Reporting requirements – minor changes to the reporting of non-material breaches and the suitability test
This article was first published by Solicitors Journal and is reproduced by kind permission.own up by seemingly minor changes to the reporting of non-material breaches and the suitability test should not be underestimated, says Susanna Heley
Version 8 of the SRA Handbook came into force on 8 October 2013. Headline changes include amendments to the rules on professional indemnity insurance, changes to reporting requirements, a redraft of the rules governing overseas practice and changes implementing the SRA’s quality assurance scheme for advocates.
Other changes include the abolition of the need for solicitors subject to regulation 3 to give 6 weeks’ notice of their intention to apply for a practising certificate and changes to the Suitability Test. There are a host of smaller changes which are largely matters of clarification.
One of the most significant changes is the removal of the obligation on the part of COLPs and COFAs in traditional law firms to report non-material breaches to the SRA. Those in ABS firms are still obliged to report such breaches. COLPs and COFAs in traditional firms are now obliged to maintain a record of non-material breaches and make the record available to the SRA on request but there is no need to report each year.
In some ways, this makes life harder for COLPs and COFAs in that there is no mechanism for them to make protective reports of non-material breaches to guard against the possibility that the SRA may later disagree with a COLP/COFA’s assessment of breaches as non material. The rules still require them to carry out all of the work identifying and maintaining a report of such breaches so there is no significant reduction in the regulatory burden on firms. That said, it is appropriate that the investigative work of the SRA should not be delayed as a result of the SRA having to divert resources into the review of hundreds, if not thousands, of reports of non-material issues.
Staying with the theme of reporting requirements, changes have been made to Rule 3.1(k) of the Practising Regulations which limit the extent of reporting required in relation to insolvency history on applications for practising certificates (whether initially or on renewal) and applications for recognition as a registered European lawyer (whether initially or on renewal). Where previously individuals had to disclose any – loosely phrased – managerial role in an insolvent company, that is now limited to any such role held in the last 36 months.
Changes to the suitability test mean that protected cautions and protected convictions within the meaning of the Rehabilitation of Offenders Act 1974 (Exceptions) Order 1975 need no longer be disclosed to the SRA and a failure to disclose will not be regarded as prima facie evidence of dishonesty.
These definitions are new to us, having been introduced by statutory instrument in May and only incorporated into the Handbook in Version 8. For those of us who don’t conduct any criminal work (and even for those who do), it may take some to establish whether a particular caution or conviction is protected, as it involves consideration of a list of offences created or listed under potentially 10 different pieces of legislation.
If the offence in question does not appear on the list and the other conditions for protection are met, it is not disclosable.
Given the potentially very serious consequences of a failure to disclose to the SRA (in terms of the suitability test, it is treated as prima facie evidence of dishonesty), these are issues which firms need to take very seriously. In a regulatory system where certain steps in our careers are only possible with SRA permission (appointment as a COLP/COFA, for example) and in a world where competition makes it increasingly difficult for those who have any kind of blot on their name, these obligations (and seeing how they develop over time) could shape entire careers.
Firms should keep these changes in mind when undergoing this month’s renewal of authorisation and practising certificates exercise. These changes are not exceptionally well publicised although the SRA’s release notes issued with every edition of the Handbook should be required reading for all practitioners.
The very speed of change and the effect of even relatively small changes to the Handbook should not be underestimated.
This article was first published by Solicitors Journal and is reproduced by kind permission.
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