In-house lawyers may risk a conflict of interest with their employers if the Financial Conduct Authority (FCA) includes in-house legal teams in its reporting and accountability regime, the Law Society of England and Wales said today.
Responding to an FCA discussion paper, Law Society chief executive Catherine Dixon said: "The legal function should not be incorporated within the FCA's reporting regime because it may create a conflict of interest between in-house lawyers and their employers, thereby inhibiting their ability to do their job effectively.
"It will also add to the regulatory burden because solicitors will be regulated by the FCA and the Solicitors Regulation Authority (SRA) which may result in duplication and will increase the costs of doing business.
"Tensions could arise where demands of compliance with the Senior Managers Regime (SMR) collide with their role as legal adviser to the organisation they serve. It could result in the organisation not getting the expert in-house legal advice they need - which is not in the interests of the organisation or the regulatory authority conducting any investigation as it could result in the organisation not doing the right thing or in delays whilst external advice is sought.
"We are also concerned that including the legal team in the SMR would erode legal professional privilege (LPP) as it may mean that the in-house team has to disclose sensitive and confidential legal advice to third parties. This could result in the organisation not seeking the advice they need to resolve concerns quickly."
LPP guarantees that clients can consult freely with lawyers safe in the knowledge that the information they provide and the advice they receive cannot be disclosed.
Catherine Dixon continued: "Recently we have seen a number of threats to LPP, which is the cornerstone of the lawyer-client relationship. It is important that LPP is not compromised and that our justice system is not undermined by the unintended consequences of regulatory change."
Notes to editors
The Law Society represents more than 26,000 in-house solicitors, many of whom who have informed this submission to the FCA.
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