not-really.
It will also mean that firms will face increasing unregulated competition, from in-house legal teams to a continued rise in ‘Alternative Legal Service Providers’.
But lawyers are an adaptable bunch, and there will be opportunities to take advantage of. Take this for starters – how many of your services are ‘reserved’ under the Legal Services Act? Can you make the case for hiving off your non-reserved work (e.g. HR, general commercial, uncontested divorce) into an unregulated body with a lower cost base?
Leigh Day: Was it worth it?
Three of Leigh Day’s solicitors, including a founding partner, have been cleared of 19 charges of professional misconduct in the handling of claims relating to allegations of abuse by British soldiers in Iraq. This was SDT’s longest-ever trial, running to 6 weeks with the SDT taking a further week to make its decision.
Why it matters
Not only was this an unprecedented case for the SDT in terms of scale, but also as ultimately it is the profession who will have to foot the bill. Leigh Day’s costs are said to be an astronomical £7 million, and SRA’s own costs are not far behind.
Given that the SRA has not been successful on any of the points then it is likely it will have to foot some if not all of Leigh Day’s costs. The SRA have not ruled out the possibility of an appeal, the costs of which are not even worth thinking about.
Questions are now being asked of the SRA, given that they were unsuccessful on all points, should the case have been handled as it was?
No doubt we will also see renewed calls from the regulator to lower the burden of proof in the SDT from the criminal to the civil standard.
Medco, the company that oversees independent diagnosis of whiplash injuries, announced on the 6th June that it had identified and suspended a further 21 ‘shell’ companies from the Medco system. The way the Medco system works is that users are given a selection of medical agencies that they can use. By creating these so called ‘shell’ companies that operate under an umbrella company, medical agencies increase their chances of being selected as an option. This is clearly a widespread issue – as 134 were also suspended in November last year.
Why it matters
There are clearly those in and around the profession that have no problem with undermining the system. We are likely to see future disciplinary actions against firms that have acted dishonestly in manipulating Medco, particularly for their own benefit.
- Solicitor Naresh Chopra was struck off the roll – for a second time – following the SDT accepting the majority of the SRA’s allegations against him including dishonesty, misleading lenders, and allowing his client account to be used as a banking facility in dubious transactions.
- Rajwinder Bharya, a Solicitor who misled her opponent in litigation, stating that she had a witness statement from a witness when she did not, was fined £7500 by the SDT. The SDT accepted that she was suffering from an illness which was known to cause cognitive impairment and said that this meant that she could not be regarded as being ‘wholly responsible’ for her wrongdoing.
- Two partners were fined £3500 and £5000 and ordered to pay costs of £16,000 on a joint and several basis for acting where there was a conflict of interest. They acted for former clients of a firm shut down by the SRA and for one of that firm’s solicitors.
- Solicitor Stefano Lucatello was fined £5000 and ordered to pay costs of £2500 for failing to display proper professional respect and courtesy in respect of a litigant in person including stating ‘please do not waste my time with irrelevance’, ‘you seem to think that I have nothing better to do but argue irrelevant issues with you’, ‘ do not think that I will not have you arrested’ and our favourite ‘(you) argued with the judge in court like a fisherwoman’.
- A paralegal received a Section 43 order for pursuing personal injury claims on behalf of clients who had not signed retainers or written instructions and had notified the firm that they did not want to pursue a personal injury claim.