An Update from the Regulatory and Economic Crime Team at the Law Society
Please find below a summary of the key updates provided by the Law Society’s Regulatory and Economic Crime Team at the Local Law Society Forum, which our representative Andrea Cohen of Weightmans attended.
SIF
The SRA received a huge response to the SIF consultation, reporting:
“The majority of the 333 respondents did not support ending the requirement for the cover, with key themes in the feedback including the potentially significant impact on the small number of individual consumers who make claims, and that the profession was willing to contribute toward funding any future arrangements.”
Consequently, the SRA decided to delay any decision on the closure of SIF for 12 months, so that they could explore alternative options. The three options they are currently considering are:
- The retention of SIF, with changes to reduce operating costs, funded by a levy
- A Consumer Protection Fund, run within or alongside the Compensation Fund
- A voluntary scheme, operated by or on behalf of the Law Society
The Law Society has engaged in constructive discussions with the SRA, and continues to advocate for the retention of SIF. We expect further consultation on the SRA’s ultimate decision.
PII
The hard market for solicitors’ PII is ongoing, with 10-15% increases in premium prices likely in the main October renewals. Firms doing conveyancing work will face particular scrutiny. Underwriters are reluctant to take on new risks, which means that it will be harder than usual to switch insurers. It is a sellers market, so firms must be proactive providing details about their risk management when completing their proposal form. Changes to the SRA’s minimum terms and conditions mean that first-party losses are now explicitly excluded from your primary PII cover.
If you do not already have a cyber insurance policy in place, talk to your broker to determine what cover you require, and give serious consideration to purchasing appropriate cyber insurance. The SRA has issued a discussion paper on options for post six year run-off cover, to which the Law Society will respond by the submission deadline of 31 August.
Financial Penalties
In November 2021, the SRA consulted on increasing its internal powers regarding financial penalties for traditional firms and individuals. The Lord Chancellor has personally intervened in this matter and the MOJ has agreed to increase the SRA’s fining powers to £25,000. The Law Society strongly opposed the steep increase at all stages. We opposed the increase for many reasons including concerns around:-
- the lack of independence within the SRA between decision makers and prosecutors, as well as the lack of transparency around SRA decisions
- the right of appeal to the Solicitors Disciplinary Tribunal (SDT) not being an adequate safeguard
The SDT remains the most appropriate jurisdiction for more serious and complex matters. We will closely monitor the impact of the increased fining powers to ensure regulation is proportionate and effective.
Rule changes to health and wellbeing at work
The SRA is seeking to reinforce its powers to deal with risks to clients and the public when these stem from a poor work culture in law firms. The SRA also seeks to clarify its approach to situations where a solicitor’s health issues affect their ability to practise or to participate in enforcement processes – for instance because illness means a hearing cannot fairly proceed.
The Law Society’s response on wellbeing made the following points:
- We are supportive of the principles of treating people fairly but oppose the introduction of additional regulation
- The SRA has not made the case for the additional regulation and itself says that firms should have applicable policies in place
- The SRA should use its existing powers, produce guidance and use comms to highlight good practice
- Existing principles require solicitors to act with integrity and in a way that upholds public confidence in the profession, and in a way that encourages EDI
The Law Society’s response on health made the following points:
- We oppose the health proposals, which are unclear and potentially wide reaching, with implications for changes to the character and suitability test that solicitors must pass in order to join the profession
- Given the risk associated with this type of change, the SRA should have a strong body of evidence to introduce this and they do not
- We have offered to work with the SRA and key stakeholders, e.g. Lawyers with Disability Division, to develop more suitable policies
The consultation closed on 27 May 2022, we are awaiting the SRA’s response.
For more information about any of the above matters or on any other regulatory matter please do not hesitate to contact Michelle Garlick, the Chair of our Regulatory Committee and our COLP/COFA/MLRO Forum at [email protected]