A recent news report in the Law Society Gazette states that the Solicitors Regulation Authority (SRA) is intervening in more multi-office firms and has experienced a spike in the number of practices it has shut down .
The regulator made 20 interventions between January and May this year, double the number in the same period last year. There has also been a notable increase in the number of medium-size firms being investigated.
An intervention is the most dramatic action the SRA can take. It is important for those running a law firm to understand what intervention is, its consequences, and how to avoid such an action.
Armed with this knowledge, they can avoid/mitigate situations that could lead to an intervention occurring.
What is an SRA intervention?
If the SRA intervenes in a firm, the action results in the firm’s bank accounts being frozen and taking over of client files.
Files will be either returned to the client or sent to another firm to be completed.
Mr. Justice Neuberger provided a succinct description of the function of an SRA intervention in Kevin Dooley v The Law Society (Unreported, 15 September 2000):
“The purpose of intervention is to allow the Law Society to protect the public interest against the activities of dishonest or incompetent solicitors and to avoid possible financial defaults by solicitors.”
Although the SRA are always keen to stress that an intervention is not a takeover by the regulatory body, for all practical purposes, this is what the action amounts to. However, the overriding goal of the action is to protect the interests of the firm’s clients.
What are grounds for an SRA intervention?
The SRA’s power to intervene arises under several statutory provisions, depending upon the nature of the practice being intervened in. These are:
- Solicitors’ practices – section 35 and Schedule 1 of the Solicitors Act 1974 (as amended);
- Registered European lawyers – section 35 and Schedule 1 of the Solicitors Act 1974 as applied by the European Communities (Lawyers Practice) Regulations 2000 (ECR 2000);
- Registered foreign lawyers – Schedule 1 of the Solicitors Act 1974 as applied by paragraph 5 of Part II of Schedule 14 of the Courts and Legal Services Act 1990);
- Recognised bodies – Schedule 1 of the Solicitors Act 1974 as applied by paragraphs 32-35 of Schedule 2 of the Administration of Justice Act 1985);
- Licensed Bodies – section 102 and Schedule 14 of Legal Services Act 2007
There is a two-stage test which must be applied before the SRA can intervene, namely:
1. are there grounds for an intervention? And, if so;
2. is it necessary to intervene to protect the public?
The grounds for investigating a solicitor are set out in Part 1 of Schedule I of the Solicitors Act 1974. They are:
- there is a suspicion that either a solicitor or employee of the firm has acted dishonestly (this also applies if the dishonesty took place in a past firm)
- there is undue delay by personal representatives of a deceased solicitor
- compliance has not been met regarding the Solicitors’ Accounts, Rules, the Solicitors’ Code of Conduct and/or the Solicitor’s Indemnity Insurance Rules
- the solicitor has been made bankrupt or entered into an arrangement with creditors
- the solicitor has been sent to prison
- a sole practitioner has become mentally incapacitated
- the solicitor lacks capacity under the Mental Capacity Act 2005 and powers under the Act have been exercised against them
- the solicitor has been struck off or suspended
- a sole practitioner has abandoned their practice
- a sole practitioner is acting as such within 18 months of an SRA intervention on the grounds of dishonesty
- an individual is acting as a solicitor without a practicing certificate
How is an intervention conducted?
If the SRA decides to intervene in your practice, they will appoint an intervention agent.
They will come to your office on the day the intervention begins and inform you that:
- all files, papers, records, and monies of the practice come under the control of the SRA except for purely administrative papers, e.g., PAYE records, VAT returns; and
- you have a right to contest the intervention.
The intervention agent will also inform you if your practising certificate or registration is automatically suspended and explain the consequences.
The agent will identify:
- urgent client matters requiring immediate attention,
- the accounts system used,
- money kept in the accounts,
- active client papers and files,
- deeds and will stores,
- archived files.
They will also remove all papers, schedule them, and distribute them in accordance with client instructions.
How can I contest an SRA intervention?
A solicitor has the right to appeal to the High Court for the decision to intervene to be withdrawn.
This must be done within eight days of the intervention notice being served.
An appeal to the High Court is the only avenue open to stay an intervention, aside from making a judicial review application.
If you believe the SRA is acting in breach of its powers or has been negligent and this has led to the intervention wrongly occurring, it is imperative that you seek experienced legal advice. Fighting an intervention is complex and requires advice and representation from a solicitor who understands the workings of the SRA and its processes.
We have been helping legal professionals with professional disciplinary and regulatory hearings for over 20 years. If you have any questions relating to SRA investigations, interventions, and/or the body’s decision-making process, please call us on 0151 909 2380. Or complete the Free Online Enquiry and I will soon be in touch.