Conflicts of interest – guidance note

This policy sets out Setfords Solicitors’ approach to the identification and management of conflicts of interests. It also details our approach to our duties of confidentiality and of disclosure, and those situations where those duties to our clients and former clients may conflict.

A large proportion of our case handlers and supervisors work remotely and so this increases the risk of the firm and individuals acting where there is conflict. This means that we must all be aware of these increased risks and take proactive steps to manage our regulatory obligations in this area.

Scope

We must comply with the SRA’s regulatory requirements for managing conflicts of interest as described in the SRA Principles and the SRA Codes of Conduct.

Breach of SRA requirements is a regulatory matter which could have repercussions for the individual concerned and in respect of the firm’s continuing authorisation. The purpose of this conflicts policy is to ensure that everyone understands the need to comply with the SRA requirements and to have effective systems and controls in place to identify conflicts of interest which arise. By fulfilling our regulatory duties our objective is to ensure we act in the best interests of each of our clients.

Conflicts of interest

Conflicts of interests are dealt with in paragraphs 6.1 and 6.2 of both the Solicitors Regulation Authority (SRA) Codes of Conduct (SRA Code of Conduct for Solicitors, RELs and RFLs and SRA Code of Conduct for Firms).

All fee earners have a personal responsibility to be familiar with the Codes as they relate to conflicts of interests. The SRA expects you to identify both own interest and client conflicts.

Own interest conflict

You cannot act if there is an ‘own interest’ conflict or a significant risk of such a conflict (paragraph 6.1. of both Codes). An own interest conflict is defined in the SRA Glossary as:
… any situation where your duty to act in the best interests of any client in relation to a matter conflicts, or there is a significant risk that it may conflict, with your own interests in relation to that or a related matter.

Circumstances that can give rise to an own interest conflict or a significant risk of one include:

• Any financial interest;
• A personal relationship;
• The appointment of you, or a member of your firm or family, to public office;
• commercial relationships; or
• Your employment.

Complaints or mistakes

If a client makes a complaint or you identify an error or omission in a client’s matter, you must immediately seek guidance from the firm’s COLP or Director of Compliance as this may indicate an own interest conflict or a significant risk of one. Their decision as to next steps will be final.

Client conflict

Where acting for two or more clients creates a conflict of interest or a significant risk of one.

You should not act in a matter where you have a conflict of interest or there is a significant risk of one arising between two or more clients, subject to certain specified exceptions (paragraph 6.2 of both Codes).

A conflict of interest means a situation where your separate duties to act in the best interests of two or more clients in the same or a related matter conflict. The most obvious example of a conflict is where the matter itself concerns a dispute between two or more current or intended clients. For example, paragraph 6.2 of the Codes will prevent you from acting for both sides in litigation. Other less direct examples include:

• Acting for two clients seeking separately to purchase a particular asset or to be awarded a particular contract
• Acting for an investor and the scheme in which they will be investing;
• Acting for both clients where one is selling or leasing an asset to the other;
• Agreeing a commercial contract between two clients.

Paragraph 6.2 of both Codes allows two exceptions to the prohibition on acting for more than one client where there is a conflict of interest or significant risk of one, where:

• The clients 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.

A substantially common interest is defined as a situation where there is a clear common purpose between the clients and a strong consensus on how it is to be achieved.

Competing for the same objective would be where two clients are attempting to buy the same asset or win the same contract.

You can only rely on either exception if the following conditions are met:

1. All the clients have given informed consent, given or evidenced in writing to you acting;
2. Where appropriate, you put in place effective safeguards to protect your clients’ confidential information; and
3. You are satisfied it is reasonable for you to act for all the clients.

Please note, however, that it is this firm’s policy that we will not seek to rely on these exceptions unless the matter has been considered by the firm’s COLP and Director of Compliance, and their written consent to acting has been obtained. Their decision on such a matter is final.

This consent, plus your evidence of confirmation of the relevant factors, should be clearly documented on the file along with your assessment of the risks and benefits to the client.

If you are ever in any doubt about a potential conflict situation, you should seek guidance from the COLP or the Director of Compliance before acting or continuing to act. Please also

consider the SRA’s guidance on conflicts of interest which was used to write this policy (www.sra.org.uk/solicitors/guidance/ethics-guidance/conflicts-interest/).

It is the firm’s policy that we will never act in the following circumstances:

• Where there is an actual conflict of interests between those of the client and the interests of anyone in the firm.
• Where there is a significant risk of a conflict of interests between those of the client and the interests of anyone in the firm
• Where there is an actual conflict of interests between clients
• Where there is a significant risk of a conflict of interests between clients
• Where there is a conflict between our duty of confidentiality to our current or former clients and a duty of disclosure to a client – a conflict of duties
• It is also our policy that we will not seek to rely on any of the exceptions to the duty not to act where there is a conflict of interests, unless you have the express written consent of the COLP or the Director of Compliance
• We will decline to act for both the buyer and the seller in a property transaction, unless the matter has been considered by the firm’s COLP and the Director of Compliance, and there is express, written consent from either the COLP or the Director of Compliance to act
• Unless the lender in a property transaction is an institutional lender who is providing a loan on standard terms, we will not act for both parties in such a matter. It is extremely important that we are able to advise either a lender or a borrow independently and impartially as to what is in their best interests. If we are acting for an institutional lender, which is lending on standard terms, we must nevertheless still consider whether there is a conflict and decline to act for both parties if there is an actual or a significant risk of a conflict
• Whilst it may be possible in certain circumstances to avoid a conflict of interests by limiting the retainer with a client, it is the firm’s policy that we will not do this unless there is the written consent of the COLP or the Director of Compliance.

Any decisions of a commercial nature which would need to be considered as part of our conflicts analysis (such as agreeing with a client not to act for their competitors) must be first discussed with the firm’s COLP and Director of Compliance. This information must then be included on the Own Interests Register so that it can be included as part of the overall conflict checking procedures.

Our procedure relating to conflicts of interest

Responsibilities for conflict checks

All new matters will be subject to an initial conflict check by the central administration team when opening a new file. However, all case handlers must conduct their own conflict checks and the ultimate responsibility for ensure that the firm does not act where there is a conflict of interests or a conflict of duties rests with the individual(s) responsible for dealing with the clients’ matters, and their supervisors. Case handlers may be asked to justify their decisions in relation to conflicts and so it is important that careful and detailed records are kept.

Timing

Conflicts of interests must be considered at the earliest opportunity before accepting instructions and must not be seen as an ‘admin task’ to be done before file opening as it is often too late by that time and we may have acted where there is a conflict.

It is important to bear in mind that conflict checks must also be carried out if we are acting solely on a very limited basis such as, for example, a free initial interview or a short fixed fee matter.

Occasionally new matters may arise which are pressing or urgent, however, this does not negate the need for a conflict check to be carried out before accepting a retainer with a client.

Details to check

Information should therefore be obtained from the client before any meeting takes place to check for conflicts with existing clients. You should take the client’s name, address and telephone number; the field of law involved; and details of the opponent or others involved in the matter, if applicable. This information will enable you to conduct a conflict check in line with the procedure set out in the file opening process.

Miscellaneous or ‘general’ ledgers

It is the firm’s policy that we do not use miscellaneous or general client ledgers. This is because the risks associated with such ledgers include not clearly identifying individual clients, which will have an impact on both our compliance with the SRA accounts rules and our ability to carry out effective conflict checks.

Seeking guidance

If you are unsure whether a conflict has arisen or is likely to arise, please speak to the firm’s COLP or the Director of Compliance in the first instance.

Identifying a conflict and declining instructions

If, as a result of a conflict check, it is considered that instructions should be declined or we should cease to act, the client should be informed as soon as possible and in any event before any meeting takes place or instructions are taken.

Own interest conflict register

To facilitate the identification of ‘own interest conflicts’ each member of staff must notify the firm’s COLP and Director of Compliance of any interest they may have outside the firm. Examples of this could include (but are not limited to) having an interest in a separate business, having an appointment or role outside the firm which could impact on clients’ matters, any personal relationship which may call into doubt your ability to act in your client’s best interests. This information, which is subject to our firm’s data protection policy and procedures, must be checked at the outset of all new matters, and periodically as part of ongoing risk management, by all case handlers.

Ongoing monitoring

In addition to the initial conflict checks at the outset and before entering into a retainer with a client, we must all be aware and vigilant to the possibility of a conflict, or problems with the duties of confidentiality and of disclosure, arising as a matter progresses. For this reason, conflict checks must form an important part of our ongoing file monitoring procedures (including risk analysis and supervisory oversight, and anti-money laundering checks).

Procedure if conflict identified part-way through

If, through your ongoing monitoring of a client matter, you identify a potential or actual conflict of interests or duties, you must immediately inform the firm’s COLP and the Director of Compliance, whose will decide whether you are able to continue to act in the matter, or whether you must terminate the retainer with the client. The decision of the COLP or the Director of Compliance on this matter is final.

You will need to exercise caution in relation to the explanation you provide to the client for terminating the retainer so as to ensure that you do not inadvertently breach the confidentiality of another client.

Training

Setfords Solicitors takes its obligations in respect of regulatory compliance very seriously. We will ensure that each member of staff receives training appropriate to their role and responsibilities within the firm. This training will be updated at least annually.

Review of this policy

This policy will be reviewed at least annually by the COLP.

Record of review