Compliance: honesty is always the best policy
Firms must educate all employees on honesty to avoid run ins with the regulators, says Tracey Calvert
Compliance professionals know there is essential information about regulation and ethics which must be imparted to all colleagues, regardless of their role, qualification or experience, including of course, the SRA Principles (the Principles).
Knowing the SRA regards these as “fundamental tenets of ethical behaviour” means we are on the regulatory backfoot if we fail to ensure our colleagues understand the content of the Principles. Not only this, but we must also ensure they have the opportunity to understand how they must respond to them – for their peace of mind, but also to contribute to the firm’s continuing authorisation.
We cannot begin to embed the need to be principled too early in an individual’s employment. I would expect the Principles to be included in induction training and for there to be discussion and analysis of the content, rather than simply a recital of the words.
Simply doing the latter will fail to convey the significance of these behaviours and the depth of the knowledge required of these core values. Without this appreciation of what is expected, we are in trouble.
Take Principle 4: “you act with honesty”. How simple is it to say this, but gloss over the meaning? We assume everyone will know what honest behaviour looks like. However, the dictionary definition does not do justice to the values being tested by this duty.
A little extra insight helps to open up the conversations that must be happening, and the behaviours expected from a person acting honestly, in our legal world. After all, in the landmark regulatory case of Bolton v Law Society  EWCA Civ 32 it was held solicitors must be honest and that this means they may be “trusted to the ends of the earth”.
There are a number of disciplinary decisions which show the significance of this and where the regulatory spotlight might fall. A message that must be understood by compliance professionals, and acknowledged by all members of the firm, is that it is not just ‘client facing’ behaviour which concerns the SRA.
For example, the Solicitors Disciplinary Tribunal (SDT) recently struck off a solicitor (albeit open to appeal at the time of writing) for dishonesty on the basis she had inflated billing figures when applying to move firms.
Should we be surprised? Not really. We have seen a number of rulings which have concerned honesty in the context of the employment relationship.
In 2018, a solicitor was struck off after it transpired she had lied on a training contract application and then for a newly-qualified position, and with evidence that she had described her actions, in the context of exaggerations in her CV, as the “hilarity of embellishment”.
As the SDT concluded, we must be allowed to expect members of the profession provide accurate information about themselves. This was lacking in that case, with the result that “Failure to do so was not acting in a straightforward manner or adhering to a steady ethical code”.
These behaviours surely mean our teaching of the honesty principle must extend to colleagues with human resources and office administration responsibilities, with messages about the importance of appropriate due diligence. Equally, the message that honesty is non-negotiable (of course) but is of massive interest to the regulator (perhaps not so obvious) must be communicated to non-lawyers within the business.
Again, illustrative examples are helpful, particularly when shared with the message that when dishonesty is found in an unregulated employee, this will usually result in the service of a section 43 order prohibiting the individual’s employment in SRA-authorised firms.
We received reports of an administrative assistant being found to be dishonest because she created a fake firm email address to concoct a fictitious reference and secure employment.
There was a graduate member of the Chartered Institute of Legal Executives banned for forging a signature on a fellowship application document; a document production assistant who applied for an interest-free season ticket loan and used the money for other purposes; and a member of a firm’s credit control team convicted of failing to disclose a change of circumstances while continuing to receive housing benefit.
Dishonesty which impacts trust in our professional status ought to be an easier message to deliver, yet still we are inundated with examples of dishonesty curtailing an individual’s legal career or otherwise having repercussions on their employability in the legal industry.
Honesty bolsters trust and this is crucial. Clients trust us with their money, they ask us to protect them and to promote their position. We act on their behalf in courts or in matters where we have the technical knowledge or entitlement to take action they can’t, and so we should not need to explain the importance of honesty in this context.
Regrettably, however, dishonesty in client dealings has not been eradicated and the SRA has demonstrated in disciplinary findings that this behaviour, when proven, is rarely forgiven.
Misuse of client money is an obvious example. We must be trusted to protect other people’s money. After all, we are entitled to hold money belonging to clients and third parties without being regulated by the financial services oversight bodies, so there is a need to act in an aggressively principled.
In the SRA’s own words: ”taking or using someone else’s money without their knowledge or agreement” may be considered dishonest “even if the solicitor did not intend to permanently deprive the other person of their money”.
These expectations will be better managed where there is effective supervision, appropriate policies and controls and an understanding of the firm’s lack of tolerance. These deliverables should be coordinated by your compliance professionals and delivered as clear-cut and unambiguous messages to the rest of the firm.
Tolerance: striking a balance
Care must be taken with the tolerance message; this must be balanced so there is a culture of openness and accountability rather than blame and shame. We need to think about two behaviours here: the situations in which we may be economic with the truth; and, the lies we tell to avoid admitting a mistake. The SRA has considered these variants of dishonest behaviour and rarely concludes there are credible reasons for dishonesty.
We need to consider whether we are honest with our clients, truthful about progress (or lack of it), and how we treat third parties. In business arrangements, we need to be careful with the information we give or allow others to believe.
In terms of mistakes triggering dishonesty, we only need to consider the many backdating, creating false documents and forgery cases heard by the SDT to know how foolish such actions are.
We need to ensure the tolerance message is a well-rounded one; mistakes happen, but it is what happens next which shows a person’s principled behaviour. In a well-run firm, the compliance professionals can facilitate the appropriate corrective actions.
Honesty definitely is the best policy for those working in the legal sector. However, the principle that you act with honesty is a nuanced, deep, personal and intrusive requirement. Understanding what it means is the backbone of personal success, and the right starting point for firms that need to ensure the SRA is satisfied that their compliance and business systems are effective.
The compliance function can support the correct response by providing training, ensuring there is consistency of approach, and by guiding individuals in their own principled journeys within the firm.
Tracey Calvert is a consultant at Oakalls Consultancy Limited oakallsconsultancy.co.uk