Rule 8.1 of the Solicitor’s Code (with an equivalent provision in 7.1 of the Firm’s Code) states that: ‘You identify who you are acting for in relation to any matter’
In an increasingly complex legal environment, it is imperative that solicitors exercise the highest level of diligence when onboarding new clients. The recent warning from the Solicitor’s Regulation Authority (SRA) and advice from Motor Industry Legal Services (MILS) highlight the critical necessity for solicitors to verify the identity of every client before commencing any substantive work. This is not just best practice; it is an essential obligation to avoid serious professional and legal repercussions.
The Risk of Unauthorised Representation
Motor Industry Legal Services (an SRA regulated law firm) has said it believes that claims management companies are raising complaints or subject access requests without proper authorisation from their clients. If a solicitor or claims management company cannot produce a letter of authority, it contends, there is no obligation to respond to these requests.
Last month, the SRA issued a stern warning about the actions and business practices of some law firms. The SRA’s concerns include:
- Law firms acting on behalf of clients without their knowledge or consent.
- Poor due diligence during client onboarding leading to low-quality and inaccurate claims.
- Failure to act promptly or adequately in response to client instructions, including requests to terminate the claim process.
High-Volume Claims and Due Diligence
The SRA has specifically called out the practice of high-volume financial service claims management. These bulk claim processes often involve multiple clients and can lead to significant risks if proper procedures are not followed. Solicitors must uphold the principles set forth by the SRA, including acting with integrity, maintaining public trust, and acting in the best interests of each client.
Specific Requirements:
Act Only on Proper Instructions: You must have clear, explicit instructions from each client before acting on their behalf. This includes verifying any third-party introductions and ensuring that you have proper authority to proceed.
Identify Your Clients: According to the Code of Conduct for Solicitors, you must know who you are acting for in any matter. This duty extends to prospective clients and involves confirming their identity even if the introduction is from a third party.
Conduct Thorough Due Diligence: Your client onboarding processes must not only be robust but also adaptive to each client’s needs and circumstances.
Consequences of Non-Compliance
Failure to adhere to these stringent requirements can result in severe consequences, including disciplinary action from the SRA. The SRA’s enforcement strategy clearly states that they will act against firms that contravene their rules. This could lead to professional sanctions, significant fines, or even the loss of your practicing certificate.
Protecting Your Practice
To safeguard your practice and reputation, it is essential to implement rigorous client verification processes. This includes:
- Obtaining clear and informed instructions from each client before initiating any claims.
- Ensuring all necessary documentation (e.g., letters of authority) is in place.
- Conducting regular training for your team on compliance and due diligence procedures.
- Implementing robust supervision and record-keeping systems to document client instructions and consent.
Final Thoughts
The SRA’s warning is a clarion call for all solicitors to scrutinise their client onboarding and management practices. By verifying the identity of every client before undertaking any substantive work, you not only comply with regulatory requirements but also protect the integrity of your practice and the legal profession as a whole.
Failure to do so not only puts your practice at risk but also undermines public trust in the legal system. Take the SRA’s warning seriously—ensure you know exactly who you are acting for, and maintain the high standards expected of you as a solicitor.
For further details on the SRA’s guidance and requirements, you can review their full warning notice issued on May 2, 2024.
Stay vigilant, act with integrity, and always prioritise the best interests of your clients.
References:
– Solicitor’s Regulation Authority (SRA) Warning Notice, May 2, 2024
– Motor Industry Legal Services (MILS) Advice on Claims Management Companies