Equality impact assessment

Introduction

• 1.

  The Investigation function of Forensic Investigations carries out on-site investigations of firms of solicitors. The aim of an investigation is to determine whether there are any potential breaches of the Solicitors' Accounts Rules or Code of Conduct which require regulatory action.

Key stakeholders

• 2.

  Our key stakeholders are

  • all individuals and bodies regulated by the Solicitors Regulation Authority (SRA) who could face an investigation,
  • consumers of legal services, particularly clients of any firm investigated, and
  • the Law Society, the Legal Services Board, the Legal Ombudsman and the Solicitors Disciplinary Tribunal.

Background to the equality impact assessment

• 3.

  This equality impact assessment began during the period in which Lord Ouseley's independent review into the issue of disproportionality within the SRA was published. During his review, Lord Ouseley found an over-representation of Black and Minority Ethnic (BME) solicitors in our regulatory decisions and early decision-making processes, and also considered there to be disproportionality with regard to the non-disclosure of reasons behind our investigations.

• 4.

  Following Lord Ouseley's report, the SRA were keen to understand the reasons behind this disproportionality and commissioned Pearn Kandola, a group of business psychologists who specialise in the area of diversity, to research and establish the cause of the disproportionality. Pearn Kandola's interim report (PDF, 23 pages, 894K) was published in December 2009 and their final report was published in July 2010. The key findings of this report are as follows.

  • A disproportionately high number of cases are raised against BME solicitors in the form of complaints or referrals from other agencies, meaning that disproportionality exists prior to the SRA's processes being put into place.
  • Whilst BME solicitors have a disproportionate number of cases raised against them, factors other than ethnicity (such as length of service and the size of the firm) are more likely to contribute to this.
  • Some SRA outcomes act to reduce the disproportionality experienced by BME solicitors, some act to maintain the level of disproportionality, and in some areas the SRA outcomes add to the disproportionality.
  • Those areas that were seen to add to the disproportionality included those cases that required further investigation by the SRA, conduct cases, decisions made about the renewal of practising certificates, and decisions made about BME solicitors' applications.
• 5.

  This equality impact assessment takes into account the findings of both reviews as far as they relate to the Forensic Investigation function. It has been updated since it was originally published in December 2010, to reflect the monitoring and review that has taken place since then.

How the Forensic Investigation function works

• 6.

  There are four different stages of investigation, which are as follows.

  • Stage 1 – risk assessment
  • Stage 2 – decision to visit or rescind
  • Stage 3 – investigation
  • Stage 4 – conclude investigation/report and referral

  These are explained in more detail below.

Stage 1 – Risk assessment

• 7.

  Information and intelligence received by the SRA is initially risk-assessed to see whether or not further investigation into a firm is required. In 2008, some matters were risk-assessed in the Forensic Investigation unit itself. Since 2009, all cases have been risk-assessed by our Risk Assessment and Designation Centre (RADC). Those matters which are considered to represent the highest risk will be forwarded to the Forensic Investigation unit for investigation.

Stage 2 – Decision to visit or rescind

• 8.

  On receipt of a matter from the RADC an investigation is authorised by the Head of Forensic Investigation, who decides whether the investigation should be carried out with or without notice. A without notice investigation is referred to as a "walk-in". The investigation is then allocated to an investigation team based on a number of factors such as available resources, priority, experience and geography.

• 9.

  On occasion, an investigation is rescinded before it has begun where, for example, there has been a change of circumstance or further information is received to indicate that a visit is no longer necessary.

Stage 3 – Investigation

• 10.

  Investigations are usually carried out by a single Investigation Officer and are undertaken under the powers contained in the Solicitors' Accounts Rules and the Solicitors' Code of Conduct. The investigation will focus on the issue which led to the investigation, although will be widened in scope if other issues become apparent to the Investigation Officer.

• 11.

  A typical investigation will involve the scrutiny of files, accounts and other documents along with interviews of staff and solicitors at the firm. During the visit, staff and solicitors are given an opportunity to answer the Investigation Officer's questions and address any concerns.

Stage 4 – Conclude investigation/report and referral

• 12.

  If the visit does not reveal any issues of concern, the investigation is concluded. If, however, the investigation reveals issues which warrant regulatory action, a report is prepared by the Investigation Officer setting out the facts of the matter. The types of issue that would lead to a report include dishonesty, fraud, serious breaches of the Solicitors' Code of Conduct, and serious breaches of the Solicitors' Accounts Rules (for example, the theft or misuse of client monies).

• 13.

  The report is disclosed to the solicitor and a formal response is requested from the solicitor, usually within two weeks. The report and solicitor's response would then be passed to a separate casework investigation team to take the matter further as appropriate, depending on the solicitor's response.

• 14.

  Formal decisions as to regulatory outcomes are made independently from the Forensic Investigation function; by a staff member with delegated powers, an Adjudicator or an Adjudication panel. All decisions are made in accordance with our decision-making criteria, which are published on our website.

Changes in processes and the move to outcomes-focused regulation

• 15.

  Since the reports of Lord Ouseley and Pearn Kandola have been published, some processes within the Forensic Investigation function have been changed to take account of their findings and improve our processes. These include an introduction of a clear set of objective criteria to determine which investigations are carried out without notice and the development of a statement of good practice addressing the issue of timeliness.

• 16.

  From 6 October 2011, we changed the way that we regulate solicitors and firms so that it is more outcomes-focused. A new Handbook came into force on this date which brings together the regulatory requirements for all solicitors, law firms and alternative business structures regulated by us to help achieve a common standard of protection for clients. Although we may still need to visit firms to investigate concerns brought to our attention, this function is being absorbed into our wider Supervision function. The Supervision function is driven by risk, which is assessed using a completely new risk framework. We are introducing our new approach gradually until the new functions are fully developed. The formal investigation function is likely to remain operational largely in its current form until fully absorbed by our Supervision function.

Conclusions about the equality impact

Engagement

• 17.

  Over the last few years, we have engaged with the profession about the work of the Forensic Investigation unit and the feedback received was largely positive. This engagement began in 2009 via a series of roadshows that were held across England and Wales. A number of these roadshows were targeted at particular equality groups, including the Society of Asian Lawyers and the Black Solicitors Network. At the sessions, we explained the nature of the Forensic Investigation function, how the unit operates and provided advice to practitioners on how to avoid an investigation. A presentation was also made to the Lawyers with Disabilities Division Conference in 2009.

• 18.

  No equality issues or concerns were raised during this engagement. However some negative feedback was received with regard to the length of our investigations. As detailed above, a Statement of Good Practice has since been published on our website, which should hopefully address these concerns. This statement aims to ensure that our investigations are monitored formally throughout their course so that they remain focused and as timely as possible.

Data analysis

• 19.

  We have analysed the data held with regard to our investigation activity for 2008, 2009 and 2010. Through this analysis, we have identified some disproportionality with regard to race, gender and age, which is discussed further below.

• 20.

  Given the limited data available in relation to disability, we have not been able to undertake any meaningful analysis for this particular equality strand. We have also been unable to analyse any data in relation to religion or belief or for sexual orientation. Whilst a Diversity Census was conducted with the profession in 2009, the data received was very limited for these areas. Work is, however, being undertaken to improve our equality data collection going forward and will be supported by improved IT systems.

Stage 1 – Risk assessment

• 21.

  Our data indicates that BME firms were over-represented in those matters risk-assessed by the Forensic Investigation Unit in 2008. At the time, BME firms made up 9.4 per cent of the firm population although represented 19 per cent of those matters risk-assessed. There was a corresponding under-representation for white firms, which represented 75.3 per cent of the firm population although only 58 per cent of those matters risk-assessed by the unit. This data refers simply to the number of reports received and risk-assessed by the unit so it represents only reports received rather than cases where we have decided to take action.

• 22.

  For those matters risk-assessed by the RADC in 2008 there was also disproportionality, although to a lesser degree as BME firms made up 12.4 per cent of those matters risk-assessed. White firms were under-represented making up 69.9 per cent of those matters risk-assessed. As above, this data refers simply to the number of reports received and risk-assessed by RADC.

• 23.

  In 2009, all matters were risk-assessed by the RADC. Having considered the data for this year, there again appears to be disproportionality as BME firms made up 10.6 per cent of the firm population and 14.23 per cent of those matters risk-assessed. There was a corresponding under-representation for white firms, with these firms representing 76.2 per cent of the firm population although only 67.1 per cent of those matters risk-assessed by the RADC.

• 24.

  This data analysis is in line with Pearn Kandola's findings that BME solicitors have a disproportionate number of cases raised against them from external sources. However, the level of disproportionality appeared to have reduced for 2009, which was encouraging.

• 25.

  With regards to gender, the 2008 data indicated that there was no significant difference in the proportion of female and male firms risk-assessed by either Forensic Investigation or the RADC compared to the total firm population. This was the same for 2009.

• 26.

  In relation to age, our data shows that firms in the younger (22-30 and 31-40) and older age bands (65+) were over-represented in the firms risk-assessed for investigation by Forensic Investigation. Within the RADC, there was also over-representation for the 22-30 and the 65+ age bands. Firms in the 41 to 65 age bands were risk-assessed in a smaller proportion than the overall population.

• 27.

  In 2009, our data shows that firms in the younger age band (22-30 and 31-40) were again over-represented in the firms risk-assessed for investigation by the RADC, with the 51-60 age group significantly under-represented (9.06 per cent of all firms risk-assessed compared to 18.1 per cent of the overall firm population).

• 28.

  In 2010, all matters were again risk-assessed by the RADC. A separate equality impact assessment on the RADC was undertaken in January 2011 and monitoring and review arrangements are currently ongoing in order to update this equality impact assessment further.

Stage 2 – Decision to visit or rescind

• 29.

  In 2008, 96.9 per cent of those BME firms risk-assessed were referred to Forensic Investigation for further investigation. This compared to 92.7 per cent of those white firms risk-assessed. In 2009, there was no significant difference between the proportion of BME firms referred for investigation (91.6 per cent) in comparison to white firms (91.2 per cent). Whilst it was hoped that this pattern would be sustained throughout 2010, the gap instead widened again with 95.9 per cent of those BME firms risk-assessed being referred to Forensic Investigation in comparison to 91.6 per cent of white firms.

• 30.

  With regards to gender, 92.4 per cent of female firms were referred for investigation in 2008 compared to 94.7 per cent of male firms. This figure went down slightly in 2009, with 89.3 per cent of female firms being referred for investigation against 91.3 per cent of Male firms. In 2010, the data shows that 92.4 per cent of female firms were referred for investigation compared to 92.2 per cent of male firms indicating no significant difference, a position similar to that in 2008.

• 31.

  A hundred per cent of those cases risk-assessed for the youngest age band (22-30) were referred for investigation in 2008. This was the same in 2009 although in 2010, this figure reduced to 91.7 per cent of firms.

• 32.

  Our data shows that for 2008, BME firms were more likely than white firms to have the investigation rescinded (12.3 per cent against 9.8 per cent). Our 2009 data shows much more parity, with 8.4 per cent of investigations rescinded for BME firms in comparison to 8.8 per cent of those rescinded for white firms. The pattern seems to have reversed for 2010, with only 4.1 per cent of BME firms having the investigation rescinded compared to 8.4 per cent of white firms.

• 33.

  In 2008, female firms were much more likely to have the investigation rescinded, (in 16.4 per cent of cases compared to only 8.9 per cent for male firms). In 2009, there was more parity, with 10.7 per cent of investigations rescinded for female firms in comparison to 8.7 per cent for male firms. There was even more parity in 2010, with 7.6 per cent of female firms having their investigation rescinded compared to 7.8 per cent of male firms.

• 34.

  There were no significant patterns identified in relation to firms falling within the various age categories in 2008 and 2009. This was the same with the 2010 data, except for firms in the 61-65 age range which had 18.2 per cent of the investigations rescinded. This was around three times the amount of the other age categories.

Stage 3 – Investigation

• 35.

  In 2008, BME firms received no notice of investigation in significantly more cases than white firms (28.1 per cent compared to 15.5 per cent of white firm investigations). In 2009, BME firms were even more likely to receive no notice of investigation (13.7 per cent compared to 3.7 per cent of white firms). In 2010 the pattern was similar to that in 2008, with 30.2 per cent of BME firms receiving no notice of investigation compared to 14.8 per cent of white firms.

• 36.

  Similarly, female firms were significantly more likely to receive no notice of investigation than male firms in 2008 (26.7 per cent compared to 16.1 per cent for male firms). In 2009, the position changed significantly, with female firms receiving no notice of investigation in only 5.5 per cent of cases, with male firms receiving no notice of investigation in 6.9 per cent of cases. The percentages rose considerably in 2010, although there was only a small difference between the male and female firms with 20.5 per cent female firms receiving no notice of investigation compared to 23.2 per cent of male firms.

• 37.

  In 2008, firms in the youngest and oldest age bands were most likely to receive no notice of investigation but in 2009, firms in both age bands were notified of an investigation in 100 per cent of cases. In 2010, firms in the 31-40 age band were most likely to receive no notice.

• 38.

  Having originally considered the 2009 data against the 2008 data, it had appeared that, in line with our objectives, we were being more open and transparent with regard to the reasons for our investigations. The pattern, however, seems to have shifted somewhat according to our 2010 data with a higher percentage of firms receiving no notice of investigation. It is worth noting that a lot more firms were investigated in 2010 compared to previous years. 523 firms were investigated in 2010, compared to 427 in 2009 and 323 in 2008, which may be a contributing factor.

Stage 4 – Conclude investigation/report and referral

• 39.

  Our 2008 data shows no significant difference in output between BME and white firms, although BME firms were slightly less likely to receive an adverse report. BME firms received an adverse report in 61.4 per cent of investigations compared to 67.7 per cent of white firm investigations. Similarly, there was no significant difference in the output of an investigation between female and male firms. With regards to age, firms in the oldest age band were most likely to receive an adverse report.

• 40.

  Our 2009 data also revealed no significant difference in output with regards to ethnicity and gender. In terms of age, the oldest age band was again the most likely to receive an adverse report.

• 41.

  Our 2010 data revealed that BME firms were more likely to receive an adverse report, which was the case for 56.3 per cent of firms compared to 50.2 per cent of white firms investigated. There was no significant change between male or female firms. With regards to age, the oldest age band was again most likely to receive an adverse report.

Discrimination complaints

• 42.

  We have monitored the number of discrimination complaints received about the Forensic Investigation unit. Under the current complaints system, two complaints of discrimination have been received and investigated by Forensic Investigations throughout 2008 and 2009. One of these was on the grounds of race and the other was on the grounds of race and disability, neither of which were upheld. In 2010, three further complaints of discrimination were received and investigated by Forensic Investigations. One of these related to race, another was on the grounds of health and age and the third was unspecified. None of these complaints were upheld.

Conclusions about the human rights impact

• 43.

  It is not considered that the operation and processes of the Forensic Investigation unit interfere with any human rights. Whilst we have considered Article 6, the right to a fair trial, we conclude that it is not engaged through our Forensic Investigation function as the role of this unit is largely an information gathering one. Although the unit sits within an investigation/disciplinary process, there are no formal decisions made about firms within the unit.

• 44.

  Nevertheless, we have considered the general principles of fairness and transparency throughout our equality impact assessment and in particular whether to give reasons for our Forensic Investigations.

• 45.

  The Solicitors' Accounts Rules provide that we do not need to give reasons for investigations, however concerns were raised that this does not sit well with our core regulatory principle of transparency. A policy was therefore introduced in May 2009 which states that we will normally disclose a brief statement of the reasons for our investigations, unless there is a risk that disclosure could

  • breach any duty of confidentiality,
  • disclose or risk disclosure of a confidential source of information,
  • significantly increase the risk that those under investigation may destroy evidence, seek to influence witnesses, default, or abscond, or
  • otherwise prejudice or frustrate an investigation or other regulatory action.
• 46.

  We have also considered Article 8, the right to respect for privacy, and accept that this is engaged as the investigations involve visiting a firm's premises, requesting sight of the firm's files and papers, and interviewing solicitors and employees about the firm's business. For those small firms where the solicitor's office is based at home, investigations take place in premises where the boundaries between office space and home may not always be clear. We are aware of the need to act with great care, particularly in visits to offices based at home and we make sensible provisions to ensure that the privacy of other residents and the home is respected. These provisions include

  • entry to the home can only be by consent,
  • the investigation will be restricted to working areas in the home, for example an office within the home or as otherwise indicated by the solicitor, and
  • arrangements to meet at other locations will be made where required.
• 47.

  Having taken all of this into consideration, it is not considered that there will be an unjustified interference with any human rights as our approach is proportionate and each investigation is conducted on its own individual merits.

Overall conclusions

• 48.

  Having considered the proportion of the matters brought to the SRA's attention for risk assessment, it appears that a disproportionate number of cases are raised against BME solicitors from external sources in the first instance. This is in line with Pearn Kandola's findings. This level of disproportionality in reports received appeared to have reduced for 2009, although it has increased again in 2010.

• 49.

  There are a number of other actions that we are undertaking that may help minimise the disproportionality that is apparent in the reports referred to the SRA. These include working with the Legal Ombudsman with regard to referrals to the SRA and providing guidelines on what constitutes a fair complaint. Clear arrangements are now in place for the Legal Ombudsman to refer cases to the SRA and for the appropriate exchange of information. We are also now monitoring the referrals data received from the Legal Ombudsman by equality group.

• 50.

  Once the reports have been risk-assessed and referred for investigation, there is some disproportionality, in particular for BME firms in the actions taken by the Forensic Investigation unit, in particular in the decisions made to rescind an investigation, the proportion of firms which receive no notice of investigation, and the proportion of firms receiving an adverse report. There were fewer investigations rescinded, more investigations carried out without notice, and more adverse outcomes for BME firms as compared to white firms. Although the forensic investigation function is likely to change over the next few months, we will still need to visit firms to carry out investigations as part of the risk-based supervision function, so we will continue to monitor this area to identify how our new approach might change the patterns that have been emerging over the past few years.

• 51.

  On a positive note, there does appear to be more parity in terms of gender, although with regards to age there are instances of inconsistency across the age groups. The youngest age band of solicitors still seem to be the group most affected in terms of those firms risk-assessed and visited. However, this may be due to these solicitors being new to the profession and having less experience in the field. One of our equality objectives going forward is to review the levels of support and supervision available to trainees and new solicitors, which may help address this imbalance. We are currently undertaking a review of the legal education and training system for lawyers in England and Wales in association with the Bar Standards Board and the Institute of Legal Executives Professional Standards. This will consider the educational requirements placed upon individuals entering the sector, including programmes and pathways to professional qualifications, as well as the training contract. We are also developing our Supervision function and part of this will involve consideration about how we supervise firms in terms of the support and supervision that they offer to trainees and newly qualified solicitors.

• 52.

  The SRA has been continuously improving our decision-making process over the past few years to ensure fairness, transparency and consistency. For example, we made sure that all matters were risk-assessed independently of the Forensic Investigation unit by our Risk Assessment and Designation Centre, we adopted a transparency policy to ensure that reasons for investigations are given unless there is a clear public interest case not to do so, and published our Statement of Good Practice and more information on our website about our investigatory powers, our investigations and our related policies.

• 53.

  In the light of our new approach to regulation and our new Handbook which will become effective on 6 October 2011, we are reviewing all our decision making criteria and embarking on a new programme of training for decision makers. All staff have undertaken a mandatory equality and diversity e-learning course following the implementation of the Equality Act 2010.

• 54.

  In July 2011, we introduced our new Equality Framework for the SRA. This set out nine equality objectives to help us continue to progress and promote our vision of equality and diversity as we move toward outcomes-focused regulation. Our priority this year has been ensuring that equality and human rights are embedded in our new authorisation, supervision and enforcement functions as well as continuing our progress in relation to a number of important equality issues that we have identified in our regulatory work, including the disproportionate regulatory outcomes for BME solicitors.

• 55.

  As we move toward outcomes-focused regulation there will be increased opportunities for us to work more closely with solicitors in a relationship of mutual trust, encouraging firms to assess and tackle risks themselves and to achieve the right outcomes for their clients. It is hoped that this will have a positive impact on our future investigation activity as closer supervision and relationship management arrangements may help avoid potential breaches happening in the first place, therefore avoiding the need for formal investigation. It is important, therefore, that we continue to monitor the Forensic Investigation function during this period of transformation.

• 56.

  Under this new approach, all Forensic Investigation work will be commissioned to the unit from our Supervision function. At present, the exact procedures are still under review, however it is considered that there is potential for our new supervisory approach to have a positive impact on our Forensic Investigation activity. The aim of our new supervisory activity is to help firms improve standards, reduce risk for consumers and enhance the reputation of legal service providers.

• 57.

  As outcomes-focused regulation will not be implemented until October 2011, it is unlikely that the new approach will have much bearing on the 2011 data. We will therefore return to this equality impact assessment in two years time to consider both the 2011 and 2012 data relating to this unit. This will help us determine whether the position has improved as a result of our new regulatory approach or if yet more work is required by the unit to address the issue of disproportionality.

Action plan