Thought leader

By Frank Maher, Legal Risk Solicitors

Rule 5 of the Solicitors’ Code of Conduct has attracted much comment for its provisions relating to the management of risk and business continuity.

Less comment has been reserved for the requirement for supervision, however. Rule 5.03 requires partners to ensure they have a system for supervising clients’ matters, which “must include appropriate and effective procedures under which the quality of work undertaken for clients and members of the public is checked with reasonable regularity by suitably experienced and competent persons”.

The approach of the Solicitors Regulation Authority is hardening. In the course of our work representing other solicitors, we are seeing more cases where something has gone wrong in the hands of more junior staff, and the partners who were supposed to be supervising them have been called to account for their conduct. Some arise from issues that would previously have been regarded as mere negligence. We are even aware of cases of partners being investigated for failing to supervise other partners.

Solicitors Disciplinary Tribunal reports reveal many cases where proceedings are brought for lack of supervision. Particular attention should be paid to the use of the words “system for supervision”, however. Also note that regulation 20 of the Money Laundering Regulations 2007 requires firms in the regulated sector to implement procedures relating to internal control, risk assessment and management.

Supervision is the area where we find the most frequent variation in the same firm. The guidance notes to rule 5.03 indicate that supervisors must be suitably experienced and competent, with sufficient legal knowledge (even if not experts in the relevant area).

Guidance note 50 comments that if a complaint is made, you will have to demonstrate that the work-checking procedures are “appropriate”, “effective”, and are undertaken with “reasonable regularity”.

Too often, when we ask partners - even in the largest commercial firms - what their system is for supervision of staff, they tell us they have an open-door policy. What firm doesn’t? But open-door policies can fail – they depend on staff recognising when they are out of their depth and being prepared to ask for help. Important though an open-door policy is, it seems unlikely to comply with guidance note 50, referred to above.

At Legal Risk, we test staff in many major law firms with Desktop, an online risk-management diagnostic tool, and unearth many concerns. Tests cover a wide variety of risk-management issues. In one large international practice, 38 per cent of one sample of fee-earning staff did not know what type of problems, including possible negligence claims, the firm required them to notify a partner of: a statistic with potentially frightening consequences.

In another top-100 firm we found that six per cent weren’t confident they knew when they needed to refer to a supervisor – good that the percentage was so low, but it only takes one to cause a calamity.

Supervision must be ‘active’ – a regular process of review. It may be weekly, monthly, or perhaps a less frequent meeting, according to the seniority of staff supervised and the work undertaken. File review will form part of the process. Partners should know what is happening in their name.

Those supervising need to ensure they ‘pass the baton’ adequately when delegating; equally, those to whom tasks are delegated need to ensure they know what is required, when it is required, and any additional information they need to prioritise.

Two questions remain. Do you have a system of supervision? And do you test it?

Frank Maher is a practising solicitor and partner in Legal Risk Solicitors. He can be contacted at Frank.Maher@legalrisk.co.uk