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Professional discipline update January 2020

Leigh Day’s regulatory & disciplinary update: special edition

Walking a knife-edge: read the results of our research into approaches to regulatory and compliance matters in the legal sector

At the dawn of this new decade, we’re delighted to be publishing a special edition of Leigh Day’s regulatory & disciplinary bulletin to share the results of research we commissioned into how law firms approach regulatory and compliance matters, in particular in relation to uptake of Management Liability Insurance (MLI) in the legal sector.

In 2018 and 2019, we had many conversations with law firm managers and officers that suggested there was a widespread lack of clarity in the profession as to whether professional indemnity insurance (PII) would cover the firm if the SRA came knocking, which other policies might, who would be covered and in what circumstances.

These conversations gave us real cause for concern because it was a MLI rather than PII policy our firm was able to call on when faced with an SRA investigation and prosecution that afforded the firm and the individuals the resources to obtain expert advice and support to respond robustly. The ability to call on specialists to help navigate the regulatory arena can be vital to careers and businesses.

To get a clearer picture of how firms are equipping themselves to deal with these sorts of regulatory and compliance matters, we commissioned IRN Research (IRN) to carry out this piece of research.

The results show that less than 50% of firms have insurance cover that would potentially afford them equality of arms with the regulator. Considering the recent changes in reporting requirements, the lowering of the standard of proof in the SDT, the resources required to defend enforcement action and, as the research shows, the unpredictability of attention from the SRA, it concerns us that firms are leaving themselves so exposed.

We would urge all firms to consider what they would do if they needed to deal with a regulatory matter tomorrow. In particular, we would encourage firms to check what insurance they have in place and what could be arranged to give the financial protection to ensure they have the best chance of successfully defending a regulatory investigation or prosecution.

We hope you find the report interesting and instructive. If, as a result of the report, you make any changes to your insurance cover or how you would deal with a regulatory matter in the future, we would be interested to hear what you took away from the report. Similarly, if you have a regulatory matter in which you currently require assistance, please do not hesitate to contact us. You can get in touch by emailing or calling us on 020 3780 0406.