Regulatory Settlement Agreements

Introduction

Purpose and scope of this guidance

This document provides guidance for those making decisions about when we will enter into agreements to conclude a case. Whilst we are under no obligation to negotiate or enter into an agreement, this guidance sets out the circumstances in which we are likely to do so.

This guidance should be read in the context of decision making at the SRA and other guidance documents. It is a living document and will be reviewed and updated as appropriate. It reflects our approach to our regulatory role and any departure must be capable of justification on the individual facts of the case.

What is a Regulatory Settlement Agreement?

We can reach an agreement to conclude disciplinary proceedings in whole or in part (by bringing to an end our consideration of one or more allegations). We do so when the person we regulate is prepared to accept that they have breached our rules and, where appropriate, are prepared to put the matter right. RSAs are not “commercial” settlements, but a proportionate regulatory outcome on terms that are agreed by the regulated person.

RSAs allow us to protect both consumers and the public interest by reaching appropriate outcomes swiftly, efficiently and at proportionate cost.

RSAs are flexible to ensure that we can reach the best possible outcome in the public interest. They will usually involve a sanction such as a rebuke or fine, or may include practising certificate restrictions, a Control Order (such as a section 43 order) or undertakings given by the individual for example to take remedial action or remove themselves from the roll with our consent.

When forming our view of the level of any disciplinary sanction, such as a fine, we will have regard to our existing powers, our rules and our guidance.

In all cases where a sanction is agreed in a RSA, it has the same effect and status as one imposed by a decision maker such as one of our adjudicators.

To enable a free and frank exchange of views, communications about a possible RSA are held “without prejudice”. This prevents statements made (whether in writing or orally) in a genuine attempt to settle an issue from being put before the court as evidence of admissions against the interest of the party that made them. In effect, this means that both we and the regulated person cannot disclose admissions made to a Tribunal or adjudicator dealing with the case should the settlement discussions fail. This does not mean, however, we would ignore facts or evidence disclosed to us in any such correspondence which is relevant to the outcome. In light of our public interest role, if information comes to our attention during the course of a without prejudice discussion which affects our understanding of the facts of the case, we will take this into account in any future handling of the matter.

Who can they be with?

We can enter into RSAs with anyone we regulate, including: law firms, solicitors, managers, employees, foreign lawyers and other role holders.

Types of matters that may be suitable for a RSA

The matters that might be dealt with by a RSA can involve a wide range of issues, relating to conduct both inside and outside of practice.

We will not, however, enter into a RSA with an individual where:

  • we are not satisfied that they would comply with the terms of the agreement. This might be because of the nature of the issues (for example, dishonesty) or because they have a history of persistent non-compliance with our regulatory controls
  • we consider that in light of the seriousness of the matter, this should be referred for determination in order to uphold public confidence in the provision of legal services and provide credible deterrence to others. For example, we are likely to refer cases of serious fraud or dishonesty, breach of integrity or abuse of trust to the SDT in order that the individual may be publicly struck from the roll, or ones in which the individual's regulatory history indicates an elevated risk
  • the appropriate outcome is outside of our current in house powers, such as a substantial fine which can only be ordered by the SDT.

Example 1

We received a number of complaints about the closure of a law firm and its failure to return money and files to clients. We investigated and found a number of breaches of our rules, including a small shortage on client account, handing live files to a third party without the client’s knowledge and a failure to obtain any run off insurance cover. The managers quickly accepted the issue which they said had been caused by problems at another firm recently taken over. We suggested a RSA to the managers who had by that time already replaced the small shortage. As part of the RSA, the managers accepted the breaches and undertook to help resolve the outstanding issues around client money and files. We agreed the managers should be rebuked and pay a total of £2,500 towards our costs. The RSA was published on our website.

The factors we take into account when considering if a RSA is the right outcome will include:

  • if the regulated person has fully accepted that things have gone wrong. If they do not accept that they have breached our rules, then a RSA will not be possible and our investigation will proceed normally
  • any action already taken or planned to be taken to put the matter right, such as repaying money improperly charged to clients or agreeing improvements to a firm’s conflict checking systems. This may also be regarded as mitigation that will reduce the level of any sanction
  • the regulated person’s health. Where ill health is raised as a relevant factor we will usually require independent medical evidence. A RSA may be appropriate because the person’s health means that they will be unable to withstand a public hearing, but may nonetheless be able to agree a sanction which enables us to achieve appropriate protection for the public
  • whether the regulated person has a good regulatory history. Previous warnings and sanctions may indicate a risk of misconduct recurring and may mean a more serious penalty may be merited than we have power to impose.
 

Other relevant issues

Form of an RSA

The terms of a RSA will generally:

  • be in writing, having been agreed by us and the person concerned
  • state the relevant facts
  • identify any admitted failings
  • set out the person’s mitigation for the breaches
  • identify the action the person has taken or has committed to take
  • identify any sanction imposed by the agreement and the factors we have taken into account in deciding on the outcome and to agree a RSA; and
  • provide that costs are payable.

Timing and timeliness

We will start discussions for a RSA if we consider that it is an appropriate case for us to do so. We welcome those we regulate also raising the possibility of a RSA and we will consider any such request. However, we will generally only agree a RSA when we have finished our investigation of the facts and have received from the relevant person an explanation of the issues raised. This is so we can ensure that a RSA is appropriate in all the circumstances and decide on the right outcome taking into account all of the evidence. Any discussions or draft RSAs are provisional until formally signed by us.

We will not allow the existence of any discussions about the RSA to delay our formal investigatory processes, which will generally run in parallel.

We will not generally consider entering into a RSA on one matter, if there are other ongoing investigations into a different matter that relate to the same person or firm. This is because the decision maker would need to consider all aspects of that person’s or firm’s behaviour at the same time.

We can also enter into a RSA when the case has already been referred for a hearing before the SDT. A reason for this may be because the regulated person is now prepared to accept that they have breached our rules (when previously they were not) or because of new evidence or issues coming to light such as significant ill health. This may change our view of the correct outcome of the case in the public interest. If we have already issued proceedings, we can only stop them if the SDT agrees, so we will ask the SDT for permission to withdraw the proceedings and will show the proposed terms of the RSA to the SDT. It is however open to the SDT to refuse our request and to hear the case and, if so, impose the same or a different sanction.

In some instances, it can help cases to be finished quickly and at reasonable cost if a statement of facts and admissions can be agreed. This is different to a RSA and will set out the facts and the admissions made, but will leave it to the SDT to decide on the sanction that should be imposed.

Multiple parties

When we have investigated a number of individuals in relation to their involvement in the same matter, we can enter into a RSA with one individual and continue to proceed with an application to the SDT for the others. We will do this when we consider that by doing so, we can reach fair outcomes more efficiently and quickly than if we were to proceed to the SDT against all the individuals. In some cases, it may be appropriate to carry on against all individuals, because their respective responsibilities will only come out properly at a full hearing.

Example 2

Four partners and two assistant solicitors were alleged to be responsible for breaches of our Accounts Rules, arising out of multiple transactions conducted by one partner and the two assistants. It became clear that one assistant was heavily involved in all of the transactions, but the other was only involved in one of them. We considered it proportionate to agree an RSA which imposed a rebuke against the latter assistant, rather than prosecute her before the SDT with the partners and the other assistant solicitor.

Publication

We will generally publish RSAs as we would any other disciplinary outcome. We consider that publication of RSAs is particularly important to achieve transparency and to hold us to account for our decisions, both of which help maintain public confidence. The published reasons must be sufficiently clear to enable the public to understand why the decision was reached and how it protects the public interest. We will consider any issues that may suggest that it is not appropriate for the RSA to be published in accordance with our publication policy.

Costs

Achieving an early resolution of an investigation minimises costs for us and the regulated person. In accordance with our normal approach to such matters, we always try to recover in full our costs from those who are found to have breached our rules. This reduces the amount of costs that we have to pass on to our wider regulated community and ultimately to consumers.

If a person with whom we are discussing a RSA provides evidence of inability to pay, we may seek to agree an instalment or payment plan.

Variation

Circumstances inevitably change. We may agree to a variation of the RSA at the request of the regulated person. For example, we may extend the deadline for an action to be taken if we consider that it is reasonable to do so. Alternatively, we may have agreed that someone should be made subject to a regulatory control and be asked several years later for the order to be lifted as the person considers that it is no longer required. In such circumstances, we will consider whether the RSA should be varied or brought to an end. When we do so, we will seek evidence to support us in our decision making.

RSAs can be reconsidered or rescinded by us if we find that the person has materially misled us (whether intentionally or not), or new information comes to light which makes it necessary in the public interest to re-open the underlying case.

Non-compliance

Non-compliance with the terms of a RSA is rare. We will always check that the person meets the terms of any undertakings given in the agreement.

A failure to comply may have serious consequences. We regard anyone who does not cooperate with us, or comply with the terms of a RSA, or having entered into an agreement behaves in a way inconsistent with it (such as by denying the breaches they have admitted, or by materially misrepresenting the agreement) to be guilty of misconduct. We can re-open the original investigation, and act on any new information that suggests regulatory action is required, including the non-compliance itself.

Example 3

Mr S entered into an RSA in which he undertook to trace and repay two clients who had £7,000 improperly deducted from their personal injury damages. He failed to do this, despite us contacting him on a number of occasions. In the meantime, a number of other serious failings by Mr S came to light and he was made bankrupt. We referred Mr S’s failure to comply with the RSA to the SDT. The SDT found the breach to be established and suspended him indefinitely. The SDT said that it was very concerned that Mr S had given an undertaking, when he knew he might struggle to find the sums to repay.