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What happens at an SRA visit?6th May 2020 Business Crime
I am a partner in the Regulation Department at JMW solicitors. Amongst other things, I represent solicitors when they are investigated and prosecuted by the Solicitors Regulation Authority. The first meeting with the SRA forensic investigator can be rather stressful and it helps to know what to expect in advance. A visit is normally authorised pursuant to Rule 31 of the SRA Accounts Rules 2011. Seven days’ notice is normal, but ‘walk-in’ visits can occur if the SRA have reasonable grounds to believe that a client’s money may be at risk or evidence may be destroyed if more notice is given. The SRA won’t normally extend this period of notice. It depends upon the reason for the visit and the level of risk arising from a postponement of the visit.
There are quite a few reasons why the SRA might visit. They may be visiting lots of firms across the industry to conduct a thematic review. It could be because of complaints from clients or problems arising in the accounts. It could be because a member of staff has reported some alleged wrongdoing by a colleague. Whatever it is, you will normally be given those reasons in advance and the level of detail will depend upon the reason for the visit. Duties of confidentiality and other factors might prevent very full disclosure in the first instance, but you should ask questions where you don’t feel you have been given a reasonable opportunity to prepare or understand the reasoning. Here are the kind of topics you might typically encounter. Not all of them will arise and not all of them are included here. It depends upon the reason for the investigation or visit.
- Some background about the firm, the kind of work it does, the number of staff/partners. Who is the COLP/COFA/MLRO and is their training up-to-date?
- Has the firm entered into any IVA’s or does it have County Court judgements? Is there a breaches register and is it up to date?
- Are tax issues up-to-date?
- Does the firm use an electronic accounts package? Is there an in-house bookkeeper or is everything outsourced? What are the IT support arrangements?
- Are the client account reconciliations up to date? Is there a shortfall in the client account or is there a credit balance in the office account? What is the level of unpresented cheques? Essentially, can the firm meet its current liabilities?
- When was the last accountant’s report? How many bank accounts are there? Who has access to the bank accounts.
- Is there an AML policy? Have the staff been trained and is the training up to date?
- Are the professional indemnity insurance premium payments up-to-date? Are there any current claims against the firm or has the firm received any complaints?
- Roughly how many files does the firm have and which heads of work do they involve? Although it may not be possible to resolve this at a first visit, the SRA might ask for a rough idea of work in progress.
- What is the firms archiving policy? Is this communicated to the client and are the ledgers reviewed properly prior to archiving?
- If apparent misuse of funds has triggered the visit, the investigator is likely to ask – are you aware of any misuse of client funds or have you taken money you are not entitled to? This is a very simple question, but the answer could have implications right across the investigation and can create parallel criminal proceedings. It needs to be considered in advance.
- Stress and mental health issues quite often arise and the topic needs to be handled with some sensitivity on both sides, so that it is placed in its proper context. Where these factors exist, do not be tempted to ‘see how it goes’. Representation should protect a fragile position.
- The first meeting might involve a consideration of, for example, individual complaints against the firm. The officer might describe the circumstances and invite comment. The SRA will rely upon those answers, so they need to be carefully considered in advance.
- In advance of the meeting, the SRA might ask you to gather particular information, such as client account reconciliations, bank statements covering the last three months or a cashbook. They might also ask for access to a list of particular files. Being a solicitor or a regulated non-admitted lawyer involves an obligation to cooperate with the regulator and non-compliance almost always has implications in terms of costs and sanctions. The SRA will be flexible to a degree, but turning up at the meeting without having done any homework doesn’t look great.
The first meeting with the SRA in these circumstances is extremely important and I often find that if I arrive in the case after the first meeting, I have lost an opportunity to properly explain the firms position. Sometimes, the situation can be retrieved, but often this is simply not possible and it becomes an exercise in damage limitation when early involvement could have avoided allegations. This can include getting in touch with the SRA during the seven day notice period to ask questions and refine the Firm’s readiness. It can involve informing the SRA that particular questions will be answered in writing. It very much depends on the circumstances. A visit can last a few hours, but it can sometimes last days or even weeks, depending upon the complexity and the availability of information. Don’t forget that there are circumstances in which the SRA charge the costs of their investigation back to the firm. Representation comes with strategies designed to expedite the investigation and reduce those costs. Similarly, you need to think about your obligations to your insurer. At what point should you inform your insurer about an SRA visit? What is a notifiable event for these purposes? These are issues we can assist with and we can lift a lot of the burden involved in an SRA inspection. Please feel free to get in touch on a no obligation basis to discuss how we can help.
Partner and Head of Department
Business Crime, Regulation & Driving Offences