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Hannah Gannagé-Stewart

Deputy Editor, Solicitors Journal

Leading by example

Leading by example


If there was ever a time to engage an ethical approach and lead by example, it's now, as Emma Walker explains 

There’s nothing like a crisis to throw behaviour into sharp relief. The covid-19 pandemic has presented a scenario where leaders can shirk or shine.

What does ethical leadership look like in our profession and how can firms and individuals regulated by the Solicitors Regulation Authority (SRA) steer a suitable course?

Guiding stars

As regulated individuals and businesses, the most obvious starting point is the rules governing our conduct. The introduction of the SRA’s Standards and Regulations (STARs), which pared down the length, detail and prescriptiveness of the previous rules, was to encourage ethical decision-making.

In its introduction to the Principles, the SRA reminds us that should they come into conflict, “those which safeguard the wider public interest… take precedence over an individual client’s interests”. With the fluid situation created by covid-19, each of us must continue to consider what that means in practice.

An example of firms working to get the balance right is to enable staff to work from home while the health crisis remains a live issue, rather than endangering the health of staff and others (potentially putting avoidable strain on the NHS) by insisting work is carried out from the office.

An example of getting the wrong balance is putting the interests of the business above those of the client, either by using client funds to keep the business afloat or, perhaps less obviously, unduly delaying payments to creditors to keep the firm’s cashflow going.

Firms will be encountering ethical questions such as whether or when it’s appropriate to furlough employees; what other alternative employment arrangements they should agree with staff (eg freezing pay or reducing hours); or how they or their staff can make a contribution elsewhere that is in the public interest – such as giving time or money to the NHS, community groups or not-for-profits including law centres or charities.

How such decisions are resolved will depend on the approach of those responsible for making them.

Finding focus

The introduction to the SRA’s code for individuals explains that the standards comprise “a framework for ethical and competent practice which applies irrespective of your role or the environment or organisation in which you work”.

In the same vein, the introduction to the code for firms explains that the STARs “aim to create and maintain the right culture and environment for the delivery of competent and ethical legal services to clients”.

Both introductions also explain that the SRA’s requirements are underpinned by its enforcement strategy. As part of its online covid-19 update, the SRA announced that it still expects those it regulates “to meet the high standards the public expect… This includes serving the best interests of their clients and upholding the rule of law.”

It added: “We must all remain pragmatic. We will take a proportionate approach: this includes our approach to enforcement. If we do receive complaints, we would take into account mitigating circumstances, as set out in our enforcement strategy.

This includes focusing on serious misconduct, and clearly distinguishing between people who are trying to do the right thing, and those who are not.”

It’s clear that the enforcement strategy should be on the reading and reference list of anyone regulated by the SRA who is serious about understanding its approach to regulation and enforcement.

Ethics from the top

Those responsible for managing firms play an integral role in setting the culture in their practice, and if there were any doubts, this responsibility is set out in paragraph 8.1 of the code for firms: “If you are a manager, you are responsible for compliance by your firm with this Code.

This responsibility is joint and several if you share management responsibility with other managers of the firm.” ‘Manager’ is defined by the SRA as “the sole principal in a recognised sole practice; a member of a LLP; a director of a company; a partner in a partnership; or, in relation to any other body, a member of its governing body”.

Sharing the load

However, the burden does not and cannot fall solely on managers where other regulated individuals form part of the business. Paragraph 7.2 of the code for individuals stipulates that you must be able “to justify your decisions and actions in order to demonstrate compliance with your obligations under the SRA’s regulatory arrangements”.

Remember that the STARs have enhanced the reporting obligations on individuals; and that reporting a matter to the firm’s compliance officer for legal practice (COLPs) or compliance officers for finance and administration (COFAs) will not satisfy an individual’s reporting obligation; the individual must also be satisfied that a report will be made by the COLP or COFA to the SRA.

Implied responsibility

Individuals don’t operate in a vacuum and what their firm’s culture looks like will not be in their sole control. Those with managerial responsibility are the ones accountable for setting the tone.

The culture of a firm will be directed in part by the systems put in place by the managers. Then, there’s the matter of how staff are taught to engage with the firm’s systems and what communication exists to ensure they are adhered to or improved where necessary.

Firms that fail to invest time and thought into building an ethical environment for their employees do so at their peril. In its enforcement strategy, the SRA indicates it “will usually take action against a firm alone, or in addition to taking action against an individual, where there is a breach of the code of conduct for firms or of our other requirements.”

It says: “This ensures that the firm as a whole is responsible for future compliance and the management of risk.”

Addressing risks

For those wondering which risks to focus on, the SRA’s enforcement strategy views certain types of alleged misconduct as more serious than others, such as “abuse of trust, taking unfair advantage of clients or others, and the misuse of client money; as we will sexual and violent misconduct, dishonesty and criminal behaviour”.

It says: “Information security is also of high importance to the public and protection of confidential information is a core professional principle in the Legal Services Act 2007.”

Some of those issues will undoubtedly be more prevalent than others during this time and we will each want to reflect on which risks to prioritise and how to address them.

In its covid-19 update, the SRA sets out its expectations of firms, noting that “if there is a breach of confidentiality and a complaint is made, all the relevant circumstances would be taken into consideration in line with our enforcement strategy.”

It suggests firms should document the arrangements they put in place to keep client information confidential. With an increase in reports of fraud and cybercrime during the pandemic situation, firms will want to review, update and document the systems they have in place to manage their client and business data.

The regulator’s enforcement strategy tells us that where a firm or individual is a victim of cybercrime, the SRA is likely to look at “whether their systems and procedures were robust enough and reasonable protective measures were in place”.

It also indicates that firms who report promptly and engage with the SRA, provide it “with evidence of that insight and gives us confidence that the firm has an ethical culture and the ability to manage risk”.

While a global pandemic presents a novel and challenging set of issues for us, it also provides an opportunity to review, adapt and optimise how we work. Though much seems out of our hands, we remain the authors of many of the circumstances that form our new realities. If there was ever a time to engage an ethical approach and lead by example, it’s now.

Emma Walker is a regulatory and disciplinary solicitor at Leigh Day