Enhanced reporting obligations under Standards and Regulations

Thursday 26th September 2019

Reporting Obligations Whistleblowing Whistle 2475470 640

This article is provided in association with Infolegal

Under the new Standards and Regulations which come into force on 25 November 2019, the Solicitors Regulation Authority (SRA), it will be mandatory to draw concerns and breaches of requirements to the regulator’s attention. The SRA has now finalised its revised arrangements for this, and they represent an increased responsibility to report issues to the regulator – not only for COLPs and COFAs but for anyone in the firm. Solicitors will be obliged under the individual Code, while reporting officers are likely to want the same obligation to apply to everyone in the firm, regardless of their individual regulatory status.

First, at paragraph 7(7) of the Code of conduct for solicitors and 3(9) of the Code of conduct for firms there is a requirement to “report promptly to the SRA or another approved regulator, as appropriate, any facts or matters that you reasonably believe are capable of amounting to a serious breach of their regulatory arrangements by any person regulated by them (including you)”.

Not only does this make more specific the duty to self-report but it now provides a twin test based on subjective factors (what the person making the report thinks) and also objective (whether this belief was reasonable). This will also be relevant to Standard 9 of the Code for firms and the need for COLPs and COFAs to make a prompt report to the SRA where a “serious” breach has arisen in their sphere of influence, as opposed to the current “material” breach under the 2011 Authorisation Rules.

Second, paragraphs 7.8 in the Code for solicitors and 3.10 in the Code for firms provide that solicitors (and COLPs and COFAs in particular under the same Standard 9 in the Code for firms) must “inform the SRA promptly of any facts that you reasonably believe should be brought to its attention in order that it may investigate whether a serious breach of its regulatory arrangements has occurred or otherwise exercise its regulatory powers.”

This can be seen as the successor to the current Outcome 10(4) but that provision merely requires solicitors to report "serious misconduct" to the SRA, and at an apparently much lower standard than at present. Under this revised wording the potential reporter will no longer be entitled to take time to investigate the facts at greater length so as to be sure that serious misconduct has actually arisen.

Fears have been expressed that such reports might be used as an underhand tactic by opponents in litigation or by former partners or employees who harbour a grudge against a firm for the way in which they been dealt with. This should be seen as a particular risk as regulatory investigations tend to be long and protracted and can have significant detrimental consequences for anyone who finds themselves subject to the process, regardless of the eventual outcome.

Treatment of whistleblowing

Accompanying these provisions the SRA’s stance on whistleblowing will now be found at paragraph 7.9 which provides that nobody should be subject to any “detrimental treatment for making or proposing to make a report or providing or proposing to provide information based on a reasonably held belief”. Unfortunately the SRA itself came under the spotlight earlier this year in this relation to a recently-admitted solicitor – Emily Scott – who had sent out fabricated documents from the firm where she had been a trainee but under duress from the partners to do so. On telling her new employers of what had occurred at her previous firm she was advised to report it to the SRA which she duly did, but with the calamitous result for her in being struck-off for her actions and for not having reported her concerns earlier.

So far as how reports should be made the new paragraph 7.12 provides that the duty to make a report as required above will have been met if reported to the appropriate reporting officer within the firm – COLP or COFA according to the issue involved. The responsibility for reporting on to the SRA will then fall upon them, much as is the case when someone from within the firm reports money laundering concerns to their money laundering reporting officer (MLRO).

Want to find out more about your and your firm’s obligations under Standards and Regulations? We offer public training and on-site training to help you prepare for these important changes.

You may also be interested in Infolegal's compliance publications.

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