New guidance from the Solicitors Regulation Authority sets out the expectations placed on law firms when it comes to ‘effective’ supervision.
Although the guidance does not officially carry the force of rules or warnings, solicitors and law firm leaders must have regard to guidance when interpreting the Code of Conduct requirements.
And the regulator “will have regard to it when exercising our regulatory functions”. So pretty much a rule by the back door.
Code of conduct requirements – supervision
The 2019 rulebook sets out the regulatory requirements. Paragraphs 3.5 and 3.6 of the Code of Conduct (for individuals) says:
“3.5 Where you supervise or manage others providing legal services:
- you remain accountable for the work carried out through them; and
- you effectively supervise work being done for clients.
“3.6 You ensure that the individuals you manage are competent to carry out their role, and keep their professional knowledge and skills, as well as understanding of their legal, ethical and regulatory obligations, up to date.”
We noted at the time that some of the rules introduced by the Standards and Regulations 2019 went under the radar. This was one of them. Not much was made of this rule directed at supervisors.
It is extremely widely drafted and would catch any solicitor with supervision responsibilities, including other lawyers, trainees and unregulated people. The word ‘accountable’ should be noted as being particularly burdensome and this alone should make the new guidance of interest to practitioners.
This is not an issue that can be filed under ‘one for the compliance department’.
The Code of Conduct (for firms) imposes similar requirements on firms’ Partners, Directors and Compliance Officers:
“4.2 You ensure that the service you provide to clients is competent and delivered in a timely manner, and takes account of your client’s attributes, needs and circumstances.
“4.3 You ensure that your managers and employees are competent to carry out their role, and keep their professional knowledge and skills, as well as understanding of their legal, ethical and regulatory obligations, up to date.
“4.4 You have an effective system for supervising clients’ matters.”
Consistent with the approach of the SRA rulebook, the individual is responsible for their own adherence to the rules, whilst the firm is responsible for putting in place the systems and controls. Supervision is seen as no different.
The guidance note also refers to separate important references to supervision in:
- Authorisation of Firms Rules
- Statement of solicitor competence
- Guidance – Workplace environment: risks of failing to protect and support colleagues
- Guidance – Immigration work
- Legal aid – Standard civil contract
- Claims management – The FSMA 2000 (Regulated Activities) Order 2001
Everyone needs to be supervised – yes, even Partners
The guidance is clear that the regulator sees the supervision requirement to be applicable across the board. Obviously employees are caught, whether or not they are qualified. As are consultants, and with the seemingly exponential rise of adoption of the ‘fee sharing’ model this is highly relevant. It is not acceptable to allow consultants to simply plug into your systems and operate without any oversight, regardless of their experience and specialism. Insurers would no doubt agree.
But perhaps the most problematic aspect of supervision for many law firms is the supervision of Partner/Director level lawyers. Frankly, it is very common for this to be a blind spot in the supervision system. And that is putting it politely.
But it doesn’t stop there. The guidance becomes even more prescriptive, going way beyond the delivery of legal services:
“Supervision of senior staff should include consideration of ethical and regulatory competencies, as well as standards of supervision and leadership.”
Do many firms actually do this in a structured way for Partners? It feels like this is an over-step by the regulator. Sole practitioners and freelance solicitors do not have the regulatory duty to be supervised in this way, and we are talking about people who will have similar experience and expertise. So why should a person choosing to practise through a firm be subject to more burdensome rules and expectations?
And it begs the question, particularly when considering those Partners with niche knowledge and years of experience, who is going to be suitable to be the supervisor? It would surely have to be a person with at least competence in the area of law in which the senior person practises. Some firms will not have anyone with the required skills and knowledge.
Other prescriptive elements of the guidance
- A solicitor (with their own caseload) supervising ten or more paralegals in a high volume department is unlikely to be considered an effective supervision system.
- Taking a ‘sampling’ approach to supervision is only likely to be acceptable in low risk work. For example, in a department delivering high volume Legal aid work conducted by paralegals under supervision, the supervisor would need to review more than a “small sample of the overall work”. This is to reflect the fact that the risk of detriment to clients is potentially high.
- In complex work, the supervisor should look at the key stages of the entire legal process, not merely the ‘end product’.
- Supervision “should include an assessment of:
- The quality of the substantive legal work – is it accurate, and does it meet the client’s needs?
- Whether the firm’s policies have been followed….
- Any relevant ethical and regulatory considerations.
- The management of the file.”
- Remote supervision may not be adequate where the person being supervised is unfamiliar with the work, needs close supervision, or whose work has previously been assessed as problematic. You might need to get into a room with each other.
- The guidance alludes to having a supervision policy, which goes into depth on the supervision system in place for each department. This is to evidence the firm’s approach to supervision on a risk based approach.
- Over-reliance on template documents processed by paralegals, without ongoing supervision to ensure the templates are being appropriately applied and (where necessary) amended, is likely to be a regulatory breach.
For help designing or evaluating your supervision system in light of the SRA guidance, please contact us.
We can all appreciate that supervision is important and necessary. As well as ensuring that work is of acceptable quality, it is also an opportunity to provide valuable feedback to team members and uncover potential issues before they become a problem.
And this guidance is undoubtedly a helpful explanation of what the SRA expects of an ‘effective’ supervision system.
But it would be nice if our regulator would be consistent with its approach to principles-based regulation. Either the rules are flexible and up to firms to interpret and implement, or they are prescriptive. The current approach of unclear rules supplemented by mandatory-ish guidance is neither one thing nor another.
The amount of supplementary guidance to the rules is quickly becoming unmanageable.