SRA Handbook

You and your business

Version 21 of the Handbook was published on 06/12/2018. For more information, please click 'History' Above

2nd Section: You and your business

Chapter 7: Management of your business

This chapter is about the management and supervision of your firm or in-house practice.

Everyone has a role to play in the efficient running of a business, although of course that role will depend on the individual's position within the organisation. However, overarching responsibility for the management of the business in the broadest sense rests with the manager(s). The manager(s) should determine what arrangements are appropriate to meet the outcomes. Factors to be taken into account will include the size and complexity of the business; the number, experience and qualifications of the employees; the number of offices; and the nature of the work undertaken.

Where you are using a third party to provide services that you could provide, (often described as "outsourcing"), this chapter sets out the outcomes you need to achieve.

The outcomes in this chapter show how the Principles apply in the context of the management of your business.

Outcomes

You must achieve these outcomes:

O(7.1)

you have a clear and effective governance structure and reporting lines;

O(7.2)

you have effective systems and controls in place to achieve and comply with all the Principles, rules and outcomes and other requirements of the Handbook, where applicable;

O(7.3)

you identify, monitor and manage risks to compliance with all the Principles, rules and outcomes and other requirements of the Handbook, if applicable to you, and take steps to address issues identified;

O(7.4)

you maintain systems and controls for monitoring the financial stability of your firm and risks to money and assets entrusted to you by clients and others, and you take steps to address issues identified;

O(7.5)

you comply with legislation applicable to your business, including anti-money laundering and data protection legislation;

O(7.6)

you train individuals working in the firm to maintain a level of competence appropriate to their work and level of responsibility;

O(7.7)

you comply with the statutory requirements for the direction and supervision of reserved legal activities and immigration work;

O(7.8)

you have a system for supervising clients' matters, to include the regular checking of the quality of work by suitably competent and experienced people;

O(7.9)

you do not outsource reserved legal activities to a person who is not authorised to conduct such activities;

O(7.10)

subject to Outcome 7.9, where you outsource legal activities or any operational functions that are critical to the delivery of any legal activities, you ensure such outsourcing:

(a)

does not adversely affect your ability to comply with, or the SRA's ability to monitor your compliance with, your obligations in the Handbook;

(b)

is subject to contractual arrangements that enable the SRA or its agent to obtain information from, inspect the records (including electronic records) of, or enter the premises of, the third party, in relation to the outsourced activities or functions;

(c)

does not alter your obligations towards your clients; and

(d)

does not cause you to breach the conditions with which you must comply in order to be authorised and to remain so;

O(7.11)

you identify, monitor and manage the compliance of your overseas practices with the SRA Overseas Rules;

O(7.12)

you identify, monitor and manage all risks to your business which may arise from your connected practices;

O(7.13)

you assess and purchase the level of professional indemnity insurance cover that is appropriate for your current and past practice, taking into account potential levels of claim by your clients and others and any alternative arrangements you or your client may make.

Indicative behaviours

Acting in the following way(s) may tend to show that you have achieved these outcomes and therefore complied with the Principles:

IB(7.1)

safekeeping of documents and assets entrusted to the firm;

IB(7.2)

controlling budgets, expenditure and cash flow;

IB(7.3)

identifying and monitoring financial, operational and business continuity risks including complaints, credit risks and exposure, claims under legislation relating to matters such as data protection, IT failures and abuses, and damage to offices;

IB(7.4)

making arrangements for the continuation of your firm in the event of absences and emergencies, for example holiday or sick leave, with the minimum interruption to clients' business;

IB(7.5)

you maintain systems and controls for managing the risks posed by any financial inter-dependence which exists with your connected practices;

IB(7.6)

you take appropriate action to control the use of your brand by any body or individual outside of England and Wales which is not an overseas practice.

In-house practice

Outcomes 7.5 and 7.7 apply to your in-house practice.

Outcomes 7.1 to 7.3, and 7.6 and 7.8 to 7.10 apply to you if you have management responsibilities.

Notes

(i)

All of the chapters in the Code will be relevant to the management of your business, in particular those which require you to have systems and controls in place.

(ii)

This chapter should also be read with the SRA Authorisation Rules, the SRA Financial Services (Conduct of Business) Rules 2001 and the SRA Indemnity Insurance Rules.

Chapter 8: Publicity

This chapter is about the manner in which you publicise your firm or in-house practice or any other businesses. The overriding concern is that publicity is not misleading and is sufficiently informative to ensure that clients and others can make informed choices.

In your publicity, you must comply with statutory requirements and have regard to voluntary codes.

The outcomes in this chapter show how the Principles apply in the context of publicity.

Outcomes

You must achieve these outcomes:

O(8.1)

your publicity in relation to your firm or in-house practice or for any other business is accurate and not misleading, and is not likely to diminish the trust the public places in you and in the provision of legal services;

O(8.2)

your publicity relating to charges is clearly expressed and identifies whether VAT and disbursements are included;

O(8.3)

you do not make unsolicited approaches in person or by telephone to members of the public in order to publicise your firm or in-house practice or another business;

O(8.4)

clients and the public have appropriate information about you, your firm and how you are regulated;

O(8.5)

your letterhead, website and e-mails show the words "authorised and regulated by the Solicitors Regulation Authority" and either the firm's registered name and number if it is an LLP or company or, if the firm is a partnership or a recognised sole practice, the name under which it is licensed/authorised by the SRA and the number allocated to it by the SRA.

Indicative behaviours

Acting in the following way(s) may tend to show that you have achieved these outcomes and therefore complied with the Principles:

IB(8.1)

where you conduct other regulated activities your publicity discloses the manner in which you are regulated in relation to those activities;

IB(8.2)

where your firm is an MDP, any publicity in relation to that practice makes clear which services are regulated legal services and which are not;

IB(8.3)

any publicity intended for a jurisdiction outside England and Wales complies with the Principles, voluntary codes and the rules in force in that jurisdiction concerning publicity;

IB(8.4)

where you and another business jointly market services, the nature of the services provided by each business is clear.

Acting in the following way(s) may tend to show that you have not achieved these outcomes and therefore not complied with the Principles:

IB(8.5)

approaching people in the street, at ports of entry, in hospital or at the scene of an accident; including approaching people to conduct a survey which involves collecting contact details of potential clients, or otherwise promotes your firm or in-house practice;

IB(8.6)

allowing any other person to conduct publicity for your firm or in-house practice in a way that would breach the Principles;

IB(8.7)

advertising an estimated fee which is pitched at an unrealistically low level;

IB(8.8)

describing overheads of your firm (such a normal postage, telephone calls and charges arising in respect of client due diligence under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017) as disbursements in your advertisements;

IB(8.9)

advertising an estimated or fixed fee without making it clear that additional charges may be payable, if that is the case;

IB(8.10)

using a name or description of your firm or in-house practice that includes the word "solicitor(s)" if none of the managers are solicitors;

IB(8.11)

advertising your firm or in-house practice in a way that suggests that services provided by another business are provided by your firm or in-house practice;

IB(8.12)

producing misleading information concerning the professional status of any manager or employee of your firm or in-house practice.

In-house practice

Outcomes 8.1 to 8.4 apply to your in-house practice unless it is clear from the context that the outcome is not relevant in your particular circumstances.

Notes

(i)

This chapter should be read in conjunction with Chapters 1 and 9.

Chapter 9: Fee sharing and referrals

This chapter is about protecting clients' interests where you have arrangements with third parties who introduce business to you and/or with whom you share your fees. The relationship between clients and firms should be built on trust, and any such arrangement should not jeopardise that trust by, for example, compromising your independence or professional judgement.

The outcomes in this chapter show how the Principles apply in the context of fee sharing and referrals.

Outcomes

You must achieve these outcomes:

O(9.1)

your independence and your professional judgement are not prejudiced by virtue of any arrangement with another person;

O(9.2)

your clients' interests are protected regardless of the interests of an introducer or fee sharer or your interest in receiving referrals;

O(9.3)

clients are in a position to make informed decisions about how to pursue their matter;

O(9.4)

clients are informed of any financial or other interest which an introducer has in referring the client to you;

O(9.5)

clients are informed of any fee sharing arrangement that is relevant to their matter;

O(9.6)

you do not make payments to an introducer in respect of clients who are the subject of criminal proceedings or who have the benefit of public funding;

O(9.7)

where you enter into a financial arrangement with an introducer you ensure that the agreement is in writing;

O(9.8)

you do not pay a prohibited referral fee.

Indicative behaviours

Acting in the following way(s) may tend to show that you have achieved these outcomes and therefore complied with the Principles:

IB(9.1)

only entering into arrangements with reputable third parties and monitoring the outcome of those arrangements to ensure that clients are treated fairly;

IB(9.2)

in any case where a client has entered into, or is proposing to enter into, an arrangement with an introducer in connection with their matter, which is not in their best interests, advising the client that this is the case;

IB(9.3)

terminating any arrangement with an introducer or fee sharer which is causing you to breach the Principles or any requirements of the Code;

IB(9.4)

being satisfied that any client referred by an introducer has not been acquired as a result of marketing or other activities which, if done by a person regulated by the SRA, would be contrary to the Principles or any requirements of the Code;

IB(9.5)

drawing the client's attention to any payments you make, or other consideration you provide, in connection with any referral;

IB(9.6)

where information needs to be given to a client, ensuring the information is clear and in writing or in a form appropriate to the client's needs;

IB(9.7)

having effective systems in place for assessing whether any arrangement complies with statutory and regulatory requirements;

IB(9.8)

ensuring that any payments you make for services, such as marketing, do not amount to the payment of prohibited referral fees;

IB(9.9)

retaining records and management information to enable you to demonstrate that any payments you make are not prohibited referral fees.

Acting in the following way(s) may tend to show that you have not achieved these outcomes and therefore not complied with the Principles:

IB(9.10)

entering into any type of business relationship with a third party, such as an unauthorised partnership, which places you in breach of the SRA Authorisation Rules or any other regulatory requirements in the Handbook;

IB(9.11)

allowing an introducer or fee sharer to influence the advice you give to clients;

IB(9.12)

accepting referrals where you have reason to believe that clients have been pressurised or misled into instructing you.

In-house practice

Outcomes 9.1 to 9.3 apply to your in-house practice.

Outcomes 9.4 to 9.8 apply unless it is clear from the context that the outcome is not relevant to your particular circumstances.

Notes

(i)

This chapter should be read in conjunction with:

(a)

Chapter 1 (Client care)

(b)

Chapter 4 (Confidentiality and disclosure)

(c)

Chapter 8 (Publicity)

(d)

The SRA Authorisation Rules

(e)

The SRA European Cross-Border Practice Rules