A practical and detailed session in regards to the current SRA position and guidance on conflict of interest under the Standards and Regulations.
Hello and welcome to today's session on regulatory conflict of interest. My name is Katie Jackson. I'm a compliance consultant and I'm here today to talk to you about conflicts of interest within the context of regulation. And also we'll be talking about some of the rules and regulations around conflict of interest. So we're going to be having a look, for example, sa ra rules relating to conflict of interest. We're gonna be having a look at clc rules relating to a conflict of interest. And we're also going to be having a look at faculty of this rules relating to conflict of interest. So let's have a look at what's on the agenda today. So we're going to start today's session with having a look at the broad concept of conflict of interest. And it's really important to start any session relating to conflict of interest, discussing and understanding the positions broadly and conceptually and the reason is conflict of interest is and can be a really complicated subject. It's something that is um frequently discussed frequently. People have questions about whether or not they have a conflict of interest where conflict dies, how people's interests conflict with each other. And there are a variety of ways in which conflicts can arise. So it can be quite complicated sometimes to unpick people's different interests and to understand where conflict might like and where it might not. So we're going to have a look at some broad conceptual ideas that hopefully then people can transfer into their professional practice. We're also going to have a look at the links between conflict and confidentiality and in particular, we're talking about the duties to maintain confidentiality of clients, but also there's a separate duty and an employee duty to disclose information to clients to make sure that the client has all of the information relevant to their particular matter. So, as a result of that, there's can be some competing and different duties that also relating to conflict of interest as well. As I said previously, we're going to have a look at the regulatory position relating to conflict. So that is S. R. A. Regulation clc regulation and also faculty of this regulation and that faculty offices regulator for notaries. Now, in respect of that, we're only looking at their position relating to convincing. We're not comparing the position relating to General Notes material act in this respect. The webinar is suitable for anybody regulated by those regulators, but also, if you're regulated by another legal regulator, you might find this interesting as CPD just to understand the various different positions relating to conflict of interest. Of course, from a comparative perspective. And when in the context of discussing conflict of interest, the complexity around the subject means that understanding other people's perspectives and different regulatory perspectives can also enhance our own understanding as well. So don't be afraid to look at the different ways in which different regulators deal with the subjects if you find them particularly complicated in the way that your regulator set it out. That is not to say that you shouldn't comply with your own regulators was because of course you should. However, sometimes it lends and develops our understanding a little bit further and translate sometimes a position for us or helps us see it more clearly in the way that our regulator intended it to. If you're regulated by an alternative legal regulator and you still want to wash your session and participate in it. There is an exercise also within the notes that allows you to go away and have a look at your own regulators position and bring that into the comparative position as well. So, don't be afraid to do that If you're regulated by somebody else as well. And also, if you are regulated by the S. R. A. C. L. C. Or the faculty office, uh, don't be afraid to listen to and join in with and learn from the positions related to those other regulators listed there. So, for example, if your license convince, uh, you know, still participate listen to watch these parts of the webinar that relate to the sorrow. And the same with the notes, still read those sections because again, I think as we've discussed, that imperative position gives you the option to then say, ah you know, this lends to my understanding of overall conflict of interest. We can always develop our knowledge and understanding of how people view conflict of interest, what might give rise to a conflict of interest, by understanding the regulatory positions that exist elsewhere. Later on in the session, we're going to have a look at a recent case that has gone before the solicitors disciplinary tribunal which related to a firm called Howell jones. And the particular point of interest in respect of that was whether it's possible to put matters right when you're dealing with the conflict of interest and we're going to have a consideration of what happened there, the tribunal prosecution and also any lessons that we can take from that or some ways in which we can start to develop our understanding as a result of that. We're going to have a think about during the session whether it's possible to resolve conflicts of interest and any steps that you might need to take. So it's important to understand that sometimes people need to seek separate representation. And we're gonna have to think about that. Also during the session, there is a separate position at law. So we're only dealing with the regulatory position in this particular webinar specifically, I am looking at the rules related to professional conduct now that is entirely suitable as C. P. D. So it is possible simply just to learn about this and understand this as a regulatory position and we are as I've said, doing as a comparative position when we're talking about the recent STT case and I'm proposing some broad ideas that you might take away from this. I think it's important then to then say these are bored ideas and it's intended to be C. P. D. Rather than advice overall. So have a think about this in the context of your professional practice and see what you can learn from it rather than taking it as being advice. So let's start as I said with some broad discussion about what we mean by conflict of interest and where we can see conflict what kinds of circumstances might be a conflict of interest. I've defined them there and you could sit down and write this down on a piece of paper if you wanted to and just spend 2-5 minutes having a think about this. But just to think to yourself how would you define a conflict of interest? Okay. And we can when we start to write down what do we mean by conflict? We can start to see all of the different ways in which people's interests might conflict with each other and all of the different parties that might be involved in any one legal matter and therefore all of the different interests that we might have to take into account. And those interests include your own interests and those interests include the client's interests. They might also include the interests of anybody who for example has invested in your firm. For example if you're a B. S. They might include anybody who is for example another party to a particular matter. So for example a litigation funder. How do we take account of all of the different variety of interests that sit within any particular matter. So what I've said and you might say something different. And again, we have to think about all of these different interests and think about conflict of interest in very broad terms. Sometimes I've said when separate duties are owed two different persons or when the interests of connected persons differ. Okay. And we have that position where for example, if we take the first sentence there where separate duties are two different persons, we can then say, okay, we've got different duties and uh you know, the final sentence of the slide, their legal professionals. So for example, the solicitor, the license convinced that the notary to think about the ones that were covering and regulatory positions that were covering in this weapon. All trusted legal professionals and professional advisers. And there are other um regulated legal professionals within this field as well. So there are wider than the other professional advisers and which have regulatory standards and therefore are seen as being trusted legal professionals and they have duties to those individual clients that they are owed. And what happens when their duties conflict. Okay. And we owe different duties. Two different persons. But also in a different sense as well, we can talk about those persons interests. So we've talked about already the different interests that might arise from different persons. So the interest that you might have and that might be the interest that your employer might have. If you work in a law firm, you can have the interests that the client has, you can have the interest another client has, you can have the interest that a third party to your particular matter also has as well. And that might have some form of say or sway in the overall matter. I've just put a few examples on sides. Um they can be the duties owed by you as an advisor to clients. The duties owed by you as a business to clients. Okay. And that could be different. The interests of clients themselves. And it's where those duties or interests conflict with each other. Okay. And where those two things might be said to be in direct conflict, how do we proceed? What can happen, what can we see as being that conflict of interest? And so we can see there's this massive variety of different duties that people have, but also massive variety of different interests that might occur between lots of different people and as independent advisors, which legal professionals are have to take account of all of these different duties and all of these different interests when dealing with the conflict of interest. So let's have a look at some different types of conflict. And again, I am taking really broad ideas and conceptual and going over these points just in order to try and embed some of this before we get into the regulatory and more technical details as we go along. So the first point is an own interest conflict and I've defined that as being a conflict of your own personal interests or your own interests as an advisor or both. Okay, so you as a person might have a particular interest in a particular matter. So for example, let's say you personally have invested in their property, for example you have interests in relation to that property. Let's say you see a client who's coming in and you put the property so the client wants to buy that property, you're in a potentially conflict of interest position related to your own interests, You bought it personally rather than as a solicitor, for example the business hasn't bought it, you haven't bought, it's a sole practitioner, all of those things, you haven't bought that as a professional but you can also have a conflict as your own interests as a professional advisor. Now we can see that in for example we talked about some of those duties that are owed and the different ways in which and I spend a lot of time talking about this is C. P. De weaponize all of those different duties that are owed by solicitors do there clients and all of those things that the to think about a measure of all bought into that particular subject now own interest conflict can even go further than what I've got on the slide there can even go further and go into thinking about the different duties that are owed by the business. So the firm overall. And recently, the SRE has even clarified that we're talking about freelance solicitors and we're talking about solicitors and unregulated organizations. It also applies to the wider organization as well, even if they're not regulated by the NRA. So let's say you had an unregulated organizations such as a supermarket who was employing a solicitor to work directly with members of the public. They think about the interests of the supermarket when dealing with this situation as being an own interest related to that professional advisor. And similarly, even if that adviser was working freelance, the interests of the supermarket would still be relevant overall and there could be an own interest conflict. So we do need to think about this own interest position as being a very wide and broad brush position. Is there any interest that you particularly have that need to be taken into account? They can then also be a conflict of interests between clients. And this is where we see this onboarding, you know, this client onboarding process that everybody goes through, and you probably have something like that in your firm as well. So, the kind of thing where you say, well, we're going to check the client surnames, we're going to check the client's address is we're going to have a look and see if we've got any particular matches and we might check the surnames of everybody who's particular material to that matter. Okay. In order to then say, we might check even the names of the people that we know. Okay. And just say has anybody come up in relation to this before? Do we think they've got anything in the material information? Can we take instructions in relation to this particular matter? So what I've said there is there can be a conflict between clients. So your client's interests might directly conflict or your duties to them conflict or it can be both. Okay. And similarly above we can say when we talk about own interests conflict, it doesn't need to be just one or the other or you know, all of those examples that it could be any of them and the same happens here. So it could be one or the other on the duties to them. Conflict case talked about those duties already. So it can be their client, they're separate interests or the duties of the adviser overall. So either of those circumstances you end up with a conflict of interest position. Okay. And when I've said in their conflict between clients, your duties to them conflict, it can be any duties. Okay. And that can be as we've already seen and that widest possible sense. Okay, your duties as an advisor, the duties of the business and those duties might even apply to unregulated organizations. If you're working within those in the new forms of organizational structure, what is the risk of the conflict as well? And this is another type of conflict where we aren't saying that it's yet formulated, but what we can see is there is a possibility that it could in the future. Okay. So we might see that in the long term this could happen, this might be a likely outcome, or this might be something that's going to occur in respect of this matter or it might Okay, and we have to weigh that up and if we think it's likely, or even if we think it's possible, we might take a risk averse approach. If you can foresee a potential conflict in the future or even if you should be able to, so we can start to turn a blind eye to what's potentially going to happen then, in that case, you should think about taking a step back from the matter as well. Okay, so these are some examples and different types of conflict. The question often arises and it is something that um the question arises and and I think it's something that often comes up and you know, something that I continuously used to get asked all the time when working for the regulator, you know, by people in a variety of different positions. How do I know if I have a conflict of interest or struggled to identify this conflict of interest overall? How did that, you know, can pass me, how has this happened? So um it's something that, you know, I spent quite a long time when I was at the regulator used to work for the S. R. A. Looking at different types of guidance and different positions that have been published over the years. And some excellent advice that was given him one of the old guides to professional conduct of solicitors which for those people who don't remember that far back or weren't in practice at the time. This is the precursor to the current standards and regulations. And some of the advice that was given in one of those really old guides. One of the earlier ones was to have a think about whether the advice to the client would be different or could be affected by the interests that we've just discussed all those duties that we've just discussed. How is that position going to be overarching? He'd be different. Okay. And would it overarching and different and if so, what you've identified is the outcome of that interest being influenced in some way, in the advice that you're giving in the outcome of the matter in the way that the matters proceeding, the way that you're choosing to proceed with the overall. And so as a result of that, I think that's really good advice, you have to take a step back from the matter and have a think about what the out can be different with the advice of the client be different? If we could take account of this over here, you know, is it being tainted in some way or would it be could it be you need to think about that in the very broadest terms. And by doing that, we're starting to reflect that broad range of interests and duties that are owed overall. We're starting to see those come into play. Now, this question assumes a couple of things. The first thing it assumes is that full advice is being given um in that we're not seeking to uh you know extract part of that or hide from it or turn a blind eye to it in any way and that full advice is being given properly and also competently and in some instances you may need to involve management or supervision in having a think about this position related to potential conflicts of interest And whether there is one or 1 advises or not. So it becomes something that you have to take a step back really and it can be useful to talk about it with somebody else when you are viewing this in order to say whether or not you think that there's a conflict of interest, so full of voice properly and also competently given, it covers all of those different duties or it can take account if we do it properly and ask that question properly and think about it fully. Um because there's all of those different duties and interests potentially in one question if we think about it in the broader sense and we consider all of the potential issues and we think about the the advice in the broadest possible way. So taking this into account can help you to identify whether or not you have a conflict. Let's have a think about a related concept which is confidentiality. And these two things are often put together. So we talk about the rules of professional conduct and talk about this and we're just removing that from the context of standards and regulations or previous handbooks at the moment and think about it in sort of conceptual terms. So those two points are often put together. So the concept of conflict and different duties and different interests and then a concept of confidentiality. Sometimes what we see is those two go hand in hand and the reason is because one of the key duties that's owed to the client is confidentiality. Okay, So we're talking about making sure that clients information remains confidential, but within that we have to also say that the solicitor, the license convince the notary, the other legal professional if you want to if you got a different qualification and you want to join in with this as well, owes also duties of confidentiality to the clients. So they can't then go around discussing um you know, another client's matters, but clients are expected to receive competent advice fully given as we've just seen on that previous slide, but they are expected to have full disclosure really in in respect of their matter. So we can say that solicitors uh license convinces legal professionals as a in a broad bush expect both confidentiality but also they expect disclosure. So they expect to be fully advised. They don't expect anything to be held back. And yeah, professional advisors are expected to meet both of their duties when dealing with their clients. So we can see on site here we've got client a and if the client they came in to see a professional legal advisor, they would expect both the duty of confidentiality and also the duty of disclosure as well. So the duty vote material information to be given to that particular client and they are expected to meet both of those requirements. We might then go further if we take this point a little bit further and say that professional legal advisor uh could be seen to be taking a client into their confidences okay, in order to provide their advice. So I kind of like this term when we think about this, it's something that I would say it's not written down in any of the handbooks or standards or regulations. But I just want to talk about in conceptual terms to aid understanding. So we can say confidences. So these things are making sure that there is confidentiality but also making sure that there is disclosure. So you can see if somebody comes in to have that discussion with the professional legal advice and to seek professional legal advice. They expect to be taken into that solicitor or other legal advisers confidences. They expect a confidentiality related to that particular matter. And disclosure. I'm full and proper voice in respect of that. So it's taking somebody into your confidence is in order to do it and that's the way I might see it. So we can see client has come in the door. Okay? So we take client a as the example which we've just seen, client comes in and is taken into confidence. Is there assured both of confidentiality and they're also assured of disclosure as well? So they're assured of the disclosure of information which is relevant and pertinent to their matter but also that they uh Professional legal advisor won't go around to discuss the matter with other people as well. So what happens then if client be arrives and there's a related position related to that? Okay So we're going to take the example relating to a solicitor here because the S. R. A. Have said that information material to the client. Information material to client a within the standards of regulations there says Is disclosed able to client eight. So they're assured of that disclosure. Okay. It's within the standards and regulations that information material has to be given to them. So as a result client B is coming in. Okay. And we don't know at this point in time until client B. Comes in um that they have any relationship or any uh knowledge relating to client. A client be arrives with a related problem or where information would be material. And you can see that straight away you don't need a full description of the matter may be highly likely don't need to know anything further. You might be able to tell straight away. Some of those circumstances might be for example if you can see the house purchases related. So we saw one earlier related to an investment where somebody else was buying it. You might take a step back up there and say at that point in time okay we need to have a look at this and see whether there's a conflict of interest. So sometimes you can see straight away but you may not necessarily get it. For example just from the name. In this case we take the example of the solicitor because we're referring to the standards of regulation. The solicitor has pre existing duties and he has pre existing duties to client A. Okay um Those pre existing GTs cannot also then be met for client be because if we look back client A which we're going back their client is in confidence. Is there assured both of confidentiality and they're also assured of disclosure? Okay. So let's say we don't know what that information is but we can tell the client B is going to have something material. Okay. The new the duties of the professional advisor cannot also be met for the new client. They cannot be met for client be So in that circumstance, client be must seek new representation or alternative representation. Okay. At that point in time, you have to say to client B. Thank you very much for coming in. However, will have to ask you to take seek legal advice elsewhere because of our pre existing provisional duties. And you might, as a matter of client care, make a list of uh local solicitors or other advisers license convinces uh other professionals that might be able to assist in order. That might be can you know, seek the representation elsewhere. Now have been in this situation a number of times and it is usually sufficient just simply to explain that you have to comply with the regulatory rules that it's not anything that the client has done wrong. But in some cases, people have to seek new representation because they have to comply with those regulatory rules. And quite often the client accepts that that position, particularly if you're aiding them, we're thinking about where else they're going. And also the client very often understands that regulatory rules exist for their protection as well. And you can explain that to them. And so accordingly they should seek their advice. And these are the places that you can suggest that they can go now, as I've said here, when do we know in which circumstances that disclosure is Two And the S. R. Way have defined that is information which is material to the matter. And I've put some further information about how I would think about that within your note pad. So let's move on then to having a look at the regulatory position in relation to this overall and what I've done there is think about what's in the code of conduct for firms and also what's in the code of conduct for individuals. Now that as I said, there is some more information in your note back and there is quite a lengthy set of notes. I think it's in the region of about 21 pages that accompany this webinar. That's got more information about everything that I've discussed and more discussion about types of conflict of interest and how you might view those. And a full discussion of what I've just discussed in terms of those broad concepts there. So do go away and have a read of those notes as as part of your CPD as part of watching this webinar. So let's have a look at that regulatory position and how the S. R. A. Considers it. Now, we're going to have a look at the SRS position. We're also going to have a look at their council for license convince this position. And we're also going to have a look at the faculty offices positions. So we're going to think about all of those three regulators, there are other positions as well. And as I said, if you are regulated by one of the other legal regulators do have a look at their rules and requirements in relation to your professional obligations and have a think about that. We're starting with the S. R. Because the S. R. As the largest lead, regulator, regulates the largest number of legal professionals, but also regulates the largest number of firms and generally speaking the other regulators of individuals. So, for example, if your license convince are working in a firm regulated by the S. R. Will accept that the S. R. A. Standard also applies their legal professionals as a result of the work in the firm. So if your license convinced are working in an s are regulated firm, for example, you do have duties that professionally sit with you within uh your individual handbook and related to your individual um practicing certificate duties that are imposed by the accounts of the license converters. However, by meeting the S. R. A. Standard, you would also be meeting those duties as well. And that's a generally accepted position. So is relevant to a number of different people and we're going to take the other uh regulatory duties as comparative positions when we're discussing those. So the points that we're going to make in respect of uh this are what's in their code of conduct for firms and also what's in the code of conduct for individuals. The code of conduct for firms and the code of conduct for individuals are exactly the same within uh srs Uh most recent standards and regulations which were introduced in 2019. And they say I'll just read this out and then we'll pick out the points that I've highlighted. 6.1. You do not act if there's an own interest conflict or a significant risk of such a conflict. 62, you do not act in relation to a matter or particular aspect of it. If you have a conflict of interest or a significant risk of such a conflict in relation to that matter or aspect of it unless a the clients have a substantial become an interest in relation to the matter or the aspect of it as appropriate or be the clients are competing for the same objective. And so those two conditions and the conditions below on bet, namely that first one all clients have given informed consent given or evidenced inviting to you, acting where appropriate. You put in place effective safeguards to protect your client information. And .3 on that list there you are satisfied. It is reasonable for you to act for all of the clients. So let's just pick out those points there that have been highlighted. The first one is um and really clearly is an absolute prohibition on an own interest conflict. So the S. R. A. giving and we can see at 6.2 when we're talking about client conflict of interest. So conflict of interest between clients there. Um You can act in those circum in some circumstances and the S. R. Way have given conditions that you can and also circumstances where you know things that you have to do in those circumstances. So what they are saying however, if there's an own interest conflict, so if your own interest conflict as an advisor, if your own interest conflict as a person who is personally interested in respect of a matter, if your own interests uh conflict in terms of the way in which the business might deal with the matter. So the S. R. Way of bringing that within it as well, then in that situation um you cannot act. Okay? They said there's an absolute prohibition on acting in those circumstances. So what they've said is you do not act if there is an own interest conflict. So if you're identifying and only interest conflict at that point in time you have to stop acting. And we remember client be there where we said client b. Has to seek that new representation or that independent legal advice. You can take those steps that we've discussed there. And sometimes this can lead to a discussion where we're talking about for example, client care issue. And uh you need to be careful about how that's 100 you want to work with if you're in an X ray from with a culp in order to resolve that and to think about how you can put together uh, information for clients and some people have standard information for clients, just discussing the rules of professional conduct and thinking about the ways in which you can present that to the client, explaining your regulatory obligations, and also how you can go forward with that particular matter. And there's more information, the discussion about that within your note pad. So they also go on to say, or a significant risk of such a conflict. And we talked about being able to foresee that in the future. Okay, So how you think about that and how you're dealing with that in relation to that in the future? 62, you do not act in relation to a matter or a particular aspect of it. If you have a conflict of interest or significant risk of such a conflict in relation to that matter, or aspect of it unless Okay. And it goes on to say the clients, okay, have a substantially common interest in relation to the matter or the aspect of it as appropriate, or the clients are competing for the same objective. Okay. So where you're dealing with particular issue and it says you do not act in relation to a matter or particular aspect of it, If you have a conflict of interest or significant risk of such a conflict in relation to that matter? Aspect of it unless firstly we have to think about it being the clients have a substantially common interest in relation to the matter, or the clients are competing for the same objective. So we have to think about those starting points there. A and B. It's always starting with the clients. Okay. Always, always we have to think about it as being the clients. Okay, So the focus is really on them, and the two conditions are substantially common interest and competing for the same objective. So there's a distinction there between thinking about and having to think about your own interest conflict, and then also having to think about the clients and the way in which the clients are positioned in respect of this matter, and the focus in respect of those points, A and B relates to the positions of the clients and the way in which they would be proceeding with that matter. Okay, So the conditions are substantially common interest and competing for the same objective now substantially common interests. The S. R. Way have given the example of their of clients who might have different interests in relation to a matter, but they have got substantially common interest, would be um the example there of clients who are working together to form a business, for example, and they might be purchasing a business, or might be setting up a business, but they might have separate interests, but in relation to that particular matter, for example, you're advising them in their commercial element in relation to that particular business, then they've got a substantially common interests, but they might be firstly coming together at that point in time. Okay, so in that situation it is fairly pragmatic approach to be able to act for those clients. Now, the 2nd 1 kinds who are competing for the same objective. The example that they've given might be the example that um where we're thinking about a contract race or something similar in relation to that, and the conditions below are met, namely that uh firstly, and these are the conditions that you need to have put in place firstly, um the clients have given informed consent, so they have to be giving that informed consent um in a full understanding, and we'll see as we go through the webinar that becomes really important to the risks of you acting in that situation. So, the clients have to really understand that there could be a conflict of interest and they could have to seek independent legal advice at any point in time, particularly the situation becomes complex. So, the first example is really good one that substantially common interest, where we think about those clients who could have a difference in agreement when we're thinking about informed consent, because um you know, if they're buying a business together or working together to form that business, but they're they're as individuals, you know, it might be quite a strong grown up conversation to have with them to get that informed consent to say, look, the two of you may have separate interests and you may want separate independent legal advice. We can work and act in respect of this uh, commercial element of forming this business, the two of you, Okay? And we can act in relation to that particular point there, but you need to consent to us doing so. Because if a conflict of interest arises during that particular matter, uh, there could be the risk that you need to go elsewhere and things need to be sorted out in respect of that in the future. So, you might want to have that discussion with them and think about how that can go forward, and if so, then they need to give that information back, inviting. Okay? And to say yes, we've had this conversation and actually, yes, we do consent. Where appropriate. You put in place effective safeguards to protect your client's information. And that can be in circumstances where, for example, clients competing for the same objective, You can see that Example as being a really clear one. In that circumstance, people need to have uh, situation set up so that um, client confidential information is not being disclosed between the two and we'll have a look at this. And the example is perhaps more clearly evidence when we think about the different ways in which people might act on the same side of convincing. We'll talk about license convinces and you are satisfied. It is reasonable for you to act all of the clients now in all of these circumstances. Some of those decisions might be quite pragmatic and it might be quite reasonable to expect people to have that overarching commercial interest or the intention of creating it going forward and therefore to be able to as a unit seek that advice is they're doing so so yes, it seems reasonable when we take that first example for people to be able to act uh as mourn and and to act as one unit. Now in this situation, uh the S. R. A. Has said when we're talking about substantially common interest or even competing for the same objective, when we're talking about acting on both sides in converting transaction, that's not something that they've necessarily intended to be within the rules. Um So let's have a look at some of these uh conditions and some of these caveats in more details to make sure when you're dealing with informed consent um that is obtained, inviting and that the risks have been clearly outlined and thought about to the parties and also considered that both the equality and the parity of the transaction overall. So when you're thinking about this, if you're dealing with two parties, for example, we're dealing with uh parties competing for the same objective and they have separate representation within your firm, make sure that you think about this and I've given more examples maintaining confidentiality there where you put in place those effective safeguards. Um You might think about the different ways in which you can separate out people who are giving um you know those advices so that people have different and separate offices or workspaces. There are different, for example, email addresses including general and reception in boxes. Uh management and supervision may differ and also follow a storage may differ and they can also be secretarial or different administration provision overall. You also need to think about within that and within each side where you put those effective safeguards in overall the equality and parity within the transaction overarching lee. So you might say for example, to make sure that if you've got a team A and team B. The team A has a fairly equal status to Team B. And we'll see that how potentially those two things uh could have an impact if we think about issues of taking a very advantage or clients could effectively complain, there could be a heightened sense of risk if there wasn't equality and parity between those two two teams and people are competing for that same objective. So, do have a think about that overall, also have a think about reasonableness. Consider the transaction overall and where it takes you to what the end outcome is. What is the impact going to be on either side when this goes through? Do we think overall there's going to be any elements that relate to taking for advantage. And do we think it's reasonable? Uh what's the impact going to be on either side in the longer term? The SRS guidance includes that it's not generally suitable to act on both sides. And convincing and also, uh where clients have opposing or completely contrary um interests. Uh there can be a difficulty, for example, when we're talking about litigation, so that's again not intended to be within those conditions where you can act in that circumstance, the negotiations between the parties, if there's any element, and again, we're thinking about that, we were dealing with conveyancing transactions if there's going to be any element that needs a bit more weighing up overall in those circumstances. The S. R. Way are saying again, take a step back from that situation, because what they want people to have, when we're talking about that substantially common interest is a fairly clear agreement about the way in which things are needed to be dealt with overall. So, any negotiation aspect of it generally wouldn't be included, and it may not be appropriate to act as we've already seen applies to both regulated organizations and potentially to unregulated organizations. We've seen that example of the supermarket. And again, we're thinking about that in both in relation to employed persons, but also potentially in relation to freelancers and, you know, thinking about the different ways in which people contract, in order to potentially influence the outcome of a legal matter, could be an element of misconduct if people set up transactions in order to try to get around those rules and try to influence the outcomes overall. The S. R. A. Have said that you cannot exempt yourself on conflict of interest rules by acting only in part and again, if it has a very influence on the way the matter has been dealt with, do you make sure that you consider any imbalance between the parties? So make sure that you think about that. And we've talked about that equality and parity and also they said think about and um consider vulnerability when we also talk about imbalance. In addition to mention as well, the sa ra are saying uh in those circumstances and this comes into that element when we're talking about vulnerability just to have a think about and make sure that you understand if we are dealing with that substantially common interests, for example, that that is genuine, that not one side is stronger than the other and may not be influencing the overall direction of the other party and in which case he may need to take a step back as an advisor and say to the clients actually, we think in this situation perhaps one person is having a greater sway and all parties may need to take over Arching independent legal advice. So again, we need to think about that those interests overall and sometimes it's important to focus perhaps on the interests of the parties and to think about how those play out before you get to the NRA's rules and guidance because it can be confusing or you can end up putting the exemptions and the circumstances in which you could act before the interests of the parties overall. And that thought process. Perhaps it is helpful to take the step back and outline the different interests. Before you get to any of the rules of professional conduct, let's move on then to having a look at the regulatory position related to the Council for license conveyances. Their regulatory position starts a bit differently. They say in these circumstances that you cannot act if there's a conflict of interest at all in any circumstances. And they've made the assumption in this situation that acting on both sides in a convincing transaction isn't in itself a conflict of interest position. However, if you identify a conflict of interest between the parties, then it isn't appropriate for you to act and conflicts of interest my declare if, for example, and we've said at the bottom here, transactions are done at arm's length, where there's, you know, an inappropriate amount of bargaining power between the two parties. And there again, specifically looking at issues relating to negotiation or how the initial bargain has been driven overall. When we're talking about that purchase price and sale price. So, they start from that position, when we're talking about client interests. There are also broad prohibitions on thinking about own interest conflict as well. So we're also thinking about their broad prohibitions on that own interest conflict, and the way in which um those own interest conflicts it. So, uh we talked about that at the beginning of the session. If you have an own interest conflict over all the CRCs saying, stop, don't take any particular additional steps, we need to then take that back and say, uh you need to take independent legal advice. We can't act in those circumstances. So we need the in order to be able to adopt the acting on both sides. From the CRC perspective, we need um those own interest conflicts to be put to one side, you know, not exist at all. We need to be able to take that off our list. And we need to then say that the clients need to be in a fairly equal bargaining position. Have driven what we perceive to be a fairly fair bargain. And also we need to understand in this situation that the clients are a point of agreement, a fairly strong point of agreement about where this is going to go forward at that point in time, you can act on both sides and convince and I've put the specific clc rules within your notes. Um Now, this only applies to clc regulated practices. Uh if the parties, uh if you're intending to act on both parties, sorry, on both sides in this situation, then the parties must be represented by separate authorized persons and against. Is the point relating to equality and parity that I've been discussing. So in this situation, if the parties are represented by separate authorized persons, Okay. Uh the intention is that they have similar levels of qualification. So, for example, you might have and when we talk about authorized persons, you might have a solicitor on one side and you might have a license convinced on the other side. Or you might have a notary on one side and you might have a solicitor on the other side. Someone who is authorized to conduct reserved work and specifically convincing operating on each side of the transaction and they have to work as if they were in separate firms. Now we talked about effective safeguards in the last slide and that's part and parcel of the sRS guidance as well. Similar uh points apply here to maintain that confidentiality. Okay, So to maintain that position of confidentiality overall when discussing the situation and the points that we've addressed in these on our for example, separate inboxes, separate supervision, separate workspaces, making sure that both files uh separate and also uh you know, workspaces. And so that parties would write letters to each other, for example, but it would just go across the office, you're not going to see the other person's file. It's as if they are represented by separate firms and the same applies to the NRA overall, again, you have to obtain informed consent and the COc have given some excellent guidance which again, there's a link to in your notes which talks about the kinds of circumstances in which they were perceived. There would be a conflict of interest. Let's then have a look at the regulatory position relating to the faculty office. Now, in this situation, you must not favour one client over another or your own interest over the client. So they've really worded that differently. Okay, again, the faculty offices wolves are reproduced within um, within your notes. Now, what the faculty office are saying is we can take a step back to all the way back at the beginning. All of those different types of conflict that talked about, you must not favour one client over another. Okay, So you must not win those two uh to client interests conflict. And you must not favour your own interests over a client as well. So that's the way they've worded it. They thought about all of those interests and they've sought to find that balance. So again, when we talk about that comparative position and developing our knowledge and understanding, we can see that is a useful wording for us to think about and play up there. There's all these different interests and we have to think about whether anyone and we talked about quality and Paraty as we've gone through this web. Now, whether anyone set of interest is being favored or not. Now the faculty office do you say you can act on both sides and convince? But they put some much stronger caveats between the two. And you might position the faculty office for notaries somewhere in between the clc which allow it for convincing and the S. R. A. Which don't allow it for your convincing or so it would not usually be appropriate. Now the faculty office is saying is that it is preferred for clients to seek independent legal advice and clients should be advised of that point. However when you're dealing with this situation you can act on both sides if the clients are established clients Um and have used the notary previously if there is small consideration. So £10,000 is their limit in this particular matter. So if somebody is for example buying a garage you might be able to do it and if all of the clients can sent in writing to that particular position. So that's where they allow it in respect of conveyancing transactions. Okay so in this situation the faculty office are asking similarly to um the S. R. A. And also the CRC. And advising the client very clearly of the risks and issues and to thinking about how that goes forward. You know how we're going to uh you know push this forward and work with you in order to deliver this service noting that you cannot favor one client interest over the other. So the notary is going to have something um quite quite clear balancing act in order to achieve between those two clients and they must be established clients in order to do it Now by putting that limit on it £10,000. You really are limiting the impact that you can have overall in that position. And you can see it's somewhere between a halfway house between the Clc who allow it in respect of all conveyancing transactions and yes Elway who say generally in convincing they're not allowing it. Now there are separate rules for notarial acts which aren't covered in this particular webinar. And there's more information in your notes about the faculty office position as well. What I've done within your notes as well is also create a summary of the kinds of circumstances and as a comparator of when certain things are allowed when certain things are not allowed. Where the conditions are, we can see a real variation between the positions of the different regulators when we comes to discussing conflict of interest. Some in some cases everybody says yes, something has to be done. Um For example, generally speaking, you're not supposed to act in a conflict of interest position. Although the S. R. I. Are perceiving to allow it in some circumstances. Now there may be an issue there where we're talking about, for example, your interests as an advisor and how they uh you know, then create that conflict of interest position overall and overcoming those things. However and other people may perceive the position differently. So through different wording, however, the rules event, you know, do have that impact of creating a situation where for some regulators, some things are allowed for other regulators, other things are not allowed. Uh, some regulators have taken the steps, such as the faculty office of limiting consideration, others saying that in certain circumstances that's allowed in certain other circumstances, it's not allowed. And there seems to be this kind of halfway house in many cases where people are trying to reach a pragmatic ground to say that that balancing act is achievable, but we need to have certain safeguards in order to prevent impact on clients over all. Now, one of the reasons we seek and we can discuss this position relating to the to the overall position. One of the reasons we seek to understand the different ways in which uh conflict of interest operates is because of the uh intractable nature of it. It becomes such a complex problem. And we'll see on the next slide that the case of how jones which went before the solicitors disciplinary tribunal was a real complex problem in particular for the firm as well. Now, it can cause such complex problems that causes it could even potentially cause a governance issue. So, let's imagine this circumstance in order to illustrate what I'm saying, uh, solicitor c is acting on one side of the transaction in circumstances will say that are permitted by the S. R. A the colleague, solicitor a is acting on the other side. And we've got these effective safeguards in place, which means that, you know, the two parts of the transaction of being dealt with completely separately and people are working in separate workspaces, they have separate um email addresses, they have separate supervision. They work in different work areas and they're not allowed to discuss the matter except in professional terms. Okay, so in one on one side uh solicitor see realizes that they have made a mistake. Okay, now we've still got the same overarching governance for this law firm that sits over the top. So you've got one side of transaction with this uh safeguards and barriers in the way We've got one side of the transaction where one solicitor realizes they've made a mistake overall. And there is going to end up being a large claim. Now the potential is where we talk about that governance is the same governance that sits over the top. The situation can be that they're firm cannot act on both sides anymore. And you can end up in situations where depending on the way the firm is structured, that there needs to be new representation for all parties, depending on that situation because there is one set of governance for the firm overall and that governance structure, you know, thinking about whether you would be able to uh separate that out or how that works and it goes beyond supervision. So it goes beyond having separate supervision, which might be a line manager and into that overall management structure. This is a good reason for obtaining informed consent for the client because what you can say in some circumstances is if there is a problem that develops on either side. In some circumstances, all parties are going to need to be uh you know, referred for independent representation. So do make sure that you outline that and and that people understand that informed consent. Let's move on then to having a look at the camera and their recent prosecution and tribunal decision relating to a matter of the firm. Howard jones. Now, in this circumstance will deal with this particular position relating to the um the transaction itself. First, in this circumstance, the firm gave some advice. And what happened was the end point of that advice where the client got to was that they felt that it was not a client felt it was not a favourable position for them overall, okay, complained to the firm. The firm then took various different perspectives reviewed it, thought maybe that was right. Maybe it wasn't a favourable position to the client. Put counsel's advice. There was an internal review, the matter was referred to the insurer various different steps and very proactive and we have to say at this point in time. A lot of thought has gone into this from the firmer in many respects, you know, my own personal view is the firm can't be criticized for the proactive nature of the way that they handled this in any way. And it's obviously very complicated and a really good example of when these things become very intractable. But uh counsel's advice is sought and also internal review. Uh and the conclusion was that they were going to attempt to put the matter right overall. Now, ultimately the option for putting that matter right? And the way in which it went forward, they were unsuccessful in doing that. And the client was even more upset as a result of the end uh and outcome and and it was a financial impact on the client. Now, the insurer was obviously involved in respect of this and was involved at that point in time, we can see that middle uh middle step there that I've drawn, now I've drawn these particular steps. So there was much simplified uh discussion of the circumstances here um at this point in time when we've got that middle step there, uh the point in time was identified, um the position of own interest conflict was raised. And the question was whether or not there would be different advice rather than attempting to put it right, whether or not the option was to take action against the firm, for example, whether or not the option was to do something different for the client and you have to think about this position in the context overall. Now, obviously the insurers involved in this position point in time and that obligation the thought process there to mitigate uh the loss, the position in respect in this respect is complex. The s are a starting point. And my own experience when working with the regulator is that they take a fairly hard line on this and that you cannot act if there's an own interest conflict overall. And the own interest conflict is thinking about the different ways in which the firm would be affected potentially if, you know, if the circumstances continued in that particular way. Now, in that circumstance, it seems as if the sa ra are saying by taking this particular line the prosecution of the firm was because there was an own interest conflict at that point in time, but they continue to act that the firm should have sat back, allowed that new representation and potentially allowed action against firm. Now, in some circumstances, that's going to be catastrophic for some law firms and to think about how they might be able to uh you know, go forward in respect of that is quite difficult for some law firms. So, the consequences uh and the ways in which this rule is operating is something where S. R. A. Guidance I think would be welcome. Now, if we have a look at this, there is a question about how we might think about resolving conflict and also overcoming that conflict. What we can say is that the S. R. A. Has rules relating to informing the client if a matter has gone wrong in this case the client was definitely informed. And as I've said, some people have said this matter really just turn on the facts and I think that also might be true we can say and if you read the judgment and there's a link to it there that so many steps have been taken by the firm in order to try and correct this. The complexity and the intractability of the situation once as a conflict of interest is incredible. But also it is very common for firms to seek to mitigate the loss and also try to put matters right when something has happened with the insurer. What the S. R. A. Seemed to be saying is it's not always possible and you're not always able to do that. And in this case that the attempt to do so did not succeed and that the firm were prosecuted for breaching the rules in that respect. The problem appears to be when looking at this from a purely pragmatic perspective. And a if we just strictly apply those rules and where that fork in the road lies okay. The decision making that sits there that says do we then take action against individuals or do we seek to put matters right overall where does that fork sit and the decision making And if there appears to be a fork in the road then we've got that own interest conflict. We have to ask the question, would the advice in any respect, be different? And could maybe even could that advice be different? Are there different options? We might be going further than would we might be saying? Even could, are there different options? Is there a fork in the road? Is there does that position of eyes which you know, which we can see? Yes. And they perceived that it did in the previous matter. And if there is that potential fork in the road, whether the client needs independent legal advice as a result. Now, within the notes, I've had to think about this and uh, you know, consider the different ways in which we might perceive it going forward. Now, this is an advice in any way and you should take independent legal advice, but just to try to uh, explore the position a little bit more as a point of continuous professional development. But also just to think about whether or not you might perceive that there's an own interest conflict, some different thoughts that you might overarching. We consider the first one was if the advice to the client could not and would not be different in any way, um, if they went to the other firm, would you be able to overcome that position, you might okay, if they're that position might not be different or could not be different in any other way if they went to another firm. Okay, so for example, if that advice would not necessarily be to take action against the firm or where those interests that are your interests are they? You know, in any way uh affecting the overall advice. They were thinking about that vice again in a different place, would that would be overarching advice to be different, where there is no decision making to be taken or perhaps for example, we can say if the next steps would have to be taken anyway. Okay. And also sometimes noting that it can cause disruption to the client overall by referring them to a new firm, particularly if something is immediate or where there is an element of certainty about the outcome of the next steps and that element of certainty might be thinking about the different ways in which uh the Matter would proceed, we might have to put .1 with .2, we might have to say. And okay, so where there is a possibility that in the long term there would be independent, you know, independent legal advice would be needed. There is an argument obviously and we have talked about this being a breach of the rules and it may be the client should immediately seek that independent legal advice and also .3 There, the impact or potential impact on the client has been considered fully. Okay, so it's one of those situations where we might take that step and also consider that point as well. So these tests are proposed not as advice or test to be necessarily implemented a strict advice in any way, but really just the option to think about conflict and think about weighing up those different interests while you're doing it in order to fully explore or to give people the opportunity. Now, the first one, first test, perhaps there is the most important having to think about whether the advice could or would in any way be any different overall and how that seeks to use it within their. But as I've said on the previous slide, the position with the insurers complex and I think the NRA's guidance on this particular point would be very welcome. So can we say from that overall that there are many options for resolving conflict. I think as we've seen in the previous slides, we've talked about that position with client be that we had back in the beginning of the webinar, towards the beginning of the webinar where we thought about and discussed the different ways in which client be might seek independent representation and that might be by giving a list of um solicitors by in some cases you might telephone and see whether you can make an appointment if the matter was particularly urgent, give some input and background to that particular circumstance overall. But also thinking about as well in the circumstances um explaining to the client and perhaps having template text ready for you to be able to, from a client care perspective, written with your cop in order to then say these are the circumstances that have arisen. These are our regulatory rules or these are, you know, you might explain it in really broad terms in order to effectively get their point across the client because we have to remember as well, obviously that lay persons would not have the same understanding of the rules of professional conduct as solicitors would. Now when we're talking about that and we talk about those tests that I've just proposed overall there and thinking about those and I've put more information about them within your note pack, um, do think about and make sure that you understand the concept that you cannot act where the where own interest conflict. When we're talking about that, we can see that at play within all of the different sets of regulatory rules. However, we can also see the difference between them. And we can also see in some cases there are exemptions. And undoubtedly when we discuss conflict of interest, the position is incredibly complicated. Do take your time to consider it carefully and take advice where necessary. Do attempt to identify where a conflict of interest exists and also make sure that you understand and take a pragmatic approach to the situation overall. And we can see that honored also within the srs guidance where we're talking about that position related to both substantially common interest and also the position related to competing for the same objective that brings us towards the end of this webinar. Let's just have a look at what we've covered. We've looked at the broad concepts of conflict of interest and also conflict and confidentiality and the duty of disclosure. We've also looked at the regulatory position on conflict related to the S. L. S. R A C. L. C. And also related to the faculty office. Okay. We've looked at that faculty office position in respect of convincing only not in relation to other No, te relax. We've also considered the position in sa ra and howard jones and their recent prosecution before the solicitors disciplinary tribunal and the complexity of that case. We've thought about overcoming conflict and resolving conflicts of interest and whether or not that's actually possible. And also some ideas for thinking about referring clients on if they need independent representation. We've only considered the regulatory position and as a comparative position overall between those regulators. There's much more information in your notes. So, do go away and have a read of those otherwise. Thank you very much for watching. Um, as I've said to have a read of those notes, and if you are regulated by another one of the legal regulators, noting the variety that's out there and the variety of different rules there are on this subject. There's an exercise for you to have a think about within the notes. For you to have a think about what your regulated community has to say about conflict of interest. Thank you very much for watching.
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