Vaughan: City partners placed a “heavy reliance” on the COLP
The introduction of entity regulation has had the unintended effect of “insourcing” professional obligations to specialist compliance staff, leaving knowledge among City lawyers of the SRA Handbook “very poor”, a leading legal academic has found as part of a major government-funded project.
Dr Steven Vaughan, senior lecturer at Birmingham Law School, said solicitors at big firms showed a “striking lack of awareness” of the professional principles.
He suggested there were two reasons for this. “First, professionalism has been insourced in large law firms to COLPs [compliance officers for legal practice], compliance teams and education teams.
“Second, there is a widely accepted view (erroneous in our minds) that the Handbook is common sense and that professional conduct issues are so obvious that direct reference back to the Handbook is not necessary.”
His three-year project, The Limits of Lawyers, focuses on the relationship between lawyers in large firms and their clients, which for this part of the work involved interviews with 110 corporate solicitors, COLPs and others from 30 of the top 100 UK firms.
Dr Vaughan said City partners placed a “heavy reliance” on the COLP to ‘do’ compliance for them as a firm and as individuals, while associates were more likely to fall back on training they had received at the firm about the Handbook rather than actually consult it.
COLPs and other compliance officers had “become the holders of professionalism for the firms, which devalues and depersonalises the sense of individual responsibility of individual practitioners”.
He said: “Some of the partners clearly saw their COLPs as oracles to whom they would turn for answers. This is, for sure, not how the role of the COLP is framed by the SRA. Having one pinpoint person seen as both responsible for compliance of a firm of thousands of lawyers, and a fount of all regulatory knowledge, may well be a burden too much to bear by many COLPs.
“This perhaps suggests that the balance of law firm regulation between entities and individuals has swung too far towards the entity end of the see-saw.”
Dr Vaughan argued that although solicitors might have “some specific” knowledge” of particular rules in the code of conduct, “in general their knowledge of the Handbook was very poor”.
There was also the notion that solicitors were ‘good’ people who did not need to refer to the Handbook to direct their conduct.
“This approach places a heavy burden on law firms to ensure they are hiring, retaining and promoting the ‘right’ people,” said Dr Vaughan. However, our other work has shown that firms lack the ethical infrastructures to be confident of these matters.
“What also confused us was an open acknowledgement by the intervieews that it may have been years (and years) since they last looked at the Handbook, but an equally strong push back they still had a ‘fair handle’ on what the Handbook said and/or that the Handbook was just a ‘framework’ for how they operated – which is, as a matter of law, a wrong conclusion to come to.”
Dr Vaughan said one answer was for there to be “clear, separate codes of conduct and professional rules” for individuals and firms, rather than the unified approach currently taken.
“I would suggest that this blurring is one of the reasons that practitioners feel it is appropriate for them to have such a poor understanding of the regulatory requirements on them.”
Dr Vaughan also suggested making firms require their lawyers to undertake “mandatory annual training” on their professional obligations.
He said the new competence regime introduced by the Solicitors Regulation Authority (SRA) made no prescription as to the topics that ‘competent’ solicitors should cover as part of their CPD.
“My research shows that the majority of law firms focus their training on the code of conduct rules (e.g. money laundering, client acceptance, conflicts of interest) and far less on the Handbook principles (e.g. independence, integrity) which apply at all times to all solicitors.”
Crispin Passmore, the SRA’s executive director for policy, said: “We welcome Dr Vaughan’s findings. The problems he highlights align with the reasons we kicked off our ‘Looking to the Future’ review of how we regulate last November. This includes a fundamental review of the Handbook.
“His research supports our emerging thinking in this area. We want to create a Handbook that is stripped of unnecessary complexity and bureaucracy. A shorter, clearer, more principle focused Handbook – that makes a clear distinction between what is required by firms and what is required by individuals – should result in solicitors becoming much more engaged. Code of conduct issues, such as acting with independence and integrity, should never just be seen as issues for COLPs or compliance teams.
“We aim to consult on changes to the Handbook in the summer. But we are already having ongoing conversations with the sector to make sure our proposals work and offer the best result for consumers.”
Earlier this year Dr Vaughan argued that a “tranche” of top commercial lawyers had “effectively become privately regulated by the clients they seek to serve”. He said some lawyers did not realise they had become “captured” by their clients and thought it was “perfectly acceptable, even desirable”.
The author of the first academic study of COLPs, Professor Joan Loughrey, recently found a “tendency” not to report regulatory failures to the SRA.
Richard Moorhead 
Very interesting but difficult to square this with the SRA’s proposal to boil down the Handbook to 50 pages. Lawyers who believe they are operating within a general framework (and don’t grasp specific requirements) may be wrong now but in the future this might be closer to the truth.