lawselect practice management

LawSelectPractice Management

Issue 3 | Winter 2015

WelcomeWelcome to the third issue of Practice Management,the newsletter specifically designed for those in legalpractice.

In this issue we are looking at a number of areas whichare likely to cause concern for many firms over thecoming year. These include the pitfalls of firms cross-selling services, especially where they lack the appropriateexpertise, and the growing need for firms to be vigilantwhere money laundering is concerned.

We also look at the need to have in place adequateprocedures for handling crises, if and when they arise,the benefits that can arise from incorporation and finallyissues surrounding the ever growing number of bogusfirms.

In this issue

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2014 PII Renewal Season: initial review

by Piers Winton, Vice President

The 2014 PII renewal season was somewhat clouded inmystery compared to previous years. Due to the removal ofthe common renewal date, it is unclear how many practicescontinue to renew their insurance on the 1st October, but it iscertain that many firms may be on 18 month policies. Withoutthe data from the now defunct Assigned Risk Pool (ARP), it isalso difficult to ascertain what the overall premium pot lookslike for this year or indeed how many firms were unable tosecure cover. However, we can consider what we experiencedin the market place during the renewal season and makeseveral assumptions.

Firstly, there was an influx of new capacity while existingcapacity continued to show a desire to write this historicallychallenging profession. Therefore there was greater choice forpractices and rates certainly were put under pressure. This isnot to say that premiums reduced as fee income for manyfirms is on the rise but aggressive pricing was witnessed onnumerous occasions. We can only speculate as to why there isthis increase in underwriting appetite (economic recovery andthe housing market) but it can only be positive news for thelegal profession.

Secondly, there was a notable increase in the demand for “A”rated insurance, no doubt driven by some high profilewithdrawals of insurers from the market but also from pressurefrom the lenders who have a minimum security ratingrequirement of “A” – while the property market continues to bebuoyant no firm wants to be removed from a lender panel.

Continued on page 2

1 2014 PII Renewal Season: initialreview

3 Cross-Selling, Retainer Creep andRelevant Expertise

4 The SRA Enforcement of the Anti-Money Laundering Regime

5 Incorporating a New Idea

6 Fraudsters at Large

7 Crisis Management

8 Questions and Answers

8 Meet the LawSelectTeam

2014 PII Renewal Season: initial review (continued from page 1)

makes securing competitive terms significantly easier. Ifinsurers run profitable books of business they will notneed to adjust pricing and this is essential should theeconomy slow down or retract.

While there are many positive signs, the aggressivepricing seen at this renewal is something we havewitnessed before. With the economy enjoying a recovery,claims frequency drops and pricing reduces. However,our market is cyclical. While these cycles of hard and softmarkets become harder to predict, firms and insurersalike must exercise caution. A portfolio that is under-priced now will cause problems in the future. It isessential that firms continue to operate a high standardsduring times of growth, as should the market retract itwill be the work carried out now that is likely to bescrutinised. Maintaining procedural discipline now will beinvaluable should the dreaded file request come throughfrom a lender in the future.

It is unclear whether unrated insurers will continue to beallowed to sign up to the SRA minimum terms andconditions and become participating insurers but it mayexplain why we are seeing more “A” rated insurersentering the market at this point in time.

Due to the ever increasing influence of Outcomes-Focused Regulation (OFR) there was also an increase infirms looking at the quality of the product offering bybrokers and not simply purchasing on price alone. Thereare now several broker led facilities that provide anexcellent risk management infrastructure for Solicitors,assisting with document libraries, HR Templates andguidance, claims bulletins and regulatory updates toname but a few. This has two purposes; firstly to supportfirms in all aspects of their risk whether insurance,business or regulatory and secondly, to help them avoidclaims. Ultimately, the claims record of a practice showsinsurers how well it is performing. A good claims record

LawSelect Practice Management Winter 2015

Infolegal leads the field in providing compliance, regulatory andmanagement support to law firms of all types and sizes.

From one-off purchases of precedents, guides and online trainingcourses to comprehensive packages which include telephone andemail support, precedent reviews, compliance checks, factsheetsand training, Infolegal can tailor a regulatory, complianceand management solution to suit the precise needs of your firm.

All of our clients benefit from the considerable experienceand expertise of our directors and associates. We have assistedhundreds of law firms with issues ranging from moneylaundering problems to setting up an ABS.

Whether by telephone, in person or through our regularly updatedonline information hub, Infolegal can provide you and your firmwith all of the regulatory support it needs - for COLPs, COFAs,MLROs, managing partners, administrators and accounts staff.

What is more, you can now access the Solicitors Office ProceduresManual by Matt Moore and Vicky Ling through our onlineinformation hub. This manual is key to meeting your complianceobligations for both the SRA and any of the quality programmes.

To find out more about our services simply call us on 0203 3711064 or email us on [email protected] and we will be pleasedto explain how Infolegal can make a difference to your firm.

T: 0203 371 1064 www.infolegal.co.uk

don’t let compliance drive you ape

law firm compliance advice and training

With firms seeking to maximise revenue with minimal outlay,it makes commercial sense for firms with various departmentsto ‘cross-sell’. Legal web sites are awash with articlesespousing the benefits of cross-selling; and for good reason.Cross-selling is usually the cheapest and easiest method ofmarketing; and who better to try to sell your firm’s servicesto, than clients who are already thrilled with your firm’s goodwork and modest fees!

There are many natural cross-selling opportunities:

Concluding a Divorce – have you thought about preparinga new will?

Setting up a new company – please meet our commercialconveyancing and employment departments.

There are also many cross-selling opportunities which will ariseout of the blue quite unexpectedly – an employment clientwho explains that she can no longer work due to an injury, ora motoring offences client who mentions he has separatedfrom his spouse.

Unfortunately, hand in hand with ‘cross-selling’ are pitfalls.

We have seen a number of claims arise out of ‘retainer-creep’where firms have referred work internally to otherdepartments and the lines between retainers become blurred,or where firms have undertaken related work which fallsoutside their usual practice.

Consider, for example, a firm dealing with the purchase of asmall company. The commercial department might be dealingwith the share purchase agreement. However, a number ofthe key employees are being kept on after the sale – a perfectopportunity for the firm to refer the employment contracts toits own employment department. It is crucial that the twodepartments work together and consider how this will affectthe client’s retainer. Will the employment work be coveredby the original retainer, or a separate one? Where will variousterms of the transaction be set out – in the SPA or theemployment contract or if necessary, do the contents of eachtie up? These issues must be considered in order to ensure anelement of the work does not fall between two stools.

Even where the work falls squarely under two retainers, suchas the example above of a motoring offences client who hasseparated from his spouse, the client will often assume that

the fee earner dealing with his divorce will be aware ofeverything that he has previously told his motoring solicitor.Certainly, I have seen claims where the client expected thesolicitor dealing with his Will to be aware of everything that hisconveyancing solicitor had known, such as how his propertywas held (as Joint Tenants rather than Tenants in Common) butunfortunately they were not.

The question then arises as to whether it was reasonable for theclient to make such an assumption – and there is a real risk thatit would be. However, this will of course turn on the individualfacts and circumstances of the matter.

A further consideration should also be whether the firm hassufficient expertise to deal with the work, and your obligationsunder outcome O(1.4) that you have:

“the resources, skills and procedures to carry out yourclients' instructions”

Following the credit crunch in 2008, too often I saw Letters ofClaim which had been drafted by conveyancing solicitors whoattempted to pursue a professional negligence claim on behalfof their clients, despite having no litigation, let aloneprofessional negligence litigation, experience. Usually thesesolicitors had been instructed on a transaction, and had noticedan error on the previous conveyance. Rather than refer theclients on to specialised solicitors as they ought to have done,these solicitors, who were short of work, thought that theywould simply run the claims themselves, much to the detrimentof their poor clients.

With the Jackson Reforms now firmly in place, litigation hasbecome more specialised than ever, and it should not beundertaken lightly without a detailed knowledge of procedure.

This scope of this issue has widened further again since theadvent of Alternative Business Structures. Full-service law firmscan now also be attached to Estate Agents or have in-houseIFAs. What of the instructions that these businesses generate?How much knowledge would a client expect has been passedon from their Estate Agent or Pension Planner?

The point therefore is this: cross-selling is an effective tool forfirms and should be encouraged. However, with multipleinstructions from clients to the same firm, it is more importantthan ever that client expectations are managed and that thescope of an individual retainer is clearly defined.

Cross-Selling, ‘Retainer-Creep’ and Relevant Expertise

Claire Collinson - Solicitor at Reynolds Colman Bradley LLP

LawSelect Practice ManagementWinter 2015

The SRA has directed increasing criticism at the profession forits alleged failure to address its responsibilities under the AMLregime. Obvious cases apart, can this can be seen to be fairgiven the compliance costs to the profession in this area andthe continuing uncertainty as to when, precisely, a disclosureshould be made to the National Crime Agency.

In September 2014 the SRA announced that it would be “steppingup its efforts to ensure solicitors’ firms do not become embroiledin money laundering activity and are compliant with the variousregulations and legislation associated with anti money launderingcompliance”. A “specific piece of focus work” would run from thedate of the press release to May 2015, “working with firms toensure robust systems are in place to guard against solicitorsbecoming involved in money laundering.” This announcementfollowed on from the July 2014 SRA Risk Outlook update, whichplaced money laundering as one of the issues that were“widespread, current and posing a significant risk to the publicinterest.”

The interim report back towards the end of 2014 did not makeencouraging news. It was reported at the SRA COLP and COFAconference in November that the SRA had encountered some“genuinely shocking” cases which would be pursued through thedisciplinary system. The same report promised some “landmark”cases which would be publicised once decided. Samantha Palmer,regulatory manager at the SRA, listed various criticisms includingfailing to appoint sufficiently senior money-laundering reportingofficers (MLROs), quoting one case where a 40 partner firm hadappointed an 18 year-old to the role, and low levels of training,including failure to update in-house initiatives supplied some timebeforehand.

Meanwhile the alleged paucity of suspicious activity reports("SARs") remains a bone of contention with both the NCA and theSRA, leading Steve Wilmott, director of intelligence andinvestigation at the SRA, to warn that that the legal profession isfacing a “bumpy ride" from the enforcement agencies. Theincreased pressure is partly due to the anxiety in government owingto the planned inspection by the Financial Action Task Force - theinternational body established by the G8 group of nations whichaims to counter money laundering and terrorist financing - in 2016.These reports are bound to make many reporting officers wonderif they are doing enough to comply with their legal and

professional obligations. The threats should certainly be takenseriously: prosecutions – let alone convictions – may be rare, butthe experience of an interview under caution is much morecommonplace and can often be no less daunting. Many suchinvestigations have been conducted in a hostile and intimidatingmanner by officers with little understanding or sympathy for therestrictions that arise under legal professional privilege, causingunderstandable distress and anxiety for those concerned.

To put the criticisms into perspective the current level of 4,000SARs by lawyers is substantially more than in any other Europeannation, and does not take account of how often lawyers turn awaypotentially lucrative work on their understanding of their legaland professional obligations to do so. The regulator’s continuingcriticism of the profession would also be more palatable if therequirements of the disclosure regime and, to a lesser extent, theclient identification processes under the Money LaunderingRegulations 2007, were more clearly stated in law and practice.

There is instead widespread continuing confusion as to whatprecisely the compliance and disclosure provisions require offirms and their compliance personnel. In a thematic review ofconveyancing work in March 2013 the SRA reported that a thirdof firms admitted that they did not know whether to report asuspicion to NCA, with a further 15% admitting to going on ‘gutinstinct’. This will surprise few who have attempted to understandhow the law of privilege, in its different common law andstatutory formats for both litigation and advice situationsrespectively, should be applied to the legal disclosures regime.

Even in its most recent December guidance on this point the LawSociety has advised matrimonial lawyers, helpfully, that reports tothe NCA are "unlikely" to have to be made during the litigationbut that there are still circumstances where a report may beneeded. Suggesting that the MLRO should fully assess suchcircumstances, "undertake the detailed analysis and apply the law,ask the right questions and think through all of the potentialconsequences both for themselves and their clients beforemaking a decision as to the appropriate course of action inaccordance with their legal obligations", does little to clarify thesituation. Until such time that clear advice can be provided on theprecise circumstances when a disclosure should and should notbe made, the growing tension between the NCA and the SRA onthe one hand, and the profession on the other, is likely to continue.

SRA Enforcement of the Anti-Money LaunderingRegimeMatthew Moore - Director, Infolegal Limited

Winter 2015LawSelect Practice Management

The legal market is a fiercely competitive and, some would say, anoverpopulated one. There is also no doubt that the challenges facedby law firms have increased in both pace and intensity over recentyears.

On the commercial side, there have been massive Legal Aid budgetchanges (we've seen £500m taken out of the market). Can firms cuttheir cloth accordingly? Combined with the slowdown in paymentsthat firms continue to face, this is a significant challenge. PostJackson, the referral fee ban and a fixed costs regime means smallPersonal Injury firms may start to run out of cash as cases are runoff and not replaced. All firms are facing increased expectations ofservice, often accompanied by downwards pressure on fees. Thelurking “new entrants” with leading technology and new approach-es to delivering legal services, are starting to come out of the wings.The Solicitors Regulation Authority (SRA) recognises the fundamen-tal risks arising from financial difficulty and has a strong focus onrequiring firms to be financially robust.

To add insult to injury, the last year has seen announcements andsubsequent implementation of a sweeping range of tax changes,which whilst not solely targeting solicitors, impact very many prac-tices. Some firms had taken advantage of a hybrid structure wherethe more traditional partnership (or Limited Liability Partnership –LLP) brought a company into the firm, to help support the workingcapital needs by taking advantage of the lower tax rates applied tocompanies (often just deferring, rather than saving tax). However,from April 2014, the benefits of this structure were eroded whilstother rules came in targeted at generating employer’s NationalInsurance (NI) contributions on the income of “fixed share partners”.Both changes added significant further pressure on cash-flow andtax outgoings.

This environment means that many firms need urgent advice anddirection. Is incorporation the answer? Well, it can be for some.

Growing a practice and paying up to 45% income tax plus 2% NI onall profits, irrespective of whether they are tied up in a large debtorbook or unbilled work in progress, makes life very difficult for manyLLPs and partnerships.

We co-ordinate an annual benchmarking survey containing datafrom more than 120 firms across England and Scotland; last year50% of firms reported a year on year reduction in net profits, andaverage profit per equity partner fell to £139k for firms with >£1.5mturnover. When you factor tax and NI into this and a reasonablemonthly draw, there's not a lot left to fund investment.

Incorporating a New Idea

John Beevers - Director, Sagars Accountants - specialists in the legal sector

Our firm incorporated last year with funding investment in IT and ourteam being the main drivers. The ability to do this out of profitstaxed to Corporation Tax at 20% rather than 40% or morewas certainly compelling. Beyond this, dividends are taxed morefavourably than employment income, and there is a choice as towhen to declare a dividend whereas a partnership is taxed on allprofits regardless of how much is personally withdrawn.

Until the very recent Autumn Statement 2014, one of the otherpotentially significant benefits of incorporation was that, if the good-will of a practice is saleable, it’s possible to reduce the overall taxliability (ie including corporation tax and income tax) by selling thatgoodwill to the limited company at a fair market value. Whilst thiscan still be done, the tax on the sale will from 3 December 2014 beat 28% not 10% as it was previously so detailed cash flow forecastingshould be considered as tax liabilities could now be acceleratedbefore savings are realised. A quarter of firms in our survey are nowlimited companies and more than half the firms we act for areactively considering incorporation. The significant benefits arisingfrom a different tax regime and improved working capital fundingoften outweigh the perceived inflexibility around profit sharingarrangements and succession.

Why doesn’t everyone do it then?

Well, it wouldn’t be any fun for us advisers if it was a complete “nobrainer”. For larger firms, the rigidity of a corporate structure canmake a practice difficult to manage. Where there are regular chang-es in partners, an LLP can provide a more fluid structure and thereare tax issues around changes in shareholdings which can beexpensive or impractical to deal with.

So, it’s mainly the preserve of the “smaller” firm (there is no strictdefinition here, but let’s say under 10 partners). There are exceptions,it can suit a larger firm if they are prepared to completely change theethos of partners all owning a stake in the business and so operatewith fewer shareholders and more senior lawyers on the payroll.

Discussions around such a fundamental change invariably bring outa lot of other partnership laundry – it can be a really useful way ofuncovering partners’ true goals and intentions. If there are numerousimminent retirements, then incorporation may be a great way ofassisting, or it may be a reason not to do it. There are many factorsto consider, including other stakeholders such as the bank, who needto be in the loop and on-side early in the process.

Our conclusion? It’s certainly not a panacea, but it would be almostnegligent not to at least consider it!


Of all the many concerns that weigh upon managing partners andcompliance officers, the growing risks of fraud attacks should notto be overlooked. Such attacks take many different guises, fromdirect raids on the firm's bank accounts to the interception of fundtransfers where the fraudsters claim to be the newly appointedrepresentatives of another party in a transaction so as to stealmortgage or completion monies.

Whatever the pattern of fraud involved, the losses andinconvenience to the victims can be substantial. Rule 7 of the SRAAccounts Rules requires the principals of a firm to repay anymonies missing from client account "promptly on discovery" andwithout regard to whether the losses will eventually be met bytheir insurers. Practice failures have followed in many such cases,if not immediately then at a later stage through an increase toinsurance premium levels which makes continued coverunaffordable.

Vishing attacksThe police web site Action Fraud reported last December that ithad seen a substantial rise in both the numbers and values of"vishing" attacks, in which criminals claim to be the police or bankemployees allegedly investigating attacks on the victim's account.The fraudster tricks the victim into providing their bank numbersand access codes, with substantial thefts then swiftly following.The client accounts of law firms make particularly attractive targetsfor this form of crime, and reports are growing of losses of manytens of thousands of pounds that have been sustained by theunwary.

The first step for all firms to take to safeguard against such lossesis to ensure that everyone in the Accounts Department is awareof the risk of such calls. So great has this problem become thatthe banks have taken the unusual step of putting out a joint alert(2nd December 2014) which can be found on the Action Fraudweb site at www.financialfraudaction.org.uk. There is also a usefulposter to put up in the Accounts or general office by way of areminder warning.

Bogus firmsThe SRA Risk Outlook should be regarded as essential reading forall practices. The November 2014 update, which can be viewedon the SRA web site, highlighted a number of financial issues as"current concerns": the misuse of money or assets; lax moneylaundering controls and the growing trend of bogus law firms.

Fraudsters at Large

Jayne Willetts - Director, Infolegal Limited

Bogus law firms pose a risk to the image of the profession as awhole and to many firms in particular if, as is usually the case, theyadopt the identity of that firm as a front for their activities.

Often operating via the web alone, those involved in this form offraud will send out bulk communications using the guise of beinga solicitor's firm to gain trust for advance payments for litigationor scam investments. When the fraud comes to light there is, ofcourse, no redress since no SRA authorised practice has beeninvolved.

The use of bogus firms as part of mortgage fraud conspiracies is amore real and pressing concern for all firms involved inconveyancing work. Here the fraudsters clone an actual firm so asto divert the payment of completion or mortgage monies (oftenwith the involvement of a dishonest estate agent who is privy tothe details of the transaction) by way of "application hijack". Thealternative pattern of fraud involves conspirators cloning theidentity of property owners - and then a law firm also - so as eitherto sell or re-mortgage a property. Here firms acting in good faithfor bona fide purchasers are at risk of being seen to be in breachof trust by having released funds innocently but without dueauthority to do so.

In the case of Davisons v Nationwide Building Society [2012] EWCACiv 1626, the criminals had managed to register their operation onthe SRA's find-a-solicitor database. The fact that at all materialtimes the bogus vendor firm was listed by the regulator as a validfirm led the Court of Appeal to rule that the firm had actedreasonably in the conduct of the transaction and was thereforeentitled to relief from breach of trust in relation to the transfer ofthe mortgage monies. This, and other such cases, stresses the needfor careful checking of reliable sources in relation to other firmsencountered so as to be beyond reproach if caught up as aninnocent party dealing with skilful fraudsters.

Safeguarding actionsThe regulator has suggested that someone in the firm shouldregularly monitor the web for close matches of its own webpresence which might amount to fraudulent activity for some time.So far as dealing with distant advisers who are not known to thefirm the advice is to always check the firm's identity, including itsaddress and phone number, on the SRA web site rather than thenotepaper received. The notepaper, along with the web site that isprobably linked to it, could easily be part of the scam that nowposes such risk to the firm involved.


Recent years have seen dramatically increasing levels of presscoverage of the solicitors’ profession as one in crisis, squeezed byGovernment and Regulator, and increased competition. Much of thismay be true, although for each practice which has struggled or failed,one can point to another that has developed and prosperedthroughout recession and beyond. Within any profession there is atendency to be insular. All businesses in all business sectors suffercrises great or small at some point. There is no reason to beembarrassed by that. The pride is in preparing for and dealing withcrises as they arise.

The SRA’s outcomes-focused regulation does require preventativemeasures to be in place. The relatively modest expense of time andmoney in putting in place a working set of quality procedures notonly meets the SRA’s criteria, but will reduce the risk of seriouscalamity, or at least make it easier to deal with when it lands.Furthermore, it reduces the risk of adverse criticism from the SRA orindeed anyone else. Reluctance to draw attention to less than A1procedures is emphatically not a reason for ignoring a crisis when itarises.

Every firm in the country at some point has a financial crisis, greator small: emergency calls for further equity are by no meansunknown even to the largest firms. The priority is to see it coming.Outcomes-focused regulation requires effective systems andcontrols to be maintained for monitoring the financial stability ofthe firm. More particularly, amongst the indicative behaviours, is arequirement for controlling budgets, expenditure and cash flow.Many firms still leave these matters entirely in the hands of theirexternal accountant, which is not a problem in itself, but it is if thataccountant only hoves into view once a year to prepare the year endaccounts. Accurate monthly figures are essential, whoever preparesthem. The Four Horsemen of the Apocalypse have not cut the swathethrough the solicitors’ profession which doomsayers predicted – orat least not to this point. However, most businesses which havefailed have overwhelmingly done so for one of two reasons. Inabilityto obtain professional indemnity cover may be becoming a morefashionable terminal symptom, but running out of cash has alwaysbeen the principal driver of failure, and still is. Solicitors’ businessesdo not generally fail through lack of profitability: lack of profitabilityis one warning sign of a cash crisis which will follow if warnings areignored.

Actual or potential supporters of a solicitors’ business – whether theybe from traditional sources like banks or from external equity buy-ins– are much more likely to be able to assist if approached before thecrisis hits, particularly if the approach is backed by up-to-datemonthly management accounts, budgets and forecasts.

Categories of crisis do exist which cannot be foreseen or forestalledeven with the most robust systems. If a trusted partner or senior

Crisis Management

Nigel Kidwell - Director, Virtual Practice Manager Limited

employee is determined to perpetrate deeds of serious misconduct,no management system can prevent them. Whatever we may privatelythink about some of our fellow members in the profession, solicitorsare clever people, and their faculties can be effectively deployed forboth good and ill. The writer has over the years had cause to dealwith fraud or other serious conduct both as external advisor andinternally. From that personal experience emerges the strongestpossible conviction that, as a first step, an independent perspectivemust be obtained. It is simply impossible to see the wood for thetrees when analysing the conduct of colleagues of long standing incircumstances where livelihoods and even liberty may be at stake.Beyond that it is important to recognise the obligation to notify theSRA in these circumstances. It should be done in a measured fashionwith the benefit of the external input obtained. The SRA in turn willgenerally investigate in an equally measured fashion – it is not anorganisation prone to panic. There should be no reticence thereforeabout notification: notifiers are generally protected by qualifiedprofessional privilege from any allegation of defamation.

Fortunately not every solicitors’ business experiences fraud;everybody though faces notifiable events at some point. Brokersencourage early notification and a tendency to over-notify if anything:quotations are not generally notification-sensitive. (If, despite all bestefforts, the claims record has become such that renewal is going tobe a significant challenge, it is vital to engage as early as possible indiscussion with brokers, giving them full details. The longer they havein advance of the renewal date the more options they will have, andthe more scope to explain your case to the insurance market.)

It is essential that notification is not considered the end of the matterfrom the insured’s point of view. Professional indemnity insurersutilise the services of an array of accomplished specialist legaladvisers. They can though only operate from the factual informationthey are given. More importantly still, an underwriter’s interests donot necessarily coincide with those of their insured. Underwriters dealin numbers not reputations or preservation of goodwill. The numbersthey deal in are also considerably bigger than ours: settlement of aclaim at a certain level may make sense to them, but it may lead toa serious hike in premium for the insured. The job of dealing withclaims made remains with insurers and their advisers and they willultimately make the decisions under the rights of subrogation theyenjoy. They do though invariably welcome a proactive andconstructive input from their insureds into the claims process, whichcan steer the process to an outcome more favourable to all.

It has never been easy to administer a solicitors’ practice; there is noreason to suppose it will get any easier. If, though, we can embracethe realities of regulation as a means of tackling some of thesignificant business challenges we face, it is at least to swim with thetide – preferable to the increased risk of sleeping with the fishes.


Meet The LawSelect TeamShould you require any assistance or you simply wish to discuss your own requirements then please do not hesitate to contact

the LawSelect team


Regulatory Questions and AnswersFrom Infolegal Limited - compliance consultancy for COLPs and COFAs

Q. My firm has dozens of historical balances on client account.Where attempts to trace the clients are unsuccessful, I wish topay the funds to a charity in accordance with Rule 20 (2) of theSolicitors Accounts Rules (SAR). To avoid paying the balancesover in lots of small sums as each file is closed, can I transfer thebalances to a suspense account allowing me to pool the moneyand pay it to the charity every month?

A. Rule 29.25 of the SAR says that suspense client ledger accounts maybe used only when they can be justified, such as where an unidenti-fied payment is received and time is needed to establish the natureof the payment or the client’s identity. The SRA take the view that theuse of a suspense ledger account in these circumstances cannot bejustified and the payments to the charity must be by direct transferof funds from each client’s ledger.

You must also record the steps you have taken in relation to eachclient and keep a central register of withdrawals in accordance withRule 29.22. This register must contain the name of the client, or otherperson or trust on whose behalf the money is held (if known), theamount, the name of the recipient charity and the date of thepayment. Finally, take note that the amount which firms canwithdraw under Rule 20 (2) has now been increased to £500.

Q. My practice specialises in commercial debt collection. I wouldlike to phone a number of companies that match our clientprofile by way of a follow up to email publicity that I amabout to send out. Are unsolicited approaches such as thispermitted?

A. Chapter 8 of the SRA Code of Conduct deals with publicity.Outcome (8.3) prevents firms making unsolicited approaches “inperson or by telephone” to “members of the public” for thepurpose of publicising their practices. However, members of thepublic is defined in the SRA Glossary as excluding “a commercialorganisation or public body”. Assuming, therefore, that therecipient organisations of your phone calls fit this descriptionthen there is no regulatory reason as to why you should not goahead as planned.

However, in order to be sure that you meet fully the outcomes inchapter 8, you will also need to ensure that your publicity isaccurate and not misleading - Outcome O(8.1). In particular, youneed to take care in relation to any statements you make aboutyour charging rates. The indicative behaviours to chapter 8 set outcircumstances in which you may fail to meet O (8.1) and theseinclude advertising an estimated fee which is pitched at anunrealistically low level.

Further guidance on these topics can be obtained by contacting Infolegal on [email protected]

Further advice should be taken before relying on the contents of this Newsletter.Paragon International Insurance Brokers Ltd accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in this summary.

No part of this summary may be used, reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying,reading or otherwise without the prior permission of Paragon International Insurance Brokers Ltd.

Paragon International Insurance Brokers Ltd is Authorised and Regulated by the Financial Conduct Authority. Accredited Lloyd’s Broker.Paragon International Insurance Brokers Ltd, 140 Leadenhall Street, London, EC3V 4QT. Registered in England. Company No. 321572.

Paragon Brokers (Bermuda) Ltd. LOM Building, 27 Reid Street, Hamilton HM 11, Bermuda. Registration No.33838.”

Michael MunnsAssistant Vice President

Direct Dial: 020 7280 8211Email: [email protected]

Janine ParkerHead of UK Professions


James NoonVice President


Adam CossinsAssistant Vice President


Piers WintonVice President


Paragon International Insurance Brokers Ltd,140 Leadenhall Street, London EC3V 4QT,

[email protected]

T: +44 20 7280 8200 F: +44 20 7280 8270

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