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The use of the term ‘outcomes-focused regulation’ (‘OFR’) to describe the approach to regulation contained in the SRA Handbook is misleading.
The SRA tells us that before the introduction of the SRA Handbook:
Now that we have the SRA Handbook, we are told that the overly prescriptive rules have been abolished. The possibility of a solicitor facing damaging regulatory action for a minor technical infraction of a regulatory provision has gone. The ‘New SRA’ is committed to fairness, proportionality and common sense. The new regulatory code is simply about plain old fashioned, professional decency. Broadly speaking, so long as you look after your clients attentively and conduct yourself ethically, you have nothing to fear from OFR.
So here are three observations about the ‘outcomes’ contained in the SRA Code of Conduct 2011.
1. A failure to achieve an outcome will always be a breach of at least one of the principles.
Why? Because ‘the outcomes describe what [you] are expected to achieve in order to comply with the relevant principles’ (SRA Handbook). Therefore if you do not achieve the outcomes, you have not complied with the principles.
Remember that the principles are described as the ‘fundamental ethical principles’ of practising as a lawyer. If you fail to comply with the principles you cannot be anything other that guilty of serious professional misconduct.
The code weaves the principles and outcomes inextricably together and thereby gives an equally high status to both. The outcomes are therefore ‘red-alert provisions’ in that failure to adhere to them could (arguably should) be professionally catastrophic.
2. The outcomes are rules in disguise.
They may not be called rules, they may not follow the traditional word patterns of rules (e.g. ‘you must not’), they may lack the precision and clarity usually associated with rules, but make no mistake about it – they are rules.
The first outcome in the code illustrates my point.
Have a look at the following two statements:
The first is from the SRA Handbook, the second, I have made up. The first (apparently) is not a rule; it is a mandatory provision requiring you to achieve a certain outcome. The second is just a rule.
There is no substantive difference between these two provisions, the differences are purely cosmetic, and incidentally, the Good English Society may well have some strong words for the SRA’s draftsmen if they ever saw such a simple provision drafted in such a ridiculous manner.
The SRA’s outcomes are rules in disguise; rules hidden behind word patterns that are often as bizarre and as difficult to penetrate as a fake beard, but rules nonetheless.
3. The outcomes are not always outcomes.
The code does not define the word ‘outcome’; it is not a term of art, we assume therefore that it is used in its everyday sense.
Strictly speaking, an outcome is simply a consequence, a result or an effect. If we truly had a system which regulated lawyers based only upon the consequences of their conduct it would be deeply flawed, because:
For these and other reasons, consequence-focussed regulation is not what we are talking about. The SRA is using the term ‘outcome’ to mean an ‘end result’, or more accurately ‘the final state or position of affairs brought about, or at least contributed to, by the conduct of the lawyer concerned’.
This is causing confusion and in our experience complacency within the profession. The view that ‘if I don’t hurt a client they can’t me’ is flourishing. It is a profound misunderstanding of the regulatory framework which is in place.
If we take as an example the rules around conflicts of interest, a truly outcomes-focussed provision might require you to achieve the outcome that ‘your client’s interests are not damaged as a result of you acting for them and for another person whose interests are opposed to theirs’. Many practitioners think that is what OFR is about and they therefore welcome it as a sensible move away from the detailed and burdensome 2007 Code. They know that they themselves are decent people and they know that they would never allow a client’s interests to be harmed because they were simultaneously acting for and against the client. They therefore relax and think they have nothing to fear from OFR.
So let’s look at what OFR does actually say about conflicts of interest. Well the first ‘outcome’ it requires you to achieve is that you have effective systems and controls in place to enable you to identify and assess potential conflicts of interests.
If you do not have effective systems and controls in place to enable you to identify and assess potential conflicts of interests you have failed to achieve the outcome (and therefore breached one or more of the principles). It is at the moment of not having such systems that you become guilty of professional misconduct.
You could do the ethically correct thing each and every time a conflict arises and still fail to achieve the required outcome by failing to be able to demonstrate to the SRA that you have effective systems and controls in place to enable you to identify and assess potential conflicts of interests.
Your inbuilt basic decency and your fine-tuned professional sense of your fiduciary duties to your clients will not save you from a finding of serious professional misconduct in this example. The irony of course is that in this example there has been – in every day speak – no ‘outcome’ whatsoever. No harm or damage to clients, no damage to the reputation of the profession, no negligence, no dishonesty, no recklessness, in short, no consequence, result or affect whatsoever. Nevertheless, your lack of robust file opening procedures, or your inability to produce documentary evidence of a comprehensive conflicts check, could land you deep in the regulatory soup.
In dozens of the ‘outcomes’ contained in the code the position is the same. No actual outcome is required for professional misconduct to be established.
Preventative Regulation – Possible ‘Outcomes’
This type of regulation could better be described as ‘preventative regulation’ than ‘outcomes-focussed regulation’. Time and again the code concerns itself with your systems, control measures, policies, procedures, practices and processes. The threads running through the code are those of risk management, practice governance, financial management and the mitigation of the possibility that legal and regulatory obligations might be breached. It is confusing to describe this form of regulation as ‘outcomes-focussed’ and then to stretch the English language to breaking point by describing the existence of a systems weakness as an ‘outcome’.
The SRA has moved to an extremely comprehensive and complicated hybrid model of regulation, combining principles, rules, and other mandatory and non-mandatory provisions, many of which are preventative and many of which focus upon the integrity of systems and procedures. It is misleading and inaccurate to describe this regulatory model as ‘outcomes-focussed regulation’.
Preventative regulation may be justifiable up to a point, but I believe the SRA Handbook has created a regulatory framework which legitimises ‘pre-emptive regulatory strikes’ of an offensive and sinister nature. We could soon see the day when a lawyer’s assets are seized, her career is ruined and her reputation is destroyed just because the SRA believed there was a possibility that she might – at some point in the future – have done something wrong.
That is not outcomes-focused regulation; it is the stuff of nightmares!
Client Relationship Manager
T: 0845 056 3949
M: 0743 727 4046
The Law Society has issued a practice note about the risks to solicitors posed by this new legislation, which came into force on 30 September.
The SRA has urged all practices to check HM Treasury’s consolidated list of asset freeze targets, which lists designated persons subject to financial sanction under EU or UK legislation.
The practising certificate renewal period opened on Monday 2 October.
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