Conflicts of Interest are increasingly common and difficult to identify. As law firms go through an unprecedented period of M&A, joint ventures (for example with accountacy firms to offer specialist tax advice services), or adopt alternative business structures, the likelihood of conflicts of interest arising is much greater.
This is a regulatory issue as well as a commercial/reputational one. Outcome 3 of the SRA regulations requires you to have a Conflicts procedure in place that enables you to identify where a potential conflict would impair your ability to act in the best interests of the client.
As clients' business structures become more complex and liable to change, having a robust conflicts procedure in place is essential to mitigating your risk exposure.
High profile conflict of interest cases continue to appear in the legal press at regular intervals.
Law firms need to prepare for:
- the rogue fee-earner who disregards the interests of clients - without effective management oversight, even the best conflict system may simply be bypassed
- known potential conflicts where the firm decides it can act - the M&S v Freshfields case emphasised the importance of putting in place effective information barriers before agreeing to act
- the duty of disclosure which is owed to one client which may be in irreconcilable conflict with the duty of confidentiality to another client - see the lexis nexis guidance notes on confidentiality vs disclosure
How Lockton can help
Our new guidance provides practical information and tips on:
- what your conflicts database should include
- how to ensure your conflict check system is as effective as possible
- when you should conduct conflict checks
- requirements of an ethical screen (information barrier)
Staff training is also essential if your procedures are to work well in practice. We have included some annotated case-studies for you to use in internal training.
Lockton clients can log in to access the full guidance. Alternatively click on the download below to access a summary guide.