Investigations

SRA power to regulate, monitor and inspect

As has been stated in more detail elsewhere on this web site (SRA – Regulatory Powers), the main regulatory function of the SRA is that of drafting, promoting, monitoring, and enforcing the various regulations which affect solicitors. This inevitably involves monitoring solicitors and their firms for compliance with the various rules, investigating firms where concerns exist or complaints have been made and, where appropriate, taking disciplinary proceedings against the firms in question.

However, in addition to straightforward monitoring and investigation, the SRA also exercises another power, namely that of the provision of guidance on practice improvement and client care, and ensuring that solicitors are aware of what constitutes good practice generally. This is a more supportive role than that encompassed within the concept of investigations but one which can, and often does, lead to an investigation because either a report has been made about a firm because it is found that major breach of the rules exists or because recommendations for changes have been made and those recommendations have not been taken on board by the firm. Further details of this can be found in a separate item on this web site entitled Practice Standards Unit visits.

Investigations

The department within the SRA which is tasked with the primary responsibility for investigation and monitoring is the Forensic Investigations department (FI)

Normally an investigation into a firm will commence as the result of one of a number of reasons including:

• because there has been a report about you or the firm from a client or third party;
• because the SRA has gathered information about you or your firm which has led to an investigation;
• because you have failed to deliver an, or delivered an unsatisfactory, accountant’s report; or
• because it has come to the attention of the SRA that you may be involved in misconduct.

Not all investigations start with a visit to your offices. If the SRA believe that there are outstanding issues which need to be dealt with then they may write to you or your firm detailing the alleged breaches or problems and asking you to provide a satisfactory explanation. In addition, the SRA can also write to you in relation to a former firm (if there is an investigation into that firm) or to your current employer if you are an employee who has moved firms.

Duty to cooperate and not obstruct

If you are written to you are under a duty to respond and you must be open, prompt and cooperative. Rule 20.05 of the Solicitors Code of Conduct 2007 (as amended) provides:

Duty to co-operate with the Solicitors Regulation Authority and the Legal Complaints Service

1. You must deal with the Solicitors Regulation Authority and the Legal Complaints Service in an open, prompt and co-operative way.
2. You must:
   1. provide the Solicitors Regulation Authority with information necessary in order to issue you with a practising certificate, or deal with renewal of registration or renewal of recognition, as appropriate; and
   2. during the period your practising certificate, registration or recognition is in force, notify the Authority of any changes to relevant information about you, or your firm or in-house practice.
3. As a solicitor, REL, RFL or recognised body you must act promptly to:
   1. investigate whether any person may have a claim for redress resulting from an act or omission of yours;
   2. provide the Solicitors Regulation Authority with a report on the outcome of such an investigation, identifying persons who may have such a claim;
   3. notify such persons that they may have a right of redress against you, providing them with information as to the nature of the possible claim, about the firm’s complaints procedures and about the Legal Complaints Service;
   4. where you have identified a person who may have a claim for redress, ensure that the matter is dealt with under the firm’s complaints procedures as if that person had made a complaint,

if required by the Solicitors Regulation Authority in relation to a matter specified by the Authority.

In addition, Rule 20.07 states that you must not obstruct a complaint

Obstructing complaints

1. You must not try to hinder or prevent a person who wishes to report your conduct to the Solicitors Regulation Authority or the Legal Complaints Service from doing so.
2. You must not victimise a person for reporting your conduct to the Solicitors Regulation Authority or the Legal Complaints Service.
3. You must not on your own or on your clients’ behalf enter into an agreement which would attempt to preclude the Solicitors Regulation Authority or the Legal Complaints Service from investigating any actual or potential allegation of professional misconduct.
4. Unless you can properly allege malice, you must not issue defamation proceedings in respect of a complaint to the Solicitors Regulation Authority or the Legal Complaints Service.

whilst Rule 20.08 deal with what you must disclose to the SRA when requested to do so:

Production of documents, information and explanations

1. You must promptly comply with:
   1. a written notice from the Solicitors Regulation Authority that you must produce for inspection by the appointee of the Solicitors Regulation Authority all documents held by you or held under your control and all information and explanations requested:
      1. in connection with your practice; or
      2. in connection with any trust of which you are, or formerly were, a trustee;

      for the purpose of ascertaining whether any person subject to these rules is complying with or has complied with any provision of these or any other rules, codes or mandatory guidance made or issued by the Solicitors Regulation Authority; and

   2. a notice given by the Solicitors Regulation Authority in accordance with section 44B or 44BA of the Solicitors Act 1974 for the provision of documents, information or explanations.
2. You must provide any necessary permissions for information to be given so as to enable the appointee of the Solicitors Regulation Authority to:
   1. prepare a report on the documents produced under (1) above; and
   2. seek verification from clients, staff and the banks, building societies or other financial institutions used by you.
3. You must comply with all requests from the Solicitors Regulation Authority or its appointee as to:
   1. the form in which you produce any documents you hold electronically; and
   2. photocopies of any documents to take away.

Further action

Having received your written explanations, the SRA will consider the matter and decide if further steps need to be taken. If they deem that no further action is required they will write and advise you accordingly.

However, if they deem that there has been a breach or the rules, or if they decide that one or more of their powers has arisen then they will take action. That action might include an onside investigation of your firm. Often you will not be provided with a reason for the visit if to do so would alert those in default and allow them to conceal their breach, disclose the source of the information ahead of the investigation, breach a duty of confidentiality or otherwise prejudice the investigation. Even if a reason is given, the SRA may still during the visit decide to investigate other matters which fall outside of the reasons given. For more information regarding the giving of reasons for a visit see the SRA policy document Transparency, protecting the public, and reasons for investigations.

During the onsite investigation

The SRA may choose to visit only your main office but may also visit branch offices. They state that they will always endeavour to keep disruption to a minimum. However, be aware that this may not always be possible and that however discrete they are the fact of the investigation is always likely to leak out. For this reason you may feel it appropriate to have in place some kind of a damage limitation plan, even if it is only used for setting at rest fears of the staff. Staff who are aware of an investigation but not aware of its purpose or effect are going to speculate and the speculation may be more harmful to the practice than the visit itself.

At the outset of the visit the SRA representatives are going to wish to meet with relevant senior partners, directors, managers and senior staff. They may request that information, accounting records, computerised databases and documents are made available to them and they may seek explanations from you as to why certain matters have been dealt with in a particular way. They will continue to investigate until they are satisfied that they have gathered the information they require. At the end of the investigation process they will usually hold a final meeting with senior members of the firm and make make an audio recording of that meeting.

Documents and papers

If during the investigation you are requested to make records, papers, client files etc. available then you must do so. You must also provide any information necessary to enable the SRA to prepare a report under rule 34 of the Solicitors’ Accounts Rules. Rule 34(1) provides that:

Any solicitor must at the time and place fixed by the SRA produce to any person appointed by the SRA any records, papers, client and trust matter files, financial accounts and other documents, and any other information, necessary to enable preparation of a report on compliance with the rules.
Following notice from us, you must provide us with any

whilst rule 34(8) provides:

Without prejudice to paragraph (1) above, any solicitor must produce documents relating to any account kept by the solicitor at a bank or with a building society:

1. in connection with the solicitor?s practice; or
2. in connection with any trust of which the solicitor is or formerly was a trustee,

for inspection by a person appointed by the SRA for the purpose of preparing a report on compliance with the rules or on whether the account has been used for or in connection with a breach of any other rules, codes or mandatory guidance made or issued by the SRA.

In addition, the SRA may also serve notice upon you to provide them with all relevant documents in your possession, or the firm’s possession, under the powers contained in section 44B of the Solicitors Act 1974 and require you to attend, at a time and place specified by us, to provide an explanation in respect of the information or documents which they require from you.

1. Where the Council are satisfied that it is necessary to do so for the purpose of investigating?
   1. whether there has been professional misconduct by a solicitor;
   2. whether a solicitor has failed to comply with any requirement imposed by or by virtue of this Act or any rules made by the Council;
   3. whether any professional services provided by a solicitor were not of the quality which it is reasonable to expect of him as a solicitor; or
   4. whether there are grounds for making, or making an application to the Tribunal for it to make, an order under section 43(2) with respect to a person who is or was employed or remunerated by a solicitor in connection with his practice,

the Society may give notice to the solicitor or his firm requiring the production or delivery to any person appointed by the Society, at a time and place to be fixed by the Society, of all relevant documents in the possession of the solicitor or his firm.

N.B. For Council read SRA

The SRA will generally not take originals of documents (except for those sought pursuant to section 44B above) but will instead require you to provide them with copies. In addition, you must be able to produce copies of materials which are kept electronically in whatever format the SRA require and provide written permission to seek verification from clients, staff, banks, building societies and any other financial institutions.

Following the investigation

At the end of the investigation process, the SRA will prepare an onsite breaches checklist and/or an Investigation Report.

An onsite breaches checklist is a formal document used in less-serious matters and containing a summary of the SRA’s findings and setting out any corrective actions which you or your firm must carry out. Failure to do so could result in a more serious sanction being imposed.

Investigation report

An Investigation Report is used where more-serious issues are found. It summarises the findings of the SRA preparatory to regulatory action being taken, including:

• a referral to the Crown Prosecution Service, Serious Fraud Office or other agency; or
• taking the report into account when considering disqualification of a Reporting Accountant and, possibly, reporting them to their regulator; or
• a more detailed investigation, requiring your written explanation before a final decision is made.

The report may be used in connection with proceedings in the Solicitors Disciplinary Tribunal.

Consequences of an investigation

The consequences which you will face depend upon your status within the firm and your own position.

The most positive outcome for all is that no evidence of a breach is found and the investigation nis concluded and the file closed.

If, however, evidence is found then:

If you are a solicitor, registered European lawyer (REL), recognised foreign lawyer (RFL) or recognised body

you will will either be:

• advised about your conduct,
• warned about future conduct and award costs against you,
• have a disciplinary sanction imposed and costs awarded against you,
• have controls placed upon the way in which you practise – e.g. by means of practising certificate conditions
• referred to the Solicitors Disciplinary Tribunal

or the SRA will take steps to:

• close down the practice (intervention)
• revoke recognition of a recognised body
• request that you enter into a Regulatory Agreement (see the Disciplinary Processes page of this web site for further information)

If you are a manager or employee

If you are a manager or employee then the SRA may:

• withdraw approval if you are a non-lawyer manager,
• impose conditions on or revoke recognition of the recognised body for which you are a manager or employee,
• refuse to renew recognition of the recognised body for which you are a manager or employee,
• refer your conduct to the Solicitors Disciplinary Tribunal,
• intervene into the recognised body for which you are a manager or employee,
• request that you enter into a Regulatory Agreement

If you are a non-solicitor is “involved in a legal practice”

If you are a non-solicitor involved in legal practice, the SRA can require that any solicitor, registered European lawyer or firm wishing to employ or remunerate you obtain prior written permission prior to doing so and can also make or seek an order requiring SRA permission be obtained before you become a manager or acquire an interest in a firm.

Recovery of Costs

In the event that there is a finding of misconduct against you, the SRA have the power to recover the costs of the investigation. At first instance, those costs fall into two levels:

• ?600, and
• ?1,350.

although these can be varied up or down in in exceptional cases.

A further fixed amount of ?250 may be awarded against you in the event that you appeal against the finding. Note however that you cannot appeal against the amount of the costs alone.

In the event that you have been required to supply documents under section 44B Solicitors Act 1974 and you failed to deliver the documents as directed, then the SRA may also claim from you the costs of any agent instructed to recover those documents.

Practising certificate applications

If, being a solicitor or REL you either fail to provide an explanation about your conduct provide a response which is not satisfactory then you will then become subject to regulation 3 of the SRA Practising Regulation (formerly the Practising Certificate Regulations 1995). Regulation 3.2 of this provides:

If regulation 3 applies:

1. an application for replacement of a practising certificate or for renewal of registration in the register of European lawyers must be commenced at least six weeks before the replacement or renewal date; and
2. the SRA:
   1. has no discretion under regulation 3 to grant the application if the applicant does not meet the conditions in regulation 2.2(a) to (c) or 2.3(a)(i) to
   2. has discretion to impose a condition or conditions in accordance with regulation 6; and
   3. has discretion to refuse the application.

Disciplinary sanctions

The severity of the disciplinary sanctions to which you will become subject depend upon the seriousness of the breach and the likelihood of it occurring again. For more information on disciplinary sanctions see the Disciplinary Processes page of this web site

Appeals

In most cases you will be entitled to make an internal appeal against a decision to:

• warn you about your conduct,
• reprimand or severely reprimand you,
• impose conditions on your practising certificate or registration,
• refuse to grant or renew a practising certificate or registration,
• impose a condition on recognition if you are a recognised body,
• withdraw approval of you as a manager of a recognised body,
• revoke recognition of you as a recognised body,
• refuse to grant you permission to employ, remunerate, engage as a manager a person,
• refuse to grant you permission to allow a person to acquire an interest in you if you are a recognised body.

but you will not be entitled to an internal appeal against a decision to:

• refer your conduct to the SDT – this is a decision to prosecute, not a sanction,
• intervene in your practice – you may however bring challenge to an intervention in the High Court,
• issue directions rather than factual findings,
• make you subject to regulations 3 of the SRA Practising Regulations 2009, if you are a solicitor or REL, or
• order you to pay the costs of an investigation.

In the event that you wish to lodge an internal appeal, then you must do so within 28 days of receiving notification of the SRA’s decision. Appeals to the High Court are covered by regulation 7.5(b) of the Recognised Bodies Regulations and regulation 7.6(b) of the SRA Practising Regulations 2009. The latter states:

Unless otherwise provided in the relevant statute, regulations or rules of Court, an appeal to the High Court must be commenced:

1. within 28 days of notification of the relevant decision; or
2. within 28 days of notification of refusal of an appeal under the SRA’s own appeals procedure,

In all other cases, you must lodge an appeal in writing within 14 days of the date of the decision letter.