Management liability: the increase in SRA investigations and fines
Quality PI provides information on management liability in the face of the increase in SRA investigations and fines.
Since the increase in powers for the Solicitors Regulation Authority (SRA) without the need for referral to the Solicitors Disciplinary Tribunal (SDT), there seems no doubt that the number of investigations and fines have increased significantly.
The cost of investigations in both monetary value and lost fee earning time has now become a significant risk for firms. This is made worse with the potential impact for the loss of an individual’s practicing certificate.
It has been evident from comments made by those regulated by the SRA on articles relating to investigations and fines that the process seems to have a level of ‘unfairness’ bult into the system. That may be a topic for a discussion all on its own, but it would certainly appear that both law firms and individuals are more exposed than ever before.
Whether investigations come from a firm self-reporting, an individual being subjected to investigation or a ‘routine’ audit discovering a problem, firms can easily find themselves in a position in which significant time can be taken up in responding to investigators.
The need to access specialist compliance advice can be both critical and expensive, but necessary to help reduce the stresses such events create both for the firm and the individuals involved.
Based on the SRA’s own information, the majority of complaints received do not result in formal disciplinary sanctions. But even where no fault is found, any costs incurred are unlikely to be recoverable form the SRA.
Having access to support and specialist advice without worrying about the cost can make the difference in outcomes due to how the firms or the individuals actions are presented and ultimately judged.
The SRA apparently aim to deal with complaints, or investigations resulting from them, within 3 months of them being raised. The SRA is very clear that their aim is to be thorough but some would argue that they are significantly under-resourced to effectively exercise their newly broadened powers.
Any interaction with them could, as a result, drag on leaving individuals and firms in limbo. This can then have hidden knock-on effects for example, impacting an individual’s career progression, hindering their ability to work, impacting how the firm’s professional indemnity renewal is viewed.
A Directors and Officers Liability (D&O) policy, which can also be referred to as a Management Liability (ML) policy can offer a solution to these risks. Through such a policy, specialist advice and legal protection can be accessed and funded. The policy is not just designed to protect the owners of the business but also those other individuals in the business at a senior level that take decisions on behalf of the firm.
If you are employed by or are considering an offer of employment by a law firm as a regulated professional, as a solicitor, COLP or COFA, the existence of a D & O/ML policy should be as high on your wish list as it is for the owners of a regulated firm.
For firms, this is an excellent way of protecting your balance sheet and attracting the best talent. But, be sure to have the right policy in place; not all policies respond in the same way so getting advice from a specialist broker that is experienced in PI and D & O for the legal sector is essential, otherwise you could be paying for a policy that is of little use when you need it most.
Kindly shared by Quality PI
