In March 2024 the SRA published draft guidance on internal investigations (“the Draft Guidance”). Whilst published alongside a suite of documents aimed at assisting in house lawyers in complying with their regulatory obligations, the Draft Guidance has a wider reach and is relevant to law firms and any individual appointed to conduct an internal investigation.
Since its publication, firms are increasingly referring to the Draft Guidance, both internally when considering whether and how an investigation should be conducted, and in inter partes correspondence when referring to best practice (when acting for either the firm or the individual being investigated).
In this news alert, Associate Gabrielle Lintott and Partner Andrew Pavlovic summarise the Draft Guidance and consider the circumstances in which regulatory action could be taken against firms/individuals who fail to investigate matters adequately (or indeed at all).
The aim of an internal investigation is clear: to fairly and impartially investigate, establish, and record the facts of a matter (on the balance of probabilities) and determine whether there is a disciplinary case to answer.
However, the manner in which an investigation is conducted can have a significant impact on all the parties involved. An ineffective investigation could result in dissatisfied complainants/witnesses, which could also have the effect of discouraging others with complaints from coming forward in the future.
Furthermore, in addition to complying with their obligations under employment law, firms and individuals must have regard to their regulatory obligations, with the SRA making clear that a failure to properly and promptly investigate allegations could form the basis of regulatory or enforcement action.
The SRA Principles of Relevance to Internal Investigations
The Draft Guidance indicates that the following SRA Principles are the most relevant when individuals and firms are conducting internal investigations, and that firms/individuals should:
- act in a way that upholds public trust and confidence in the solicitors’ profession and in the legal services provided by authorised persons (Principle 2)
- act with independence (Principle 3)
- act with integrity (Principle 5)
- and act in a way that encourages equality, diversity and inclusion (Principle 6).
It is important to note that the SRA Principles apply not just to firms and lawyers but also to law firm employees, and the SRA has previously brought proceedings in the Solicitors Disciplinary Tribunal (“SDT”) against a firm’s HR director, among others, in respect of their conduct of an internal investigation. It follows that firms should ensure that the Draft Guidance is widely circulated so that all individuals who have responsibility for conducting/assisting in internal investigations are aware of it.
Ensuring the independence of an internal investigation can be particularly difficult when the individual being investigated is a senior individual within the firm. This may be because the individual appointed to investigate, who will also typically be a senior individual, is a contemporary or has a personal relationship with the individual being investigated, which could impact on their ability to investigate and reach conclusions impartially. Alternatively where General Counsel are appointed as investigators, they may experience pressure from senior leaders or participants involved in the investigation to reach certain outcomes, and practical difficulties may arise further down the line if the same General Counsel is subsequently asked to advise in relation to matters upon which he/she acted as investigator.
For those reasons, where allegations are made against or involve a managing/senior partner, the firm will need to consider whether they are capable of conducting the investigation internally or whether it should be outsourced to an external investigator, to guard against conflicts of interest or perceptions of bias. Where a firm does decide to investigate matters internally in such circumstances, they should document their decision and set out any steps taken to mitigate the risks to independence.
How Should an Investigation be Conducted?
Whilst there is no “one size fits all” when it comes to workplace investigations, the SRA’s guidance places emphasis on:
- Having clear terms of reference: these should set clear expectations from the outset, covering:
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- the scope of the investigation and process (i.e. what is being investigated and why, what is the investigator’s role, how will the facts be investigated, what information will be shared with whom and when and what the output will be)
- how those involved will be supported during the process, and
- confidentiality and the level of information sharing between third parties and witnesses.
An investigator should also consider whether it is appropriate to first circulate a draft copy of the terms of reference to the parties involved for their review;
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- Supporting those involved in the investigation process and approaching sensitive issues carefully: being involved in an investigation can be stressful, and the individual who raises an issue, any witnesses and the subject(s) of the investigation will each need support. The level of support will vary in each case, but will include making sure the process is fair, considering whether an individual should have the right to be represented or accompanied and providing certainty around the timeframes for interviews and what is required of the individual. Where appropriate, support may include making reasonable adjustments and accommodations, and investigators should also consider how different cultural values, perceptions and communication styles might impact on an individual’s participation and whether the process should be adjusted;
- The “integrity of the evidence” and approaching fact-finding with an open mind: evidence must be appropriately obtained and issues can arise where an investigator is not trained, asks leading questions or where the interview is conducted in a way or manner which prevents the individual from answering freely. An investigator must be transparent as to the evidence they have relied upon in making any findings, and therefore, all interviews should be documented and a note should be made where it is not possible to speak to someone who is involved;
- Reporting the output of the investigation: the report should make factual findings about what happened. Where provided for in the terms of reference, the report may include recommendations as to sanctions and/or whether any remedial steps are required. The terms of reference should address whether the respondents and/or the person who raised the concern/complaint will have an opportunity to comment on the draft report before it is finalised.
Self-Reporting
The Draft Guidance confirms the SRA’s position, as set out in their enforcement strategy, that firms may need to report matters to the SRA before an investigation is concluded, where the threshold for reporting has been met, namely where the firm is aware of facts or matters which give rise to a reasonable belief that there has been a serious breach of the regulatory arrangements.
However, the SRA’s guidance on reporting concerns makes clear that the SRA do not expect firms to “simply pass on any concerns that are raised without question” and recognises that firms may wish to investigate the nature of any concerns to understand whether they are serious. This means that firms are entitled to subject allegations of misconduct to a degree of scrutiny before deciding whether or not to report them to the SRA, albeit the trigger for reporting (a reasonable belief) is relatively low. Often firms will report to the SRA at the point that they have conducted an initial assessment and decided that there is a need to investigate a matter, and the SRA will usually be happy for firms to complete that investigation and report the findings to them.
Once the investigation is complete, the firm will then be required to submit a follow-up report to the SRA setting out whether any misconduct had been established. The SRA state in the Draft Guidance that they will place a higher degree of reliance on evidence collected as part of a properly conducted and robust investigation, albeit in practice the SRA will need to conduct their own interviews with witnesses if they decide to investigate the matter. However, a poorly conducted/documented investigation may give rise to the question of whether the firm’s conduct of the investigation has itself given rise to regulatory breaches, and could result in the SRA choosing to investigate a matter where the firm found no wrongdoing, on the basis that the SRA lack confidence in the firm’s findings.
Potential Regulatory Action Arising from Inadequate Investigations
In their guidance on workplace environments, the SRA indicate that they will take action against firms where, among other things, there has been a failure to deal with a complaint of discrimination, victimisation or harassment in a prompt and fair manner.
Furthermore, in a joint statement issued in January 2023 (“the Joint Statement”), the SRA/SDT indicated that they would refer matters to the Tribunal where there has been a failure by a firm to take appropriate steps to protect an employee from counter-inclusive misconduct, or to ensure a safe working environment. A failure to properly investigate concerns raised by an individual, could amount to a failure by the firm to take appropriate steps to protect employees.
Finally, Rule 1.6 of the Code of Conduct for Firms requires firms to challenge unfair treatment, bullying, discrimination, harassment etc., and a failure to investigate matters and make findings of fact, which could then form a basis for a challenge, could accordingly amount to a breach of that rule.
As referred to above, the SRA has previously brought proceedings in the SDT against a firm/individuals within that firm in relation to their conduct of an internal investigation, and whilst the firm/individuals in that case were ultimately acquitted of misconduct, the Joint Statement indicates that they will take action again in an appropriate case.
Conclusion
Whilst containing nothing new or revelatory, the Draft Guidance is a useful reference point for firms and individuals at the outset of an investigation, particularly when considering whether an internal investigation is appropriate.
It is clear from the SRA’s focus in this area that, where allegations of misconduct are made, it is not just the allegations themselves, but also the firm’s investigation of those allegations which will be subject to regulatory scrutiny. In practice, the SRA will routinely ask for firms to provide complete copies of their investigation files, including, among other things, transcripts/notes of meetings with witnesses. A timely, well run and properly documented investigation will give the SRA confidence that the firm has the appropriate processes in place to comply with its regulatory obligations.
If you would like to discuss the Draft Guidance in more detail or have any specific questions arising from this alert, please contact Associate Gabrielle Lintott or Partner Andrew Pavlovic, both of whom are part of CM Murray LLP’s dedicated Investigations Unit. Find out more about our Investigations Unit and expertise in advising employers, senior executives, firms and partners and acting as independent investigators here.
