Criteria to determine the focus of an investigation
Updated 10 May 2012
View previous version of this criteria (published 14 February 2012)
Firms are responsible for delivering outcomes and for all aspects of compliance within the firm. Action may be taken against the firm only, individuals or both.
While levels of personal knowledge (such as intent or recklessness) on the part of one or more individuals in the firm may be relevant to aggravation or mitigation of a failure to comply with principles, rules or regulations, or a failure to achieve outcomes, such knowledge is not a necessary precondition to a finding against the firm.
Nor is such knowledge a precondition to a finding against an individual, although it may be relevant to whether or not action is pursued against that individual as well as being relevant in the usual way to mitigation or aggravation of a failure.
Our policy concerns in determining how we investigate and take further action include:
- to encourage compliance and provide credible deterrence proportionately and at reasonable cost;
- to ensure that a firm takes full responsibility for the acts and omissions of everyone in the firm (including managers);
- to investigate and take consequential action against individuals when, having regard to the Better Regulation principles, it is necessary to do so, particularly to ensure that the public is protected and that failure to comply with the principles or to achieve outcomes is subject to credible deterrence;
- to enable firms to accept responsibility on the basis that it is not necessary to investigate individual culpability—while ensuring that firms do not seek to avoid or purport inappropriately to mitigate responsibility on the basis that the failure to comply was by an individual.
It is clear from the Code in the Handbook that firms are directly responsible for compliance.
All relevant circumstances will be taken into account. The existence or need to investigate one or more of the following factors is likely to lead to the relevant individual(s) being subject to investigation and, if necessary, further action:
- intentional, reckless or seriously incompetent conduct
- misleading the court or others including clients, other lawyers and third parties
- abuse of a position of authority or trust, such as when acting as trustee, receiver or attorney
- otherwise serious misconduct—particularly that which is systematic, deliberate or pre-meditated and/or with potential for significant adverse impact or involving a vulnerable person
- serial or repeated misconduct in the context of the person's history
- criminal convictions or findings of other regulators
- failure to comply with personal regulatory requirements—such as practising uncertificated, breach of practising certificate conditions, breach of a section 43 order or any order under the Legal Services Act 2007 (such as disqualification)
- failure to ensure that client money is properly accounted for at all times
- breach of duties under primary regulatory legislation such as the Solicitors Act 1974 or the Legal Services Act 2007
- conduct outside practice which reflects on the person's integrity
- the public interest is directly engaged—the allegations raise issues about the conduct of an individual which it is in the public interest to investigate or which are of particular sensitivity or importance
- where the individual has direct or indirect responsibility for the relevant activity.
For the avoidance of doubt, being a Compliance Officer for Legal Practice or for Finance and Administration does not of itself mean that that person has responsibility for a particular activity or for compliance by the firm as a whole, which remains as set out in the Handbook, namely usually with the firm's managers.