Ethics Column: Ensuring Ethics is included in the Compliance Agenda

Ethics Column: Ensuring Ethics is included in the Compliance Agenda

Tracey Calvert

Oakalls Consultancy Limited

tcalvert@oakallsconsultancy.co.uk

www.oakallsconsultancy.co.uk

 

Tracey Calvert

 

ENSURING ETHICS IS INCLUDED IN THE COMPLIANCE AGENDA

Compliance professionals are familiar with the concept of continuous assessment to evaluate how successfully they have addressed the various regulatory demands made of them and their firms by the SRA. They look at their breaches records, complaints data, dealings with the SRA and Legal Ombudsman and similar. The idea behind their introspection is to consider which, if any, of their systems and policies need fine-tuning, where their risk pinch points are, how to remedy hotspots, and how to develop areas of proven success. Compliance never stands still!

 

This is of course very sensible. The SRA likes to see evidence of this; the Handbook is littered with clues in words and phrases such as ‘evaluation’ and ‘monitoring’ and ‘continuous improvement’ which begs an answer to the following question: what have we learnt about ourselves and what could we do better or differently?

 

This year I would suggest an area of contemplation which should be added to this assessment process is a consideration of the ethical complexion of the firm. This is useful to ensure consistent and safe individual and firm wide professional behaviour and to facilitate ethical thinking in internal compliance schemes. There may be a temptation to think that compliance controls are all that are needed to create an ethical culture; in my view, this is a dangerous assumption and it is prudent for firm owners and compliance officers to understand the behaviours of their colleagues and, more specifically, be able to have confidence that their colleagues will make the right ethical choices.

 

It is perhaps understandable that basic ethics has been on the backburner in recent times. The changes in our relationship with our regulator have been colossal and identified by compliance terminology. There has been a need to think about systems and policies which will demonstrate that we have adapted to the SRA’s regulatory style with internal compliance officers, compliance plans, recording and reporting, and systems and policies. Ethical behaviour has not been a key focus of this journey, by which I mean that the emphasis has been more on the development of audit trails and less on the consideration of the behaviours of those we expect to comply.

 

However, in my view, successful compliance strategies in law firms will not work without solid ethical foundations. At a time when we must start thinking about a review of internal compliance processes to align with the impending relaunch of the SRA Handbook in 2018, maybe it is now appropriate to consider what ethics in the workplace means in your environment.

 

This begs several questions about the correct starting point, an understanding of both regulatory and the business’s expectations, and whether ethics can be taught to colleagues. We do after all have the opportunity with the Statement of Solicitor Competence to add ethics training to the mix, and there are several ways in which awareness of the SRA Principles and SRA Code of Conduct can be taught to support the overall compliance picture.

 

I have visited many firms which are using the changes in continuing professional development to introduce compulsory training (often described as ‘refresher’ or ‘update’ training to avoid embarrassment) on core ethical and professional conduct subjects. Topics I have delivered include training on conflicts and confidentiality, client care and client money, and ethics in litigation practice. This supports personal development as well as being good for the development of correct behaviours within the firm at large. In other words, such training helps with risk management.

 

The significance of such training should not be underplayed. These days, being a good lawyer means so much more than having knowledge of the black letter law; understanding and displaying ethical decision-making skills are crucial characteristics of a modern lawyer. There is no doubt in my mind that the SRA is now considering ethics with renewed vigour. If the first staging post of the revolution in legal regulation has been risk-based regulation and the focus on the compliance framework, the second marker is a return to ethical basics as demonstrated in much of the SRA’s recent policy work. We have had the Question of Trust project and many risk priorities stem from what happens if our behaviours are inappropriate. Add to this many SDT decisions where such fundamental ethical concepts as independence, integrity and trust in the profession are analysed and it is hard to turn a blind eye to such clues.

 

One such SDT decision which makes this point clearly was published late last year. The case of SRA v Ford (Case number 11272-2014) shows what can happen if basic ethical responses are not applied. The decision showed that Mr Ford, a sole practitioner from Bolton, had been over reliant on referrals of personal injury work from third parties (to the extent that he had paid out £475,000 in referral fees between 2011-2013 before the referral fee ban took effect). The SDT found that the relationship with the referrers had meant that the solicitor’s independence was compromised and that his actions lacked integrity. Add to this mix other factors including serious Accounts Rules breaches, disregard of conflict of interest considerations and poor standards of service to clients, and it seems perhaps inevitable that Mr Ford was struck off the roll of solicitors. He was also ordered to pay costs of £75,000. The SDT commented in their findings: “the respondent’s conduct in relation to his dealings with referrers and clients fell woefully below the standards of integrity expected of a solicitor”.

 

It does not surprise me that the SRA’s review of the Principles, which they describe as the fundamental tenets of ethical behaviour, has led them to suggest a cull so that we may be left with the following six, as opposed to the current ten, personal behavioural requirements:

 

1. uphold the rule of law and the proper administration of justice

 

2. ensure that your conduct upholds public confidence in the profession and those delivering legal services

 

3. act with independence

 

4. act with honesty and integrity

 

5. act in a way that encourages equality, diversity and inclusion

 

6. act in the best interests of each client 

 

In other words, all the signs indicate that there is a regulatory return to the prioritisation of core personal values. To repeat my earlier question about whether these can be taught, my answer would be that perhaps the individual’s personal ethical starting point cannot be taught as this is something innate and an individual characteristic. However, the firm’s compliance culture can be used to mark out and clarify the firm’s expectations about acceptable standards and to ensure that inappropriate ethical behaviour is rooted out and challenged. The consequences of allowing improper ethics into the workplace are likely to be dire for the individual concerned and for the entity in which they practice. Are you monitoring to ensure appropriate ethical behaviour?

 

Tracey Calvert

13 February 2017

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