The investigation process

Last updated: 15 February 2012

Triggers for investigation

The Solicitors Regulation Authority (SRA) receives information from various sources and this information can trigger an investigation into a firm. These sources include:

• members of the public or the profession
• whistle blowers
• other regulators
• Legal Ombudsman
• the firm itself.

In future, information provided by the firm as part of its annual reporting may also trigger an investigation.

Most investigations relate to firms rather than individuals and thus the guidance is written in terms of firms. However, similar processes would apply to individuals.

The SRA assesses all the information it receives and will decide what action it will take on the basis of its risk assessment. In some cases, it may just record the information on the firm’s file. The SRA may also contact the firm, where appropriate, to bring the matter to its attention. This allows a firm the opportunity to consider whether any internal action needs to be undertaken. There will be no requirement for a firm to report to the SRA on any internal action taken. This is known as 'no engagement at present'.

In other cases, the SRA will engage with the firm regarding the report. In a straightforward case, it may send a 'letter of advice' without first contacting the firm. There is no right of appeal against a letter of advice as this is not a formal regulatory decision. In more complex or serious cases, the SRA is likely to contact the firm and consider an investigation.

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Initial stages of investigation

Initially, the SRA will write to the contact at the firm detailing the issues and asking them for an explanation. It will normally provide the firm with a copy of any report made by an individual or body. If it is satisfied with the explanation, this may be the end of the matter and it will inform you of this.

It will decide that further action is necessary if:

• there has been a breach of a professional rule, principle, outcome or regulation; and/or
• one or more of its powers has arisen in relation to the firm, and it needs to take action.

The SRA may then decide that an on-site visit is required. The firm has a duty to cooperate with the SRA during this investigation.

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On-site investigation

The SRA will normally give reasons for its visit and this will help you to prepare for the visit. However, it will not provide reasons if, by doing so, it would:

• breach any duty of confidentiality
• disclose or risk disclosure of a confidential source of information
• significantly increase the risk that those under investigation may destroy evidence, seek to influence witnesses, default, or abscond; or
• otherwise prejudice or frustrate an investigation or other regulatory action.

Even where the SRA gives reasons, its investigation may not be limited to, or constrained by, the reasons given for the investigation.

The length of an investigation can vary considerably depending on its complexity and the level of cooperation, amongst other things. Once the visit is completed, the SRA will either decide to take no action or issue a formal report. If the SRA decide to take no further action, it will issue a closure letter. This may detail any actions the firm has agreed to undertake as a result of the visit. If these are not undertaken the SRA may decide to take further action.

If the SRA decides to issue a formal report of the investigation the firm will be given 14 days to respond to the report. This report may be referred to an internal department e.g. Casework Investigation and Operations or Legal and Enforcement for further consideration or to other authorities e.g. the Crown Prosecution Service. A formal report can form part of proceedings issued in the Solicitors Disciplinary Tribunal (SDT).

The final report should normally be issued within 3 months of the conclusion of the investigation. However this timeline can be extended considerably with the agreement of relevant senior management in the SRA.

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The on-site investigation process

Normally the SRA will visit your main practice though it may visit other branches. It will hold an initial meeting with senior or other available partners, directors, members or managers of your firm. It will normally request information, documents and explanations from you.

Following notice from the SRA, firms must provide the SRA with any:

• records
• papers
• client and controlled trust matter files
• financial accounts and other documents, and
• any other information necessary to enable the SRA to prepare a report on the firm's compliance with rule 34 of the Solicitors' Accounts Rules
• all relevant documents in the firm's possession (pursuant to section 44B of the Solicitors Act 1974)

In addition, it may require you to attend, at a time and place specified by it, to provide an explanation in respect of the information or documents it requires from the firm.

Except for documentation sought pursuant to section 44B, the SRA should not take original documents. However, the firm will need to provide copies if requested. The SRA can also request that electronic information is produced in a form that it requires. If necessary, the firm must provide written permission for the SRA to seek verification from clients, staff, banks, building societies and any other financial institutions used.
Once the SRA have gathered all the information it needs it will normally hold a final meeting with senior or other available partners or managers of your firm. The SRA may make an audio recording of the meeting. Further information can be found in our practice note on Use of investigatory powers.

Caseworker stage

A formal report may be referred to the Casework Investigation and Operations team. A caseworker will then consider the issue. Based on the information provided to them, the caseworker will make a recommendation. The recommendation is normally disclosed to the firm. This recommendation will then be considered by an adjudicator. A formal report may also be referred directly to Legal and Enforcement, where the SRA considers that the breaches are sufficiently serious that the code for referral to the SDT will be satisfied. A decision will then be made by an advocate in Legal and Enforcement as to whether to authorise disciplinary proceedings.

The SRA can close a case with a Casework Decision and without formal adjudication when:

• there is no issue of professional conduct
• there is no evidence of misconduct or
• it is not proportionate to pursue the matter in all the circumstances.

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Enforcement action

Individuals

There are various sanctions that the Solicitors Regulation Authority (SRA) can take against an individual solicitor including:

• issuing a warning
• imposing a fine of up to £2000
• issuing a rebuke
• recovering costs

The SRA may publicise a decision to take this action.

In more serious cases, the SRA may refer the matter to the SDT. Referrals to the Tribunal and the findings of the Tribunal are normally made public.

The SRA can also take a more informal approach to regulatory breaches including issuing a ‘letter of advice’. The SRA may also come to a formal agreement with a firm to resolve disciplinary issues, known as a regulatory settlement agreement. This may involve the firm agreeing to:

• changing practices to ensure the issue does not arise again
• apologising to those affected
• returning monies
• accepting a disciplinary sanction

This agreement may be made public.

The SRA also has the power to apply conditions to a solicitor's practising certificate. These conditions may limit the work that the solicitor can carry out or require them to do something in order to continue practising e.g. undertake a training course.

Firms

The SRA can take action against regulated entities. The sanctions that the SRA will employ vary slightly, depending on whether the entity is an Alternative Business Structure or not. However, the principles are much the same.

Similarly to the powers with regard to individuals, the SRA can:

• impose a fine (of up to £250 million for an ABS or £2000 for non-ABS)
• issue a rebuke
• recover costs

The SRA may publicise a decision to take this action.

The SRA can also take a more informal approach to regulatory breaches including issuing a letter of advice. The SRA may also come to a formal agreement with a firm to resolve disciplinary issues, known as a regulatory settlement agreement. This agreement may be made public.

In certain situations, where it is in the public interest, the SRA can intervene in a firm. When the SRA intervenes in a firm, the practice monies are vested in the SRA and it takes possession of the firm's documents, including client papers. In effect an intervention amounts to the end of the practice. An intervention is normally carried by agents on behalf of the SRA and the solicitor is liable for any costs.
The SRA can also withdraw a firm's authorisation/recognition or impose conditions on authorisation / recognition. The loss of authorisation will mean that a firm cannot continue to practice. Loss of authorisation may lead to intervention.

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Other individuals

The SDT has the power to make an order preventing solicitors from employing an individual who is a non-lawyer. The SRA can also make orders limiting a non-lawyer's ability to work for a solicitor.
The SRA can take regulatory action against managers and compliance officers including withdrawing approval. More information on this is available in our practice note on compliance officers.