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3 Regulatory Trends for 2023 – Part 1

In this series of news alerts, our regulatory and professional discipline partner, Andrew Pavlovic, identifies 3 key regulatory trends which firms and solicitors need to be aware of in 2023. In this first alert, Andrew considers the SRA’s continued focus on firm culture, following its thematic review and guidance on workplace environments in February 2022.

Firm culture was undoubtedly one of the SRA’s key themes in 2022. The guidance and thematic review on workplace environments, published in February last year, sought to address the role that firm culture plays in regulatory misconduct, and emphasised the importance of firms having proper systems and policies to:

  1. Identify and support staff with mental health difficulties, to both protect those staff members and mitigate risks to clients;
  2. Cultivate a “speak up” culture in which individuals can admit to making mistakes or report unwanted conduct without fear of excess criticism or victimisation. The SRA’s recent guidance on sexual misconduct reiterated the obligations on firms to combat such conduct, and that action may be taken against firms where there has been a failure to investigate or address poor conduct which has then escalated;
  3. Supervise client matters effectively. In this regard, further guidance on supervision was published in November 2022, alongside specific guidance on the conduct and supervision of immigration matters.

The focus on firm culture is set to continue in 2023, with the introduction of a new rule in the Code of Conduct for Individuals/Firms requiring firms/individuals to treat colleagues fairly and not unfairly discriminate against them, alongside a new obligation on managers to challenge behaviour that does not meet this standard. 

The SRA has indicated that it will publish accompanying guidance when the rules are introduced. Such guidance will presumably set out the circumstances in which a failure to treat someone fairly could become a regulatory matter, given the concern that this rule could be leveraged in any complaint by an employee about unfair treatment. It is also hoped that the guidance will also address how unfair/discriminatory behaviour should be “challenged”, in particular whether this will require challenging behaviour in the moment or whether managers could satisfy their obligation to “challenge” behaviour by reporting it to their firm’s Compliance Office for Legal Practice.

Junior Solicitors

The SRA’s guidance/thematic review on workplace environments was perceived by many to be a response to the criticism that the SRA’s prosecution of individuals, particularly junior solicitors, failed to take into account how the solicitor’s workplace contributed to the misconduct that occurred.  A number of high profile cases resulted in junior solicitors being struck off the Roll for acting dishonestly, despite their complaints of inadequate supervision, excessive workloads and working environments where they would not feel supported if they admitted to making an error.

In addition to the guidance/thematic review, there are indications that the SRA has taken this point of view on board. The decision to compromise the prosecution of Claire Matthews (previously discussed here) was viewed as a positive sign and a potential turning point. To their credit, the SRA also took on board consultation feedback when deciding that the obligation to challenge behaviour should only fall on managers, in doing so acknowledging the difficulties that junior solicitors may have in challenging the conduct of partners or other senior lawyers.

What to expect in 2023

At the virtual COLP/COFA conference in November 2022, Oliver Sweeney (Head of Legal and Enforcement) confirmed that the SRA were currently investigating around 40 cases of bullying, discrimination and harassment within law firms. Whilst the subject of that investigation may be the relevant individual/s accused of bullying/discrimination etc, as part of the SRA investigation, firms are being required to demonstrate that they have proper policies and procedures in place for handling and investigating complaints and are implementing those policies/procedures in practice.

In practice, determining whether a firm has a bad culture is unlikely to be as straightforward as determining whether an individual has committed a rule breach. However, there is now an expectation and understanding within firms that the SRA will not consider allegations of dishonesty, sexual misconduct, discrimination etc. in a vacuum. When such incidents occur, firms now need to consider whether their cultures, systems or processes (or lack of systems/processes) have played a role in the misconduct. The guidance has accordingly had a significant impact on the way that incidents are self reported to the SRA, and increased the importance on policies, training and complaints handling. 

The Guidance has played an important, and probably overdue, role in shifting the dial and putting the focus on firms when misconduct occurs.

If you have any questions in relation to the SRA’s Guidance and Thematic Review on Workplace Environments, please contact Andrew Pavlovic, who specialises in professional discipline and regulatory law.