PRESS: The SRA report into ethical culture in-house is being spun – and GCs aren’t happy

In-house lawyers are telling the regulator to step up and offer support rather than platitudes

The Lawyer has covered the GC response to the SRA In-house Review here.

The piece is by journalist Lucie Cruz who has a big picture interest in the role of in-house lawyers in business and society. Lucy ensured the lawyers from the GC group interviewed for this piece were able to speak candidly, by ensuring their comments were unattributed.

The piece is behind a subscription wall though can be accessed without payment.

Lucie Cruz 24 April 2023

There’s a revolt brewing.

In March, the SRA’s in-house solicitors thematic review was released, surveying around 1,200 in-house lawyers on ethical culture

The findings covered safeguarding independence, managing risks with policies and controls, managing pressures and meeting regulatory obligations, and maintaining continuing competence. Some of the key findings were that the SRA thought in-house solicitors were largely able to withstand pressure to compromise on objective and impartial advice, and that while many respondents felt demands from colleagues was their biggest pressure, most felt able to affirm they must take an ethical course of action.

Paul Philip, SRA chief executive stated in conclusion that “the findings of this review are generally encouraging,” citing only a minority of lawyers as struggling to uphold the high standard expected of them.

But there’s a problem. A lot of GCs don’t agree – and they’re getting vocal.

Over 30 have signed a letter voicing their concerns. The letter challenges the findings by the SRA, arguing that it is common for in-house lawyers to face ethical challenges and pressure to compromise their regulatory obligations. Jenifer Swallow, a consultant GC with many years of experience in the industry, shared the letter on LinkedIn, highlighting the sentiment that several of the findings in the report that had been highlighted by the SRA as positive were actually a real cause for concern.

So where has the SRA gone wrong?

Such an optimistic tenor from the SRA no doubt rattles in-house lawyers who are facing increased challenges of independence, integrity and scrutiny in the wake of scandals including the Post Office, RICS, and P&O Ferries. Some of the key points that stood out in the report included that 64 per cent of in-house solicitors are not raising their regulatory duties, including the duty of independence with their employers; that one in 10 experience pressure to compromise their regulatory obligations; and that 50 per cent of general counsel feel isolated.

One GC in the TMT sector speaking on the matter explains: “If you have a huge number of years of experience in the industry, you will have had situations in which you as an individual have had to step up to the plate and be brave, and ultimately do things that could cost you your job. Our profession relies on us to have the strength of character to be able to raise points of ethics and compliance with laws, without the actual support of a regulated position to do that. There are also others who are of a more junior qualification in senior roles who need support, as do more senior lawyers. We look to our regulator for that support, and to back the independence of the legal profession.”

In the letter, the GCs argue they often feel that in difficult situations there are no options except to either conform or resign. They also highlight that being put under ethical pressure to compromise their regulatory obligations is not a minority issue, and the regulatory support behind in-house lawyers is lacking.

“As a GC, during my career I have been asked to backdate documents, be a witness to documents already signed…there are ways of dealing with these things such as making them be in effect from a certain date, but lawyers have to be clear when it was actually signed or it is the start of a slippery slope,” a GC comments. “Sometimes it takes looking someone in the eye and saying no, we don’t do that, we are not that kind of organisation. But when you stand up for yourself and your team and profession, you aren’t always going to have backing.”

Particular concern was raised for more junior lawyers, who may not have the confidence or backing internally to deal with these hard conversations.

A GC in the tech sector explains that the concern also expands to more junior lawyers worrying about their end of year appraisals. “Being a very good lawyer often involves giving advice the business does not want, but that translates into juniors being nervous they might be marked down for not just looking over things,” the GC says. “Another example of this is that if you do an internal customer survey, people regularly complain about legal and compliance for essentially just doing our job.”

This ties into the fact that once you move in-house, there is very little further training required from the SRA and no real guidebook to steer you.

“Junior in-house lawyers have no legal training from the regulator to help them spot areas where ethical dilemmas may come up,” another GC tells The Lawyer. “This should be a requirement of continued professional development and the regulator should be supporting organisations to help issue support and provide tools. We should be helping the next generation of in-house lawyers with this.”

One of the requests in the letter was that the SRA provide more training and more support to in-house lawyers in the form of actively reaching out to the CEO and boards of their employers to remind them of the regulatory requirements of in-house solicitors, and recommending a summary of professional duties is included in employment terms. They would also like to see the SRA introduce recommendations regarding things such as board engagement, reporting structure, and recording regulatory and ethics risks.

“Education on what our roles are as lawyers is important for our clients, and our teams. I’d like to see more mandatory training in that area,” one GC tells The Lawyer. “We need this to get the people we work with to understand when issues are serious, and when they are really serious. We need that backing so we can say – it matters that we do things this way, we have to comply. We aren’t just doing this to be difficult.”

Lessons from the FCA

GCs highlight the disparities in the SRA’s regulation of in-house lawyers in comparison to the extensive support and guidance for those subject to other regulatory boards, such as the FCA.

“Working in a regulated business, you have very strict requirements under various FCA regimes,” says a senior in-houser. “The sad thing is – the FCA content is more helpful on most things than SRA content. The SRA information that is practical and that you can actually point to as a lawyer to guide integrity, codes of conduct, etc, is virtually non-existent.”

Another GC adds: “The FCA writes to regulated companies on a regular basis to remind them of the requirements and standards expected of them. The SRA does nothing like that.”

The open letter also suggests that the SRA should engage with bodies such as the FCA, PRA, FRC, ICA and others, on the regulatory and professional duties of solicitors, the risk interdependencies and commonalities across regulated professionals working in-house and the measures and support necessary to discharge those duties and mitigate risks.

When asked about how they get through challenges at the minute, one GC describes the only support they have as ‘a network of GC self-help.” The GC community is a great one, and there is a clear camaraderie among in-house lawyers who feel they can go to each other for support, but a lot of the time this it to fill gaps in where actual regulatory support it.

One stark example comes from a GC who had been responsible for disposing of a company while working for a previous employer. Once he started at his new job, he was faced with a warranty claim for multiple million pounds brought against the disposing entity, and a claim was made against him with a threat to sue. “It was all smoke and mirrors, but I was lucky that my new GC backed me and paid for a law firm to deal with it. Had I not been that lucky, there was no other toolkit in place to deal with it. There wasn’t then, there isn’t now. We need regulatory support and guidelines for this to ensure lawyers have proper constructs in place, that they contractually can’t be fired for a decision made by the board, that they have an indemnity, and access to personal advice and money for legal spend for these situations just in case.”

When The Lawyer spoke to GCs, the examples of times they felt compromised, or they had no choice but to resign flew in.

“Working for an international company I was pressurised by one of my team to paper a consultancy agreement to support a big for a multimillion-pound deal,” confides one. “I was essentially told off for asking a lot of questions about it because they wanted it to be a done deal. Thankfully, someone else in the team came to me and explained it was a flat out back-handed deal. I killed the deal, and the team knew they had me to turn to in these situations. But you don’t always have that – unless dealing with someone with an extensive background, you’re not going to have the confidence to walk away when you’re being pressurised.”

A GC of a PLC recalls: “In my first in-house role I discovered the CTO was lying to me and when I spoke to the CEO about it, he told me to go back to private practice as this is how the real world operates and I needed to be ‘commercial’. I quit the same day for ethical reasons.”

Similarly, a GC previously in a young financial services company told us that they had “raised concerns about compliance and a lack of transparency, governance and controls and how to address that. The CEO was all powerful and the board ineffective and unwilling to address the issues head on for fear of impacting growth.  It was a difficult time which resulted in me resigning – I was unable to do my job as GC without conflicting with my regulatory duties.  They later hired someone junior into the role.” 

SRA response

While GCs feel there is a long way to go, the SRA has in the meantime responded: “We welcome all feedback on our thematic review. One of the key purposes of the report is to raise awareness of issues within the inhouse sector, while highlighting both good practice and areas of concern.

“This report is very much a first step in our development of a range of bespoke resources to support the inhouse community. We will continue to work with the in-house profession to help shape this.” 

Moving forward, it is clear that in-house solicitors need to feel supported by their regulatory body in order to uphold the high standards that being a lawyer requires of them. At this point, too many feel like they are forced to compromise or leave businesses that don’t fully understand their role. Considering the number of junior lawyers that are moving in-house, there is an obvious need to better protect and train them for dealing with these situations too. Given the pushback from GCs, this might be the beginning of a long-overdue dialogue that will develop better training and guidelines for such a significant part of the legal profession.