Many of us went to law school with the aspirations of one day becoming a partner in a law firm. For all the changes to the profession, it’s still seen by most as the pinnacle of a legal career.
However, it also carries considerable risks and in this blog we consider the regulatory issues.
Fundamentally as a partner you are on the hook for any regulatory failings of the firm, even if you are not directly responsible for, or aware of, the misconduct. This is because people held out as partners – even without any equity in the business – are regarded by the SRA as ‘managers’. The compliance burden rests on all managers’ shoulders.
Take the case of Ejaz Ahmad, who was struck off the roll by the SDT following a finding that he had permitted improper payments of over £1.2m of client monies. He denied the allegations, stating that he did not have conduct of the matters resulting in the dodgy payments.
Mr Ahmed claimed that “his appointment as a partner was an ‘honorary’ position”, and that this was “not what he had intended to be responsible for when he joined the Firm as a partner”.
The tribunal disagreed. “As a Partner, the Respondent was responsible for ensuring that any undertaking provided by the Firm was complied with, irrespective of whether or not he had conduct of the matter. It was not a defence to assert that he was not the solicitor with conduct…In joining the Firm as a partner, the Respondent was under a duty to ensure that the Firm complied with its legal and regulatory obligations and was liable if the Firm failed to do so. This was the case even if the Respondent believed that he had joined on a ‘courtesy’ or ‘honorary’ basis.”
See also the case of the partners of former law firm Geoffrey Parker Bourne Limited. The legal cashier of that firm took nearly £1.7m from the firm’s client account. He confessed to his wrongdoing and confirmed that he had hidden is actions from everyone else at the firm. The partners admitted to failing to ensure that there were proper controls in place to prevent the improper transfers and were all fined by the SDT, with the managing partner also receiving a section 43 order.
We are not saying that you should reject an offer of partnership, but you should certainly think about it carefully. It is not something to be taken on lightly. You will have the status of a ‘partner’, but you may also be responsible for anything that happens in the firm, whether you were aware of it or not.
And that’s before you even consider the commercial liabilities of the role.