Regulatory requirements, ethics, LLP and conflicts

This article considers the legal and regulatory framework governing lawyers themselves. We look at regulatory bodies, the potential for ethical dilemmas and conflicts of interest and provide a brief overview of legal professional privilege.

The role of the legal professional is heavily regulated.

This is especially true if you work in financial services and tends to get more involved the more senior you become. There are also some grey areas regarding ethics and legal professional privilege, which are yet to be fully clarified. This piece will raise your awareness of these issues.

The laws that regulate lawyers

As a lawyer, you’ll be subject to a wide range of regulatory and ethical guidelines. In some circumstances, your advice may be protected by legal professional privilege (LPP), though recent judgments suggest the restrictions on LPP are quite limiting for in-house lawyers.

Here, we look at the most common obligations for in-house lawyers.

Regulatory requirements


The legal profession in England and Wales is regulated by the Solicitors Regulation Authority (SRA). The SRA:

  • Sets the standards for qualifying as a solicitor;
  • Monitors the performance of organisations that provide legal training;
  • Drafts the rules of professional conduct to make sure they protect the interests of clients;
  • Provides authoritative guidance and rules to solicitors on ethical issues, laws and regulations that affect their work;
  • Administers the roll (register) of solicitors;
  • Provides information to the public about solicitors, their work and the standards the public is entitled to expect; and
  • Sets requirements for solicitors' continuing professional development.


If you’re a senior in-house lawyer working for an organisation in the financial services sector, you may soon have an additional regulatory burden. In January 2016, the Financial Conduct Authority (FCA) opened a consultation on whether people in roles such as yours should fall within its accountability guidelines, which are known as the Senior Managers Regime (SMR). With the consultation having closed in January 2017, we await further announcements.


Every solicitor in England must be able to demonstrate that they’ve reflected on their abilities to deliver competent legal practice and bridged any gaps in their competence through learning (see Appendix I - SRA Development Record).

Means of learning are many and varied. They range from on-the-job training, formal training such as professional qualifications or industry-specific courses to continuing professional development (CPD). CPD exists in most industries and there are a number of approved providers of appropriate schemes. A notable development in CPD provision in the legal profession recently has been the departure from the traditional hours or points-based formats to outcomes-focused training. This makes CPD more relevant to your individual learning and development needs.

Industry specific regulation

Though not specifically linked to you personally, there’s likely to be a great deal of regulation specific to the industry sector your organisation operates in. This could govern how it uses customer data, handles dangerous substances, ensures its products are safe and even what claims it can make in its advertising and marketing materials. As the in-house lawyer, you’ll be expected to have a full grasp of these regulations.


It’s a fact of in-house life that the possibility of a conflict of interests is never far from the surface. Competitive commercial environments impel organisations to take risks – and sometimes these risks involve acts of questionable legality.

The classic trilemma for the in-house lawyer here is this: do you:

  • Turn a blind eye in an effort to be accepted as ‘commercially aware’, thus compromising your profession? or
  • Put your foot down and be shunned by your colleagues and senior management for being obstructive and naïve about the ‘real world’? or
  • Accept that something is wrong but tolerate it so long as there is progress towards getting it fixed in the mid-term. Which is often the case when the something wrong is built into the way a system, a process or a financial models within the business works and so change cannot be effected overnight.

Unfortunately, in-house lawyers coming down on all sides of this trilemma have felt the cold winds of retribution. Lawyers at General Motors lost their jobs when they were found to be among a group of people at the carmaker for failing to share information about defective ignition systems in the company’s vehicles. Others have described the daily ‘terror’ of being seen as ‘difficult’ by non-legal colleagues.

In its Competence Statement for solicitors (see Appendix II - SRA Competence Statement), the SRA says lawyers should:

‘Act honestly and with integrity, in accordance with legal and regulatory requirements and the SRA Handbook and Code of Conduct, including:

  • Recognising ethical issues and exercising effective judgement in addressing them;
  • Understanding and applying the ethical concepts which govern their role and behaviour as a lawyer;
  • Identifying the relevant SRA principles and rules of professional conduct and following them;
  • Resisting pressure to condone, ignore or commit unethical behaviour; and
  • Commitment to the rule of law and proper administration of justice;
  • Duties and responsibilities owed to clients;
  • Running the business;
  • Interacting with the regulator; and
  • Duties to others;
  • Respecting diversity and acting fairly and inclusively.’

Nevertheless, the subject of internal conflicts remains a grey area for many in-house lawyers. Recognising this, two leading legal academics, Professor Richard Moorhead, Director of University College London’s Centre for Ethics and Law, and Dr Steven Vaughan of Birmingham University, decided to take action. Having interviewed 34 senior in-house lawyers and compliance experts in major organisations, they’ve started work on a blueprint for ethical in-house practice. Rather than a call for more regulation, this initiative is an invitation for in-house lawyers to share their insights and experiences with a view to creating an ethics framework that works for all parties. We watch this space with great interest.


The SRA Statement of Legal Knowledge (see Appendix III - SRA Statement of Legal Knowledge) sets out the knowledge that solicitors must have when they qualify. As if to demonstrate the importance of the subject, the first section of this document is:

‘1. Ethics, professional conduct and regulation, including money laundering and solicitors accounts.

1a. The ethical concepts governing the solicitor's role and behaviour, including as expressed in the law, and the economic, social and cultural influences that can bias independent and ethical judgement;

1b. The SRA Principles;

1c. The Code of Conduct;

1d. Money laundering;

1e. Financial services;

1f. Solicitors' accounts:

  • Identification of office /client money;
  • Receipts into and payments out of office and client account/money;
  • Payment of deposit interest;
  • Accounting systems and internal controls;
  • Recording transactions and preparation of financial statements; and
  • Regulatory controls.

1g. Obligations to report relevant to a solicitor's practice’.

While some of these areas of knowledge and awareness relate to lawyers working in a private practice, the implication is clear. Ethical standards are of paramount importance to any lawyer regulated by the SRA.


Legal professional privilege (LPP) is a provision that prevents communications between legal professionals and their clients from being disclosed without the client’s permission. Dating back as far as the 16th century, this principle was designed to allow lay people to access the legal system on the same footing as those with legal knowledge. By not having to disclose the advice given to them by their lawyers, they avoid being seen as less knowledgeable than their adversary in a legal dispute.

The problem for in-house lawyers is that the General Counsel/internal colleague relationship is less clear-cut than that of a private practice solicitor and their paying client.

The validity of LPP for in-house lawyers was put to the test in two cases recently and the judgements do not make comfortable reading for General Counsels. Although the decisions are being appealed, they place very limiting definitions on:

  • Who can be defined as a client;
  • In what circumstances advice may be privilegable; and
  • How a lawyer’s notes need to show ‘legal train of inquiry’ to be privileged.

At CLL, we’re following this story closely and you can read our most recent update on our blog, Has Three Rivers drowned legal advice privilege?

For more details about LPP, see the Law Society website.


While taking care to ensure your organisation stays compliant, you’ll also have regulatory obligations of your own. As well as demonstrating competency, legal knowledge and adhering to the SRA Code of Conduct, you may also be subject to the FCA SMR. Ethical dilemmas and conflicts of interest are not uncommon in in-house legal life and you’ll need to keep yourself informed about judgements that affect legal professional privilege.