Spotlight on Solicitors Regulation Authority (SRA) Guidance: Part three, guidance for employers and for governing boards and senior management

A. Series overview

This briefing forms part of a series looking in detail at the SRA’s guidance for in-house teams, issued following a thematic review of the sector, recognising the growth and importance of the in-house role and the unique pressures to which in-house solicitors can be subject. The guidance covers six topics and does not introduce any new standards or requirements but aims to explain how the existing framework applies in particular in-house scenarios.

Part one covered reporting concerns about wrongdoing and internal investigations and part two covered identifying your client and legal professional privilege. In this part, we cover two documents which are aimed at facilitating the conversation between in-house solicitors and their employers:

1. guidance for employers in relation to in-house solicitors' professional obligations; and
2. key points for governing boards, chief executives and senior officers in organisations employing in-house solicitors.

B. Guidance for employers in relation to in-house solicitors’ professional obligations

This guidance is aimed at senior executives and non-executives (or equivalent), as well as HR professionals and those who are responsible for managing and supervising solicitors and legal teams, at firms which employ in-house solicitors. It aims to help these individuals understand the regulatory duties and standards that in-house solicitors must comply with and sets out: (i) the regulatory duties and standards that all solicitors must comply with as members of a regulated profession; and (ii) how these can benefit the organisation and support its goals. Key points from the guidance include:

1. The SRA’s regulatory requirements: While employers will have considerations in relation to solicitors that are common to all employees, in-house solicitors have specific obligations as officers of the court and members of a regulated profession for which they are personally accountable. Employers should have open discussions with their legal teams about these regulatory obligations and how these apply to their roles as employees.

   All in-house solicitors must adhere to the SRA’s Principles, which outline the ethical standards expected of all solicitors. Where obligations conflict, those that protect the wider public interest (for example, acting with independence and integrity and upholding the rule of law and public trust and confidence) take precedence. The SRA will ask the most senior or lead solicitor to account to it, as the contact point for regulatory matters in respect of the solicitors and legal work within an organisation.

2. What employers can expect from their regulated in-house solicitors: Based on the regulatory duties that the SRA sets, in-house solicitors must:
   1. demonstrate high levels of professionalism, acting with honesty and integrity at all times;
   2. offer advice that is independent, impartial, and free from any internal, external or personal interests;
   3. develop a good understanding of their organisation to ensure their legal advice is business-oriented, tailored to their employer’s needs and aligned with their strategy and values;
   4. maintain their competence to carry out their roles effectively and keep their professional knowledge and skills up to date, and ensure that the individuals they manage are also competent where appropriate;
   5. effectively supervise work done by individuals they manage or supervise;
   6. alert employers, and refrain from acting, where they are put in a position of conflict such that they are unable to act in their employer’s best interests; and
   7. keep their employer’s matters confidential, unless the employer agrees to disclosure or they are required or permitted by law.
3. What employers can’t expect their in-house solicitors to do: In-house solicitors should not be expected to:
   1. approve or ignore any dishonest or illegal action;
   2. act in ways which compromises their duty to act with independence;
   3. mislead the court;
   4. act dishonestly;
   5. breach any duties of confidentiality or legal professional privilege owed (subject to limited circumstances); or
   6. act outside of their competence.

C. Key points for governing boards, chief executives and senior officers in organisations employing in-house solicitors

This shorter piece of guidance sits alongside the employer’s guidance discussed above and has been developed to assist Boards and leaders of organisations that employ in-house solicitors to better understand the varied role(s) and responsibilities of the in-house solicitor. The guidance states that it aims to facilitate discussions about the mutual expectations of both parties and points of note include:

1. How solicitors may work within an organisation: General Counsel and in-house legal teams play a key role in helping organisations to behave legally and ethically by supporting good corporate governance, improving accountability, managing risk, supporting robust decision making and supporting a strong ethical culture within the business. In-house solicitors can have visibility over the entirety of a business and are often referred to as being both a trusted adviser and business partner, being well placed to identify and intervene where they see wider risks and issues in the business. 
2. Balancing commercial interests with regulatory/ public interests: In-house solicitors are embedded in an organisation and can provide tailored advice that is both business-orientated and aligned with the strategy of the organisation. Whilst this has numerous advantages, it can present as a challenge where the activities of a business come into conflict with a solicitor's professional obligations. Where these interests do not align, an in-house solicitor will, on occasion, need to inform their employer that they have a concern that something improper or unethical may be taking place within the organisation. In doing this, solicitors can support organisations to take lawful and ethical actions and help to prevent corporate scandals. This is a valuable function of the solicitor's role and in-house solicitors should be empowered and supported to raise concerns.

D. Actions

Key practical steps for employers, Boards and in-house teams to take include:

1. Discussion: Considering internally how to ensure there is appropriate discussion of regulatory obligations and how these relate to the legal adviser role. These obligations could, for example, be reflected in internal policies which may prompt dialogue in this area.
2. Access to information: Ensuring that in-house solicitors have access to information about, and understand, what insurance arrangements or support employers can provide to them in relation to any liability arising from their role.
3. Advice formalities: Making sure that solicitors know who they are advising, have the information they need to be able to advise/ act, can agree realistic delivery timeframes and can identify and manage legal and regulatory risks at the outset of each matter and on an ongoing basis. Employers and in-house teams may wish to consider how this is best achieved in their organisation – for example, a template or standard form email might assist.
4. Integration: Considering how the legal function can participate in leadership and operational roles/ decisions across the business, such as through membership of relevant committees.
5. Reporting lines: Checking that the in-house team has appropriate levels of access to organisational decision makers and information to allow the legal team to identify issues and risks, such as through establishing and recording internal reporting lines.
6. Speak-up procedures: Ensuring that: relevant internal policies and procedures are adequate; senior managers encourage a speak up culture; and solicitors are not disciplined or victimised for raising concerns about potential wrongdoing or refusing to act where to do so would compromise their regulatory obligations.
7. Policies, procedures and resources: Providing support to ensure that solicitors can meet their regulatory obligations by, for example, implementing processes and resources that allow solicitors to keep their professional knowledge and skills up to date and developing dedicated policies and controls to record and report risks and manage conflicts and confidentiality.
8. Costs: Considering how support can be provided with managing costs pressures so that in-house solicitors do not compromise their ability to provide a competent and ethical legal service that meets both organisational requirements and regulatory standards.

We have experience of supporting employers and their in-house teams in relation to in-house solicitors’ professional obligations, including in connection with SRA and/ or Financial Conduct Authority enquiries, investigations and enforcement. If you would like to discuss any of the issues raised in this briefing, please do contact any of the authors.