Practice Standards Unit Visits

Introduction

The Practice Standards Unit (PSU) of the SRA was formed in 2001 and has since then undertaken over 5,000 visits to solicitors? practices. It’s initial remit was to be supportive and to help improve standards in practice, although many feel today that there may be an element of “backdoor” investigation to the way in which it undertakes its visits.

In a Gazette article of the 24 May 2007, Peter Williamson, the then Chairman of the Board of the SRA, stated that the PSU had ?established a reputation with a track record of improving standards of practice? and that whilst some firms view PSU visits ?with some degree of trepidation? for others they can be ?a real opportunity to review and improve their current working practices.? However, just over a year later, a report in the Law Society?s Gazette of 5 June 2008 stated that the President of the Liverpool Law Society, Anne Heseltine, had written to managing partners in her area after receiving complaints about heavy handed PSU visits and a lack of consistency of approach. Inevitably the true position is likely to lie somewhere between the two.

PSU have a staff of about 60 and currently undertake approximately 1,000 visits per year. Their choice of which firms to visit is based generally upon risk assessment and by considering trends within the profession and information received, although a number are selected on a purely random basis. Therefore, if a firm has not received a visit yet, then given the proportion of firms who have already had a visit to the (ever shrinking) number of firms in the marketplace, there is every chance that it will receive one in the next two years.

What to expect during a visit

A typical PSU visit will last two days and it will look at a firm?s compliance with the Solicitors’ Code of Conduct, the Solicitors’ Accounts Rules, the Financial Services Rules, money laundering regulations and other regulations and laws to which practices are subject, including, for example, discrimination legislation. Those carrying out the visit will seek information from the firm, including:

• who in the practice is responsible for complaints,
• who is the risks manager,
• who is the money laundering reporting officer, and
• who is the person responsible for recruitment.

In particular, the visit will look at:

• the areas of work the firm undertakes;
• whether the firm undertakes conditional fee work;
• how the firm gets its work ? e.g. whether there are any referral arrangements and if so, whether the procedures which govern how these are regulated are in place;
• the supervision and management arrangements that are in place for each office, whether regular file reviews are undertaken and if so how often and by whom;
• whether the firm has an office manual, whether it is up to date and how its contents are communicated to staff;
• how incoming and outgoing post/faxes/emails are checked, whether the firm has an email policy and whether staff are aware of it;
• the effectiveness of diary systems including centralised diaries and key date diaries;
• the arrangements the firm has put in place for client care including looking at the contents of your client care letter and information about costs;
• the manner of charging for telegraphic transfer (TT) costs ? in particular making sure that the firm does not add an uplift to the cost of TTs and then show these enhanced costs as a disbursement;
• procedures for conflict of interests checks;
• the procedures for the control of undertakings and the safekeeping of documents;
• recruitment, promotion and appraisal procedures, whether the firm has job descriptions for every member of staff and the keeping of CPD records;
• complaints handling processes, record of complaints over the last 12 months and how these have been handled;
• fee sharing and referral arrangements, how they operate, who they are with and whether they comply with the Code of Conduct;
• separate businesses operated by the managers and staff;
• issues in relation to immigration advice and whether the firm undertakes OISC checks before taking on unadmitted advisers;
• anti-discrimination rule compliance, monitoring and training and in particular whether staff have been trained in and are aware of the requirements;
• investment business arrangements including the identity of the compliance officer, whether the firm undertakes incidental investment business and whether the firm is on the FSA register;
• compliance with rule 7 of the Code of Conduct on publicity;
• compliance with the requirements of the money laundering regulations and whether appropriate staff have been adequately trained; and finally
• the accounts system, including any software used, the nature of the firm?s bank accounts, housekeeping procedures, ongoing credit balances on client account, the payment to clients of interest, reconciliations and their frequency and procedures for dealing with unpresented cheques.

In carrying out their inspection of the practice the PSU adviser(s) will want to meet with the firm?s managing and/or senior partner, will want to talk to staff about their awareness of the procedures within the firm and the office manual (where relevant) and will also want to review a number of client matters ? either by viewing the physical file or by reviewing electronic data held ? to check, for example, that client care letters and costs information is being provided and to see that files are being progressed adequately and subject to monitoring and supervision arrangements where necessary.

Following the visit, a report will be prepared and this will summarise any breaches which have been identified and highlight areas where the firm ought to be taking steps to correct inadequacies or ramp up procedures. Where the firm is required to take specific steps then the matter will be kept under review and a further visit may be arranged after an appropriate length of time in order to check that remedial steps have been taken.

It has to be said that the vast majority of inspections do not lead to anything more onerous than a recommendation that certain procedures be tightened or documents altered. For example, during May 2008 only 2% of those firms visited were formally referred to another SRA Unit for further or more drastic action to be taken and throughout the whole of 2007 only 6.7% of those visits lead to a referral for regulatory action.