A "wholly unjustified and unreasonable" decision to prosecute a small law firm for supposed failure to comply with the new Code of Conduct has left Andrew Hopper QC of the view that the Solicitors Regulation Authority (SRA) is becoming increasingly dysfunctional
We all know the story so far: the SRA adopted a new Code of Conduct in 2011, and with it "outcomes-focused regulation" (OFR), a completely new approach to the old "tick-box" regime. Rigid adherence to black letter rules is gone, replaced by a new commitment to achieving broad "outcomes", with firms allowed a degree of flexibility as to how those outcomes are met. The idea is for firms to be free to develop their practices in a way best designed to serve their particular client mix, rather than be restricted by a one-size-fits-all approach. So far so good.
But in practice, this grown-up way of doing business and regulation has proved fraught with problems. Firms have to think for themselves about the needs of their particular clients and how they are going to approach delivering appropriate legal services within the confines of the relatively broad compulsory outcomes that have been set. The SRA, meanwhile, must allow some leeway and accept that "their way" is not the only way. So much grey. Because firms are left to exercise judgement with very little guidance from the regulator (a key principle behind OFR), the SRA must accept that firms will not always get it right first time. If, however, a firm has made reasonable attempts to get it right, rather than being penalised for failing to hit the mark first time, surely they should be given guidance at this stage. Unfortunately, this doesn’t always happen.
It has to be said that, generally speaking, the SRA is not trusted by the profession. In adopting OFR, the SRA itself recognised it needed to change; that it had been a heavy-handed regulator, inclined to act disproportionately in its response to mistakes by well-meaning solicitors. It officially embraced change and embarked on a major retraining exercise to imbue staff with the new culture, intending to build bridges with the profession and an improved and healthy relationship. It wants to be trusted and would like to think that practitioners – and in particular firms’ compliance officers – will pick up the phone and talk to its staff members if there is a problem. More than anything, the SRA wants to be recognised as a proportionate regulator.
It isn’t working.
The problem is there appears to be a complete disconnect between the generally progressive, insightful individuals at the top of the SRA who set policies and envisage them being implemented with an intelligent understanding of the role of the regulator in a fast-changing marketplace; and over-zealous prosecutors working on the ground, putting those policies into practice on a day to day basis. The latter group seems to have no inkling of the sophisticated thinking at the top.
A recent story makes the point: a very strange decision was made to prosecute a seven-partner firm in the Solicitors Disciplinary Tribunal. It was so strange that the leading counsel advising the firm (not I) wrote an advice which he suggested be copied by his client to the SRA chief executive, Antony Townsend, as the prosecution was wholly unjustified and unreasonable. Queen’s Counsel do not lightly express such views. The letter and advice appears not to have reached Mr Townsend. After consideration of the matter at a departmental level, the prosecution solicitors wrote a lengthy letter justifying the SRA’s position and insisting the prosecution would proceed. Because I hold certain roles within the representative function of the Law Society I was able to bring the matter to the attention of another member of the SRA’s senior management team. I did so because it seemed obvious that the prosecution was wholly inconsistent with what could be expected to be the SRA’s philosophy under OFR. A few days later the SRA’s solicitors agreed to drop proceedings.
This may seem a good result for the firm, but there was little satisfaction in achieving it as the damage had largely already been done. Being threatened with public disciplinary proceedings, let alone being the subject of them when they are not justified, is hugely stressful. The threat is also public, even at this early stage, so reputational damage is acute (after all, there is ‘no smoke without fire’ – unless you are the one accused); professional life is on hold (you cannot plan to recruit or expand for fear of what may happen); staff and partners may leave; insurance premiums will rise; wherever it is necessary to disclose the situation (such as in public sector tenders) the work will not come; specialist panel accreditation may be lost. And none of this takes account of the human factor: the sleepless nights, the distraction from your normal work, and the resentment at being singled out for unfair treatment.
The firm in this case is happy for the story to be told, albeit anonymously. The opposite is more common, and there are many similar stories that will never be told for fear of future repercussions and animosity from a powerful regulator.
It is naturally very difficult to ask senior managers of a large regulator to become involved in individual matters, so in that sense the case mentioned here is exceptional. But the message is clear: those taking regulatory action on a day to day basis, who enjoy enormous power and discretion, often seem to misunderstand the much more sophisticated nature of OFR. And those at the top seem to be unaware that their thoughtfully constructed policies are not always being applied in practice.
Andrew Hopper QC is a solicitor who specialises in professional regulation and disciplinary matters, principally in relation to solicitors. He is co-author of The Solicitor's Handbook and The Guide to Outcomes-Focused Regulation.