SRA executive director issues warning over growing trend for improper practices
The number of reports of solicitor dishonesty has nearly doubled in the last two years due to financial pressures on the profession, according to the Solicitors Regulation Authority (SRA).
Samantha Barrass, SRA executive director, said the misuse of client money or assets was a particular concern.
“When market conditions are tough and financial problems begin to bite, individuals who are usually principled and ethical can succumb to pressures and temptations, getting drawn into dishonest practices that put their clients, their businesses and their future at risk,” she said,
Barrass was speaking at the launch of the SRA’s first annual assessment of the profession, Risk Outlook, this week.
Some 30% of all interventions in the last five years involved suspected dishonesty while nearly half included breaches of the accounts rules, and “the trend is growing”, she said.
In response, the SRA has a whistle-blowing policy, operates a “red alert” hotline, and has introduced the role of the compliance officer for finance and administration.
Barrass warned that, where dishonesty is found, the solicitor responsible would “almost invariably be struck off”.
The SRA has divided the risks facing the profession into “current”, “emerging” and “potential” categories.
The most significant current risk is financial failure. The SRA is receiving “more and more” reports of firms in trouble, and is currently working with 51 firms where “the likelihood of a costly intervention is very high”. It has also identified about 2,000 firms that are “particularly susceptible” to financial difficulty, for example, because of over-reliance on a particular area.
Barrass said some behaviours increased risk, including “management weakness, such as excessive concentration of power, limited sharing of information, inadequate budgetary controls and failure to adapt to a changed market or the changing needs of employees”.
Examples of emerging risks include poor succession planning and a poor standard of service and legal advice.
Barrass said potential risks include group contagion—a risk increased by the rise in mergers, ABSs and complex business structures—as well as “improper or abusive litigation, lack of due diligence over outsourcing arrangements [and] lack of transparency in complex business structures”.
