There are a number of changes that managers, COLPs and COFAs need to consider to ensure their companies don`t inadvertently violate the new code. On 25 November 2019, the Solicitors Regulation Authority (“SRA”) standards and regulations came into force, replacing the current SRA Handbook. This was only the fourth amendment to the Code of Professional Conduct for Lawyers in 12 years. The latest amendments are intended to give lawyers more flexibility. While the rule changes are not radical, it is important that team members, especially COFA, understand what they need to do. As long as the company`s policies and procedures are up-to-date and compliant with the rules, companies should be well prepared for these updated rules. The new disciplinary rules govern how the SRA investigates and takes disciplinary and regulatory action. Perhaps the most significant change is that the SRA will now investigate allegations in accordance with the civil law standard – after weighing the odds and without a doubt. The Solicitors Disciplinary Tribunal also amends its rules to also adjudicate cases in accordance with the civil law standard. These changes align the SRA and TDS with other regulatory bodies such as the Bar Standards Board. The reduction in principles is also offset by the addition of a new principle requiring lawyers and companies to act honestly. This requirement is in addition to the current and maintained principle that lawyers must act with integrity. The separate treatment of honesty and integrity comes after recent judicial treatment created different and different meanings for each term.
See Wingate and Evans/SRA; SRA vs Mallins  EWCA Civ 366 and more recently SRA vs Siaw  EWHC 2737 (Admin). The new codes of conduct are much more concise than their only predecessor from 2011, and the many indicative results and behaviours have been thrown overboard. The new Code of Conduct for Lawyers, Admitted European Lawyers and Registered Foreign Lawyers sets out the standards of professionalism expected of persons authorised to provide legal services. The new Code of Business Conduct now sets the standards required of companies and requires them to monitor their financial stability. Rule 8.1 states that it is the responsibility of the managers of an entity to ensure that the entity complies with the Code. Rules 9.1 and 9.2 detail the functions of Compliance Officers for Legal Practice (“COLP”) and Compliance Officers for Finance and Administration (“COFA”). The new rules are supported by our revised enforcement strategy, which was launched in February 2019 and clarifies our approach to potential misconduct. Key changes include: a new set of SRA principles, two separate new codes of conduct for lawyers and firms, changes to disciplinary rules, and significantly shortened accounting rules. As we pointed out last month, the rules on lawyers` accounts are about to undergo their biggest overhaul in more than 20 years. The new rules will come into effect on November 25, 2019, which means changes need to be made to your systems and procedures.
From our perspective as accountants, we will conduct our next review as usual, but we will test the 2011 rules by November 24, 2019 and the news from November 25, 2019 until the end of the reporting period. Compliance with these rules is where we found the most violations, and we encourage all companies to review their written policies and procedures in these areas. If your business continues to abide by the “old” rules, it`s usually not a violation of the new 2019 rules. However, this must be specified in the company`s policies and procedures. For example: “Funds will be transferred from the customer`s account to the business account within 14 days of billing.” The guidelines cannot simply say that the company is following the 2011 rules. With respect to bank reconciliations, another rule we have repeatedly violated is Rule 10.1(b), which states that businesses must prepare reconciliations for customers` own accounts. This was not a requirement under the 2011 regulations (although it was always proposed as a best practice). When companies maintain their own accounts, they must ensure that they prepare bank reconciliations at least every 5 weeks and that these are reviewed and signed by COFA. Shortly after its launch, the world went into lockdown, leaving law firms struggling with the new rules while facing the challenges of COVID-19.
In response, the SRA announced that it recognizes the exceptional circumstances in which the regulations were introduced, although it continues to expect full compliance. A year later, however, we expect the SRA to take stricter action for minor violations. Here, we explain how the rules differ and highlight areas where we`ve seen violations over the past year. The SRA expects to be notified when a company uses a TPMA (via its TPMA form) and to be kept informed of any changes you make. Accounting rules have been significantly reduced to 13 (previously 52). The stated objective of this revision is to ensure a simpler system by placing more emphasis on the principles of security of client funds rather than on a broad perspective of technical rules. We expect the changes to evolve over time and expect further guidance from the SRA and other governing bodies, including the ICAEW, in the coming months. Of course, we will keep you informed of these instructions. We expect any further clarification to focus on: “By removing outdated and unnecessary rules and giving lawyers more flexibility in designing and delivering their services to their clients, our new rules are designed to help people access a wide range of quality services with confidence that adequate safeguards are in place.
This can only be good for the public and the profession. While there are some similarities between the “old” and “new” rules, there are a number of changes, including: As you know, companies are already obliged to keep their customers informed of problems that arise during the negotiation. The new Code of Business Conduct goes even further, and the new Rule 3 (on cooperation and accountability) gives the SRA the power to ask companies to investigate whether anyone might have a claim against the company. This includes providing the SRA with a report on the results of your investigation and informing affected individuals that they may be eligible. With this in mind, if companies are faced with a complaint or potential claim, they should consider a detailed review of the records of the relevant royalty recipient to determine, for example, whether there is a previously unidentified trend causing problems. Don`t forget to update your policies and procedures to reflect your changes. The existing, highly prescriptive rules will be reduced to just 13 shorter rules, taking into account the different systems and processes of different law firms. The new regime focuses on systems and procedures. While this flexibility offers many positive changes for law firms, it will not be without challenges. The implementation of principled policies through a system that ensures compliance with very detailed rules requires both reflection and discussion.
Of course, there will be disruption in changing procedures, but businesses should take advantage of the opportunities offered by the changes, such as new systems that save administrative time (i.e. less frequent banking – see below), while still being able to demonstrate overall compliance. The manual is intended to be more user-friendly, simplified and focused – and is significantly reduced to 130 pages. The amendments aim to improve public access to justice by removing restrictions on lawyers` workplaces and by emphasizing and placing greater emphasis on professional standards. The firm is required to establish its policies and procedures in writing with respect to the following rules: We have confirmed that our new rules, which allow lawyers greater flexibility in the way they work and make it easier to get help, will come into effect on November 25, 2019. The purpose of abolishing so many regulations is to reduce the burden on lawyers and law firms and to give them more freedom and flexibility in selecting and maintaining the necessary standards. The need to act with honesty and integrity – two fundamental elements of the practice of law – are now principles in their own right – the former perhaps due to problems the SRA has experienced with businesses. Four principles have been deleted but are covered by the new codes, ensuring that the principles are universally applicable and avoiding duplication. Rule 1.2 allows non-lawyers to be covered by the disciplinary rules in certain circumstances. Especially when an allegation is made that “raises the question that the person has otherwise engaged in conduct that suggests that he or she should be decided under Rule 3.1.” This rule applies to everyone, whether they are lawyers or not.
Rule 3.1 sets out the powers of the SRA when it has been established that a claim has been proven.