Solicitors Regulation Authority (SRA) Production Orders
18th July, 2017
Our Professional Practices team have contributed to an article on Solicitors Regulation Authority (SRA) Production Orders. These are specialist orders on which we advise law firm clients on a regular basis. The article, published by The Law Society Gazette , on 4th July 2017 can be read in full below.
If you require personal advice, please contact our Professional Practices team for a no-obligation chat, using the contact details below.
Having the SRA arriving at your firm with a production order requiring you and your firm to deliver documents to it is a daunting experience. Paul Bennett outlines how to get your firm ready for investigation in case it should happen.
You’re on holiday, having a well-deserved rest. And then the phone call comes. The Solicitors Regulation Authority (SRA) has turned up at your office with is an order saying the firm is under investigation and must hand over client papers, bank records and all sorts. What do you do? What you tell the clients and staff?
We all hope the SRA never has cause to investigate our firms, but as a solicitor advising law firms, it appears to me to be an increasingly common experience. Typically, I’ll get a phone call from a panicking lawyer describing a scenario like the one above. So what should you do if it happens to you?
Why does the SRA serve a production order?
Legislation is the driving purpose. The legislation is designed to protect the public and empower the regulator. In the last issue of Managing for Success , I looked at production orders under the Proceeds of Crime Act 2002, but here, I focus on the orders the SRA can seek under the following: sections 44B and 44BA of the Solicitors Act 1974 for the majority of law firms; section 44BB of that act for any person (including suppliers and individuals etc); and sections 93 and 94 of the Legal Services Act 2007 for alternative business structures (ABSs).
Investigations usually follow a third-party report. Disgruntled former partners, employees, clients and aggrieved opponents are usually the root cause, but actually it’s irrelevant why the SRA is investigating, because it’s central to a good outcome to deal with the SRA in a manner that conveys your professionalism and reduces its perception of risk to consumers.
What can the SRA ask for?
The SRA’s powers are wide. The production order may seek:
- information – what the firm or named individual knows
- documents – files, trust documents, court documents and bank statements
- bank documents
- documents held electronically
- a meeting at a specified time and place to explain any of the above.
The last point often surprises people. Orders can be served on not only firms and solicitors, but also anyone, including third parties, such as suppliers or individuals, who might have access to the relevant material sought by the SRA. In one case of mine, the SRA sought information from a medical agency and a claims management company.
Production orders may be enforced in the High Court if not complied with.
When does the SRA serve an order?
At the start of an investigation, the SRA determines its scope. This is effectively a generic overview of the area being investigated, often consisting of a single sentence, phrase or word, such as ‘misuse of client money’ or ‘fraud’. This will determine what documents, information or explanation the SRA needs from the firm, its partners / directors and staff. The SRA may use a production order to secure the documents from you by post, or prior to an announced visit (usually on three to seven days’ notice) or an unannounced visit (when it literally arrives at the door of the firm).
A production order typically contains this introduction: ‘I am satisfied that it is necessary for the purpose of investigating whether the terms of a licenced body’s licence are being, or have been, complied with to give notice to the regulated person named above requiring that person to provide information or documents as set out below.’
The key aspects of this are as follows.
- The SRA is self-certifying there are grounds for an investigation (an order is usually signed by a ‘senior technical officer’ who is an approved person for certification of the orders).
- By the time you see an order, the firm or an individual within the firm is already under investigation.
- It is about the past events and the current position.
Why should I respond?
When solicitors are concerned because they suspect, know or fear something has gone wrong within their firm, it can be tempting to say nothing and hope the SRA cannot prove it. Self-incrimination is a risk, but R (Nawaz) v ICAEW (unreported, CA, 25 April 1997) guides that when you enter a profession, you accept all the duties, responsibilities and liabilities of that profession. In Nawaz, it was ruled that it is in the interests of the public that a regulator can acquire all information necessary to assess potential misconduct. Holder v Law Society  EWHC 2023 (Admin) confirms the Nawaz decision applies to solicitors.
The SRA has pressed home this point by writing a rulebook which puts cooperation at its heart. Outcomes 10.8 and 10.9 of the SRA Code of Conduct 2011 require solicitors to comply promptly with any written notice from the SRA, and produce information as requested by the notice.
The only option is to be open and transparent, and produce the materials requested by the SRA.
How do I present the information requested?
Your management challenge is to present the information requested fairly, openly and honestly, and also in such a way as to showcase your firm (and your role) in the best manner possible. I call this ‘signposting’: you are providing what they ask for and helping them see it in the best light.
Start planning your response upon receipt of the production order. Address the basics.
- What is the allegation?
- Why might it have been made?
- What files is the SRA seeking? (Is there a theme and are there other files your team should review and consider that the SRA has yet to identify – if so, what steps could protect clients interests?)
- Do we need to suspend a partner / employee if dishonesty is a potential factor?
- What messages do we wish to ensure the SRA receives from us in our response?
Those questions should form the heart of your planning. Don’t make unnecessary admissions. In around half the cases I see, unsolicited admissions are made, making disciplinary action more unlikely, so I would encourage factual presentation of the material: ‘Here are the documents you requested’.
It sounds very basic, but make sure the file is in good order – that is, chronological, and with client correspondence and each third-party’s correspondence separated. The correspondence will probably be read by someone unfamiliar with the matter, so it needs to be easily understood. A jigsaw of a file or correspondence which is not logically ordered (dumping all parties’ correspondence on one clip for example) will not give a good impression.
If SRA investigators are in your office, ensure staff are briefed to treat them politely and professionally. In my experience, SRA investigators are invariably good, professional people doing a challenging job. They are on your patch, so are naturally cautious. Make them welcome, offer drinks and photocopying, and they will judge you and your firm by the professional impression created, and be more willing to help you resolve any issues.
Case Study: costs dishonesty
P is a sole practitioner who undertook consumer litigation for Mr and Mrs S. The case was more complex than originally thought and the engagement letter ambiguous on what costs were and were not included in a fixed fee review of their prospects of success.
Mr and Mrs S complained about an uplift in costs to reflect the size of the papers (around £300). P rejected their complaint. Mr and Mrs S went to the Legal Ombudsman, which referred P’s conduct to the SRA.
The SRA investigated by way of the Legal Ombudsman’s report and by using a production order requesting the client file, documents and firm’s bank records. Initially, P thought as a litigator she would simply send the file. Based on the file, P was accused of dishonesty as a consequence of the SRA’s interpretation of her file. The SRA issued a ‘letter of explanation’ requiring an explanation of her conduct.
After taking advice, P’s explanation and signposting of the documents demonstrated Mr and Mrs S had misled the Legal Ombudsman and the SRA. Key was the actions within the file being understood by the SRA. The file was closed without disciplinary action.
How do I avoiding being subject to an investigation in the first place?
Simple good practice helps avoid queries and concerns arising. The SRA Handbook 2011 is broken down into multiple sets of rules. As a management team, including your compliance officers, how well do you know these? If the partners of the firm change, how long have you got to tell the SRA about these changes? If you discover a breach of the SRA Handbook, is it a ‘material’ or ‘non-material’ breach? How do these rules affect your solicitors’ decisions?
Key things to minimise the risks of being investigated include the following.
- Training – all managers and teams should receive training on the SRA obligations, and at least annually on the SRA’s risk materials which guide firms on risks.
- Supervision – is your supervision effective to monitor the actions of all staff? If people are struggling with stress, depression or workload, then typically it will show in randomly selected reviewed files.
- Culture – make sure your culture is open and transparent so that problems on files emerge and can be solved. The theme I see when things go wrong is a culture of fear leading to hiding mistakes, which always makes things worse.
- Communication – who is going to keep reminding everyone of what your firm expects, and how will they do it? A mix of written and oral communication is needed.
- Leadership – are your compliance officers allowed to lead on legal and financial compliance? They must be.
difficult partner who never engages!).
All this boils down to two simple things: know your professional obligations, and build being safe into everything you do. These can get forgotten sometimes as we focus on clients. Remind everyone regularly (including that difficult partner who never engages!).
Do I need legal advice?
It is your career, it is your professional reputation and how familiar are you really with the process? If you have the question in your mind the answer is ‘yes’. If you feel 100 per cent comfortable responding without advice then ‘no’.
All this boils down to three simple things.
- If you’re served with an order, don’t panic.
- Be open and transparent, but do not make admissions without advice.
- Train your teams to try to avoid giving rise to an investigation ground in the first place.
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