Example 1
Core principles relating to client relations
You must act in the best interests of each client; and
You must provide a good standard of service to your clients.
Client Relations
Core principle 1 states that you must act in the best interests of each client; and
Core principle 2 states that you must provide a good standard of service to your clients.
Core principle 1 is intended to achieve the following outcomes for your clients:
- Clients are confident that the firm has the intention, resources, skills, and procedures to act in their best interests.
- Clients receive services in a manner which at all times protects their interests, subject to the administration of justice.
- Clients receive services in a manner which at all times protects their interests, subject to the administration of justice.
- Clients are protected to the extent of the minimum level of indemnity insurance required by the Solicitors' Indemnity Insurance Rules for a policy of qualifying insurance.
- Clients are in a position to make an informed decision about limiting your liability above the minimum level of indemnity insurance required by the Solicitors' Indemnity Insurance Rules for a policy of qualifying insurance.
Core principle 2 is intended to achieve the following outcomes:
- The standard of service received by clients is competent and delivered in a timely manner.
- The standard of service received by clients is competent and delivered in a timely manner.
- Clients are in a position to make informed decisions about the services provided and the options available to them, including costs.
Examples
E1. Undertaking the following would tend to show that you have achieved the outcomes and, therefore, complied with Principles 1 and 2:
Conduct of a client's matter
- agreeing an appropriate (level) of service with your client;
- explaining to your client your responsibilities and those of the client;
- ensuring that the client is given, in writing, the name and status of the person dealing with the matter and the name of the person responsible for its overall supervision; and
- explaining any limitation or conditions resulting from your relationship with a third party (for example a funder, fee sharer or introducer), which affect the steps you can take on the client's behalf.
Funding arrangements
- discussing with the client whether the potential outcomes of any legal case will justify the expense or risk involved including, if relevant, the risk of having to pay an opponent's costs;
- advising the client of the basis and terms of your charges and if and when they are likely to be increased
- advising the client of likely payments which you or your client may need to make to others;
- discussing with your client how the client will pay and, in particular, whether the client may be eligible and should apply for public funding, and whether the client's own costs are covered by insurance or may be paid by someone else
- advising the client of their potential liability for any other party's costs and whether these may be covered by alternative means;
- advising the client of their potential liability for any other party's costs and whether these may be covered by alternative means;
- where you are acting for a publicly funded client, disclosing all relevant information relating to the impact on costs of their publicly funded status; and
- providing the relevant information to the client in a clear form and in writing, except where it is unnecessary to do so.
Complaints handling
- having a written complaints procedure;
- providing each client with relevant information concerning their rights and the firm's approach to complaint handling;
- informing the client at the outset how complaints can be made and to whom complaints should be addressed;
- providing the client with a copy of the firm's complaints procedure on request; and
- in the event that a client makes a complaint, providing them with all necessary information concerning the handling of the complaint.
E2. Undertaking the following would tend to show that you have not achieved the outcomes and, therefore, not complied with Principles 1 and 2:
Accepting instructions
- taking on or retaining a client when you have insufficient resources or lack the competence to deal with the matter;
- taking on a client when instructions are given by someone other than the client, or by only one client on behalf of others in a joint matter without checking that all clients agree with the instructions given;
- taking on or retaining a client where you have reasonable grounds for believing that the instructions are affected by duress or undue influence without satisfying yourself that they represent the client's wishes;
- ceasing to act for a client without providing reasonable notice; or
- entering into a contingency fee agreement before:
- a court of England and Wales, a British court martial or an arbitrator where the seat of the arbitration is in England and Wales, except as permitted by statute or the common law; or
- a court of an overseas jurisdiction or an arbitrator where the seat of the arbitration is overseas, except to the extent that a lawyer of that jurisdiction would be permitted to do so.
[Additional guidance as required]
- 21.
The contact between the SRA and the firms it regulates will change, both in terms of the level of contact and the content of that contact. This contact will increasingly focus on gaining an understanding of the firm in order to assess the risks that it poses to the statutory objectives and, in particular, to the public and consumer interests. In visits to firms we will move away from the investigation of rule breaches, to a discussion of whether a firm can demonstrate that it is acting in a principled manner and achieving desired outcomes for clients. In other words, there will be less "ticking of boxes" and more discussion of the effectiveness of the firm's risk management systems.
- 22.
The basis for enforcement action is likely to change, in that there will be more instances of enforcement based on a breach of principles and a failure to achieve defined outcomes, and fewer based on a failure to comply with detailed rules. We would characterise this change as one of emphasis (i.e. focusing on our primary concern, which is compliance with the core principles).
- 23.
We will continue to review the balance between enforcement actions against legal services providers and individuals. In the case of individuals, the focus will be on senior managers and their approach to the exercise of their responsibilities.
- 24.
We recognise that the primary aims of a regulator are to change behaviours and discourage unprincipled behaviour. Disciplinary action is not always the best way of doing this and we will continue to use and develop options such as Regulatory Settlement Agreements. Where firms show that they are willing to address problems in a responsible manner, disciplinary action should usually be avoided.
- 25.
In making these changes, we are aware that firms and their senior managers will be concerned about the risk of "retrospective regulation". For this reason, we expect that there will be a need for guidance for firms on the interpretation of our regulatory approach, which should enable firms to know, at the time when they take an action, whether that action should expose them to the prospect of enforcement action because it is a breach of either the principles or the rules. Firms should be in a position to predict what behaviour demonstrates compliance with the core principles.
Example 2
An application for authorisation
A group of solicitors decide to set up a new firm. The group applies for authorisation and is required to provide information relating to its proposed structure, activities and sources of income. The group is also required to supply the SRA with a five-year business plan to assist the SRA in determining the likely risks to the regulatory objectives and, in particular, to the public and consumer interests.
In the course of reviewing the business plan, we have had discussions with the group of solicitors over matters such as:
- the extent to which the new firm will be reliant on one source of income (a referral arrangement from a trade union);
- the proposed operating structure (one qualified solicitor to twenty non-qualified staff) and how the proposed partners of the new firm will ensure an appropriate standard of advice is given to clients; and
- the previous experience of the proposed partners in the new firm, and in, particular, their experience of running a partnership.
Example 3
A visit to a firm to discuss client relations
We would hold meetings with senior managers to see how they assure themselves that clients are in a position to make informed decisions about the services provided and the options available to them, including costs.
The evidence the senior managers are likely to use would encompass results of internal monitoring of standards based on the firm's own risk assessment, client satisfaction surveys, analysis of client complaints (including complaints referred to the LCS/OLC), results of internal file audits and internal training and outcomes of periodic reviews of standard documentation. They could also include other methods that the firm has developed to suit its own client base/business model.
We would also consider how the firm had responded to issues that it had identified. We would be looking for a commitment to identifying and resolving issues and promoting best practice. Our concern will be to work with the firm to improve standards. Where problems are identified, but the firm is responsive to the need for change, we would look to the firm to set out its own approach in an action plan, which we would monitor. This would be unlikely to lead to disciplinary action.
Example 4
Thematic review
As a result of changes to the delivery of legal services, our analysis of data received from firms and the outcome of visits to firms, we decide to undertake a review based around the theme of the management by firms of conflicts of interest. The rationale behind the themed review is that our analysis of emerging risks from the changes to the legal services market combined with its analysis to date indicates that, while firms may have conflicts of interest policies, they are nevertheless acting in cases where they have a conflict of interest.
We take the following action:
- a series of visits of firms identified as representing a "high risk" in relation to conflicts of interests is undertaken to:
- (i) assess the quality of controls within firms to manage conflicts of interest,
- (ii) identify instances where clients may have been prejudiced by firms acting where a conflict exists, and
- (iii) determine what remedial action firms need to undertake and whether disciplinary action is appropriate;
- following the visits, all firms receive additional guidance from the SRA regarding its expectations in relation to the management of conflicts of interest;
- we conduct a series of workshops on conflicts focusing on the expected outcomes for clients of effective conflicts management; and
- we issue a warning to firms that continued failures in relation to conflicts of interest will result in more severe regulatory action.