17 Nov 2022
Mergers and acquisitions of firms involve some regulatory involvement, but it’s the potential for firm’s closing down at short notice that will cause the most angst in the Cube. Given that we are currently in the traditional window for PII renewal, there will be a heightened concern that firms are unable to secure cover inside the extended insurance period (30 days from renewal date) and the subsequent cessation period (60 days from the EIP).
For firms that have been unable to secure cover, there’s an obvious stress. Despite this, the usual regulatory obligations remain. Further issues also arise – such as the need to notify the SRA within 5 days of entering the EIP/CP (SRA Indemnity Insurance Rules, rule 8.1).
If a firm does close, common themes that can concern the SRA include:
Closure of the firm does not bring an end to the duties of the Principals, and the SRA will take action against individuals where appropriate. Taking all reasonable steps to close the firm in an orderly manner will minimise the risk of regulatory action.
Aside from the closure of firms, economic uncertainty can lead to an increased risk of fraud. This includes frauds perpetrated by clients (such as money laundering, or property based frauds), or an internal risk where rogue members of staff take advantage of lax internal controls. Firms need to be alert to the following:
These are the types of questions the SRA will ask if a firm is subject to an investigation, especially so if client money has been lost as part of a fraud.
If you need advice on any issue relating to SRA compliance, including; dealing with an investigation, your reporting requirements, or implementing robust internal systems, we are happy to help. Our Head of Compliance, Richard Esney, is a qualified solicitor who worked for the SRA for 14 years, prior to joining Harding Evans. You can contact Richard here.
Harding Evans is a trading name of Harding Evans LLP, a limited liability partnership, registered in England & Wales (registered number: OC311802), authorised and regulated by the Solicitors Regulation Authority (SRA number: 419663).