SRA issues investment schemes warning
The Solicitors Regulation Authority (SRA) have repeated their warning to the profession about involvement in high-yield investment schemes.
A warning notice has been published telling solicitors about the risks of involvement in such schemes after a number of reports were received of law firms being linked to potentially fraudulent incidents where clients have lost substantial amounts of money. The warning reiterates a previous notice from September 2013, as well as a notice issued last year on allowing client accounts to be used as bank accounts.
The SRA state that those operating dubious schemes seek the involvement of solicitors to give their scams an impression of credibility or security. Investors believe that because a scheme uses a law firm, and monies are paid through a law firm, it is a genuine investment and they will receive the returns they are promised.
Some schemes are also used by money launderers, with funds paid into client accounts by investors before being transferred to the operators.
Commenting on the warning, SRA Chief Executive Paul Philip said:
“The involvement of law firms in dubious investment schemes is not new. We have disciplined many solicitors because of this, and some have been prosecuted and imprisoned.
“This is not the first time we have warned the profession about such schemes. We will continue to deal quickly and decisively with any solicitor who becomes involved in them.
“Fraudsters have certainly paid attention to our warnings and adapted their schemes to avoid suspicion. Solicitors asked to use their client account, or any other account, for this purpose should be extremely careful. In normal circumstances, there is no good reason for investors to pay money to a law firm which could be paid direct to an investment company.
“Firms should also remember that, even if they are acting for an investment company, they have a duty not to take unfair advantage of others.”
The SRA are to carry out further analysis of cases involving solicitors and high-yield investment schemes in light of this increase in reports and their insights will be shared.
The current Warning Notice can be viewed at www.sra.org.uk/solicitors/code-of-conduct/guidance/warning-notices/Investment-schemes-and-client-account–Warning-notice.page
See also the Lawyers Defence Group article from May of this year entitled Prohibition on provision of banking facilities by solicitors