Competence failures: mitigating against incoming risks

Following a recent report from the Solicitors Regulation Authority, law firms who fail to make sure solicitors are competent to carry out their role could soon be identified and subject to enforcement action. Without identifying and addressing competence-related issues, disciplined firms may suffer significant consequences in the form of fines, management liability, and reputational damage.

Competence levels are under scrutiny

In recent years, a growing gap has emerged between public expectations with regards to ensuring lawyers’ competence and the extent of checks that are currently in place.

In research conducted by the Legal Services Board (LSB) (opens a new window), published in December 2021, it was revealed that 95% of those surveyed believed lawyers should have to demonstrate that they remain competent throughout their careers. Meanwhile, 87% thought legal regulators should do more to reduce the risks of lack of competence within the legal system.

In the wake of this research, and following calls from the LSB for regulators to take action, earlier this year the Solicitors Regulation Authority (SRA) published a statement of policy on ongoing competence (opens a new window), outlining how it will develop and broaden identifying solicitors that are not competent.

Building on its existing approach to making sure solicitors remain competent, the SRA will:

  • Take forward thematic reviews to both target areas where competence is an identified risk and uncover other competence-related risks

  • Enhance its approach to following up on competence reports which do not meet the threshold for enforcement but where improvement is required

  • Pilot a proactive, risk-based approach to identifying and following up with firms, where data and information shows they may not be competent

  • Continue to review training records, focusing on high-risk practice areas

Crucially, where solicitors’ competence is found to fall below the standards expected, the SRA has confirmed its willingness to take enforcement action against guilty firms.

Regulatory action a possibility

The SRA adopts a broad definition of solicitor competence, as being ‘the ability to perform the roles and tasks required by one's job to the expected standard’.

When it comes to enforcing competence, the SRA will abide by the principles set out in its general approach to enforcement (opens a new window). This indicates that it will investigate competence issues where these are particularly serious, or suggest multiple failures or repeated or persistent poor conduct. It will do so notwithstanding any involvement of Legal Ombudsman or the courts.

In considering what action to take, the SRA will consider any mitigating and aggravating factors. However, even where strong mitigation factors exist, the SRA’s response may involve agreeing or imposing conditions or controls to prevent the individual or firm from providing certain services, if it does not consider that they can do so safely and effectively.

Where firms and solicitors are unable to carry out essential duties in relation to clients, they may find themselves the recipient of lawsuits on behalf of clients, with principals held liable where their actions are found to have contributed.

The SRA also reserves the right to impose disciplinary sanctions against firms or individuals where a serious breach has been committed, in the form of fines or rebukes. For solicitor, traditional law firms, and the individuals who work with them, fines may be imposed to a maximum of £25,000. For licensed bodies (Alternative Business Structures or ABS) and the individuals (including solicitors) which work in them, this increases to £50 million for an individual or up to £250 million for the entity.

Details of the fine may be published if it is deemed to be in the public interest, bringing an added element of reputational risk for firms involved.

Mitigating against competence risks

Taking action in cases of lack of competence is not without precedent for the SRA, but law firms should expect the regulator to follow up on more such cases in the future, either with a view to remedial action, regulatory action, or simply as a preventative measure.

With that in mind, it is wise that firms review the experience, qualifications, and expertise of their solicitors to identify competence issues.

Measures to mitigate against competence-related risks include:

  • Conduct a review of business activities to identify target areas for competence improvements and uncover competence-related risks

  • Direct staff towards available resources for competence-related support, particularly in those areas of greatest scrutiny (for instance, areas of law where there are vulnerable clients – resources may include the SRA’s good practice guide (opens a new window) for practising in the youth court)

  • Train managerial staff to identify competence issues and take appropriate action to develop individuals’ abilities

  • Where competence issues are identified by the SRA, take action to prevent repeat incidents

  • Gather data around competence issues and competence-related complaints to enhance understanding of competence, identify repeat actors, and facilitate proactive risk mitigation

The SRA has also published a suite of resources (opens a new window) to help firms and solicitors maintain competence.

For further information, please visit our Lockton for Solicitors (opens a new window) page, or contact:

Steve Holland, Senior Vice President, Global Professional & Financial Risks

T: +44 (0)20 7933 2444

E: steve.holland@lockton.com (opens a new window)

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