The increasing reliance on Regulatory Settlement Agreements (RSAs) by the SRA to resolve cases of alleged misconduct, including breaches of anti-money laundering (AML) regulations, has raised significant questions about their fairness and effectiveness.
While RSAs are often framed by the regulator as a pragmatic way to achieve swift regulatory outcomes, to those on the receiving end they can be more like coercive instruments that exploit the inherent imbalance of power between regulator and regulated. This article explores the challenges and implications of RSAs, focusing on their application, impact on the profession, and potential reforms.
To explore this issue, we spoke to five leading regulatory defence practitioners: Geoffrey Williams KC, Jeremy Phillips KC, Susanna Heley, Paul Bennett and Steve Roberts. Their valuable insights have informed this article.
What are RSAs?
RSAs are agreements offered by the SRA as an alternative to going through the full disciplinary process and potentially a hearing before the Solicitors Disciplinary Tribunal (SDT). In theory, they allow the SRA to dispose of misconduct cases swiftly and cost-effectively while avoiding the delays and expense associated with the full disciplinary process.
If the accused rejects an RSA, the matter is referred to an SRA adjudicator which is likely to result in a higher fine and increased costs. The right to have the adjudicator’s decision reviewed by the SDT is rarely exercised.
“The principle of agreed regulatory sanctions is fundamentally sound,” noted Jeremy Phillips KC. “RSAs have the potential to save both parties significant legal and administrative costs which, in themselves, serve no useful purpose. Unnecessary hearings can also delay achieving a fair outcome: such delays are not in anyone’s interest.”
Susanna Heley also observed that “there is clearly space for RSAs where misconduct is obvious and admitted at an early stage.”
However, the regulator’s stated goal of protecting the public interest and ensuring proportionality is frequently questioned. RSAs have the potential to compel solicitors and firms to admit wrongdoing and accept sanctions when they might otherwise have a good defence to put forward.
Mr Phillips voiced concerns that “the fear of serious adverse publicity (notwithstanding ultimate success) might occasionally persuade some individuals or firms to settle cases where there would, in fact, be a reasonable argument to be advanced”.
Solicitors are also “highly likely to accept RSAs to avoid the stress and costs arising from disciplinary proceedings,” added Geoffrey Williams KC, but they “may come to regret it later – for instance the impact on PII premiums”.
The promise of efficiency
The primary justification for RSAs is efficiency. They are designed to expedite the resolution of regulatory issues, reducing the financial and emotional burden on both parties. This approach aligns with the broader trend of seeking alternative dispute resolution mechanisms across the legal sector. By avoiding formal adjudication, the SRA aims to minimise costs and resources while maintaining public confidence in the profession.
RSAs “certainly reduce the pressure on those accused of professional misconduct and offer a helpful doorway to walk through which some find essential,” said Paul Bennett. “Unfortunately, they also reflect the pressure the SRA can, and does, apply”.
Critics argue that the streamlined nature of RSAs often prioritises expediency over fairness. Allegations are not tested and defences are not taken into account. Standardised agreements may overlook the nuances of individual cases, creating outcomes that feel imposed rather than agreed upon. This has the potential to alienate practitioners and further erode trust in the regulatory framework.
Paul Bennett also pointed out that fairness can also be undermined by a misunderstanding of the nuanced nature of legal work. The SRA “lacks knowledge of how solicitors work in practice and tend to overlook key facts and evidence”, he commented. To achieve fairness in RSAs “it requires an SRA staff member with good interpersonal skills, who is rational and listens to the other side”.
The absence of negotiation
One of the most contentious aspects of RSAs is the lack of genuine negotiation. Solicitors frequently report that RSAs are presented on a take-it-or-leave-it basis, leaving little room to challenge the SRA’s findings or proposed sanctions. This dynamic can create a sense of coercion, as practitioners face the unenviable choice of accepting potentially unjust terms or rolling the dice and incurring the significant costs and risks associated with the alternative process.
“Where we have been unable to agree an RSA, it is because the SRA has acted unreasonably in demanding admissions to allegations which are not sustainable and has ultimately done worse in the SDT. In that respect, I don’t think that they are used fairly, but rather as a tool to require admissions,” commented Susanna Heley.
“Sometimes they are simply not reasonably negotiated because the SRA loves hindsight but most scenarios are judgment errors,” added Paul Bennett. “Anything serious such as dishonesty is beyond the scope of an RSA.”
Long term damage
A particularly thorny aspect of RSAs is the “acting inconsistently” clause, which effectively binds the accused to the admissions made in the agreement. This removes the option of accepting the deal and then making an official complaint about the way the process was handled at a later date.
More importantly, once an RSA is agreed, the solicitor or firm cannot provide additional context or explanation beyond what is documented in the RSA. To do so, the clause explicitly says, would be a disciplinary offence in itself.
This NDA-like rigidity has far-reaching implications. “I am not sure that solicitors, particularly junior solicitors, fully appreciate what it means to agree to an RSA and what impact it may have on their long term career prospects,” remarked Susanna Heley.
She observed that the clause limits a solicitor’s ability to clarify the nuances of their case or present mitigating factors in other professional contexts, such as during job applications or considerations for promotions. This can be career-limiting, as the admissions in an RSA may paint an overly simplistic or negative picture of their conduct. The risk is particularly acute for those aspiring to roles in the judiciary or government, where character and regulatory history assessments are stringent. Without mechanisms to address or contextualise these admissions, solicitors may find their career progression unfairly hindered.
Another significant issue with RSAs is the role of publicity. When RSA outcomes are made public, the reputational damage to a solicitor can be severe and long-lasting, often out of proportion to the misconduct in question. This public element, while intended to promote transparency, can feel punitive and discourage solicitors from challenging RSAs for fear of escalating the issue.
Financial and emotional costs
Although RSAs are intended to reduce costs and stress, the reality is more complex.
For many, the financial implications of accepting an RSA can be severe – they are not an easy way out. Fines, costs and the potential for lost future earnings due to reputational damage often outweigh the benefits of a swift resolution.
For smaller firms and sole practitioners, the burden can be particularly acute. They are more likely to lack the resources to contest allegations through a tribunal, so may have little choice but to accept the terms of the RSA.
“I think it really is time to revisit the profession’s arrangements for ensuring equality of arms in disciplinary and regulatory proceedings,” argued Susanna Heley.
The emotional toll is equally significant. The stigma associated with accepting an RSA can tarnish a solicitor’s professional reputation, even when the misconduct in question is relatively minor.
The pressure to admit wrongdoing – often under the shadow of potentially harsher tribunal outcomes – can leave practitioners feeling demoralised and disillusioned. There is always going to be justifiable concern about how the admissions will look to clients, colleagues and future employers.
“Given much of the delay and time involved in disciplinary proceedings are at the investigation stage, RSAs don’t actually save as much time as may be believed,” noted Steve Roberts. “Much is made of reducing stress, but again the investigation process will have been exceptionally stressful for a Respondent in an investigation. The stress felt by Respondents prior to reaching an RSA can be huge and that is precisely one of the reasons why they are open to misuse”.
Lack of consistency
The SRA’s use of RSAs has also been criticised for lacking a consistent approach. Practitioners report instances where similar breaches result in vastly different outcomes, creating a perception of arbitrariness.
Even where facts are not in dispute, the way that the SRA arrives at its assessment of “seriousness” is opaque and subjective, suggested Paul Bennett. “We could assemble a panel of pundits, and like at any sport event, we would all see different things.”
Equally, the financial penalty calculation is frequently questioned. “The SRA method of fining a percentage of turnover provides inconsistent sanctions for similar misconduct”, commented Steve Roberts.
The SRA’s turnover (or salary) based approach to fining results in “massive headline fines for relatively minor misconduct”, commented Susanna Heley. “The publicity surrounding such decisions rarely makes clear that the reason for the large fine is not the seriousness but rather the financial resources of the Respondent”. She suggested that a more objective approach of publishing simply the level of fine (i.e. the penalty band and percentage of turnover) would “take away the shock value” and apparent inconsistency.
Power dynamics
The SRA’s position as a powerful regulator with clout, makes RSAs possible in the first place, noted Jeremy Phillips KC. “Whilst some would certainly argue that the regulator comes to the negotiation with a very significant advantage, one must be realistic and recognise that without that factor few settlements would be achieved”.
However, Susanna Heley has concerns that this balance of power is too heavily weighted in favour of the regulator. “RSAs are misused at present and I think that they present a serious risk that solicitors take a commercial view and make admissions under pressure to close matters off”.
Echoing that sentiment, Steve Roberts suggested that RSAs are “open to misuse because there is no independent analysis of whether the misconduct was in fact proven, or over the level of the sanction to be applied.”
The power dynamics inherent in the RSA process have drawn comparisons to broader studies of authority and control, such as the Stanford Prison Experiment, according to Paul Bennett. When one party holds disproportionate power and the other has limited recourse, the potential for perceived or actual abuse increases significantly.
Power also comes from the fact that taking your chances with the disciplinary process comes with huge risks. “Respondents will be keen to do a deal because the commercial realities are that it will be favourable to do so rather than contest the matter in the Tribunal,” remarked Steve Roberts. “We need to be mindful that even where Respondents are successful in Tribunal proceedings, they will face an uphill struggle to recover their own costs”.
“The biggest risk of a poor RSA is that solicitors will do anything to make the pressure end,” added Paul Bennett. “Talk of suicidal thoughts and self-harm are not uncommon when facing SRA investigation over two or three years”.
The benefits of RSAs
Despite these criticisms, RSAs have undeniable benefits when used appropriately. They can provide a practical solution for straightforward cases where the facts are clear and both parties are willing to engage in good faith. By avoiding protracted battles, RSAs can free up resources for both the SRA and solicitors.
“If solicitors go into negotiations on an RSA and are well advised the outcome can be reasonable and costs are reduced,” noted Paul Bennett. “However, if the SRA has misread or misunderstood something substantial it is a poor forum to resolve such differences”
For RSAs to achieve their potential, their use must be transparent and proportionate. Practitioners must feel that their concerns are heard and that the process reflects a genuine commitment to fairness. Without these safeguards, the advantages of RSAs risk being overshadowed by their shortcomings.
Reforming the process
To address the criticisms surrounding RSAs, several reforms could be considered. Introducing a mediation or negotiation phase could make the process feel less adversarial and more collaborative. Independent oversight or review mechanisms could provide an additional layer of accountability, ensuring that agreements are equitable and proportionate, rather than a tool for coercion.
Education is another key area for improvement. Many solicitors lack a clear understanding of their rights within the RSA framework, which can leave them feeling powerless. Providing clearer guidance and resources could empower practitioners to engage more effectively with the process.
Finally, greater dialogue between the SRA and the profession could help rebuild trust. Consultation and feedback mechanisms would allow solicitors to voice their concerns and contribute to the development of a more balanced regulatory framework.
Conclusion
This all highlights the importance of getting appropriate advice at an early stage.
RSAs are a relatively new tool and represent a significant shift in how the SRA approaches regulatory enforcement. While they offer clear potential benefits in terms of efficiency and resource allocation when the facts are undisputed, their current use raises serious questions about fairness, transparency, and proportionality.
For RSAs to live up to their potential, they must reflect the nuance of legal practice and represent genuine agreement rather than a way for the regulator to achieve easy wins and to nudge the rest of the profession into compliance with headline-grabbing outcomes. This requires a commitment to reform, ensuring that the process balances the interests of the public, the profession, and the regulator.
