UK's SRA publishes guidance on internal investigations for in-house lawyers

The Solicitors Regulation Authority (SRA) issued finalised guidance for in-house lawyers and regulated firms in November 2024 for understanding and managing the regulatory risks and issues associated with conducting an internal investigation.

The SRA's guidance is part of a wider suite of materials that it is publishing to support in-house counsel in particular – but, given the risks to client and lawyer of getting it wrong, is recommended reading for all regulated lawyers.   

What are internal investigations?

An internal investigation is a process carried out by an organisation or individuals within it to establish the facts relating to an allegation, a concern or misconduct about or related to that organisation or those within it. The main purpose is usually to establish the facts so that if there has been wrongdoing, it can be identified, steps can be taken to prevent its recurrence and the company can ensure appropriate remedial action is employed.

As acknowledged by the SRA, internal investigations are "an essential aspect of risk management and help to ensure firms and organisations meet their legal, regulatory and employment obligations".

Beyond this, an investigation done well can also have significant value in terms of demonstrating an organisation's commitment to tackling concerns and allegations of misconduct raised.

Who is in scope?

The guidance applies to in-house solicitors and to firms regulated by the SRA when they are involved in leading or conducting an internal investigation.

Guidance coverage

There is no "one size fits all" approach when it comes to investigations and elements of the Guidance will not be new to practitioners familiar with investigations. However, it contains a  framework useful for all regulated individuals. This can assist the lead investigator in explaining the need for certain steps to be taken – including mandating the limited level of involvement of certain individuals – to ensure the investigation's independence and integrity.

 The guidance in particular covers:

Terms of reference in internal investigations

A written terms of reference sets clear expectations from the outset as to the shape of the investigation and mitigates risks associated with poorly managed investigations.

This should generally cover:

• the scope of the investigation
• how facts will be investigated
• the investigative team
• timelines
• information sharing
• support for people involved
• personal data handling
• confidentiality and legal professional privilege
• output (for example, a written report)
• potential recommendations 

Supporting people involved in the investigation process

Organisations and investigators should be clear about what support is available for people involved in the investigation, who will provide it and how. The investigative team should be alert to red flags that indicate any individual is at risk. Support may be required to protect the anonymity of whistleblowers and protect them from victimisation.

Interviewing those involved in the process

Where appropriate, reasonable adjustments and accommodations should be made for interviewees. These interviews should be documented as part of the evidence-gathering process. The interviewer must be adequately trained.   

Managing and recording evidence

Investigators must take care to preserve the available evidence, including ensuring underlying documents and data are not destroyed. Technical support may be required and should be sought to save or recover relevant files and communications.

Decision-making

The investigation should be concluded fairly and without undue delay relative to the nature and scale of the subject matter and all the parties involved.

Reporting/ Documenting

The output of the investigation would typically take the form of an external or internal report, which may also include recommendations such as sanctions or remedial actions. The ToR should clearly state if the investigator has a role in the decision-making and, if so, this must not affect their independence.

Notifying the SRA (if applicable)

The organisation and investigative team should consider their reporting obligations; that is, if the individual or firm implicated in the wrongdoing identified by the investigation is itself a firm or individual regulated by the SRA.

Independence

The SRA Principles set out the core ethical values that apply to all regulated solicitors at all times, and in relation to investigations the SRA notes that principles 1, 2, 3, 5 and 6 are particularly relevant. It also draws attention to a number of linked paragraphs in the SRA Code of Conduct.

Importantly, the guidance contains a section specifically dealing with the requirement to act with independence (principle 3), something which can be challenging due to the very nature of an internal investigation. Whether it is feasible for an in-house solicitor or general counsel to lead an investigation will depend on their ability to demonstrate they are able to act with independence.

In particular, solicitors need to have in mind:

• Who commissions and directs the investigation and how far removed they are from the alleged wrongdoing. This includes thinking about who is funding the investigation, how to ensure freedom from undue influence and how to avoid perceptions of bias.
• The investigators themselves should have no prior knowledge of, or involvement in, the concern or alleged event.
• Whether there are measures that can be put in place, such as information barriers, to maintain confidentiality and independence from any individuals providing advice on the underlying matters.

In-house lawyers must not be in a position where they might in due course be required to advise their employer on matters related to the investigation (for example, be required to advise on any claims subsequently brought against the employer in relation to the handling of the investigation).

In recognition of the difficulties that an in-house lawyer can face in such scenarios, the guidance notes that appointing an independent investigator may help to guard against any conflicts of interest or perceived bias.

Privilege and internal investigations

A regular consideration in the conduct of any investigation is whether legal professional privilege applies. As part of its suite of materials for in-house lawyers, the SRA has published guidance on legal professional privilege and its the application within investigations. The guidance recognises that both types of legal professional privilege – legal advice privilege and litigation privilege – can potentially apply in this context.

The application of legal advice privilege to communications and documents created during an internal investigation will be "fact specific" but the key element remains that "the dominant purpose of the document or communication is the giving or receiving of legal advice". The SRA draws attention to the recent Court of Appeal decision in Al Sadeq, where it was held that legal advice privilege can apply to the output of a lawyer instructed to conduct an investigation, even where some of their work (for example, presenting or summarising the factual position) might have been able to be carried out by a non-lawyer instead.  This was on the basis that "the lawyers involved were engaged to bring their lawyers' skills to the investigatory process and conduct it through lawyers' eyes". 

Documents produced as part of an internal investigation may also be protected by litigation privilege where those documents are or were prepared for the sole or dominant purpose of adversarial litigation. The application of this limb of privilege will, again, be fact specific. 

The potential impact of legal professional privilege is such that it is essential to identify early on in an investigation processes to ensure its application and preservation, where appropriate, with the benefit of external legal advice if necessary.

Osborne Clarke comment

The guidance has been generated as part of the SRA's thematic review of the unique challenges facing the in-house community, something which has been under particular scrutiny following the Post Office scandal. It offers a practical example of how the day-to-day conduct of solicitors must always accord with the core ethical values set out by the SRA.

The SRA has made it clear that compliance with the guidance will be considered by the SRA in exercising it regulatory functions: where allegations of misconduct are made to the SRA following an investigation, the investigation process as well as the allegation itself will be open to regulatory scrutiny.

The recent update to the guidance has been delivered in response to requests from lawyers for more information and support around the conduct of investigations. While the guidance is primarily targeted at offering this information for the benefit of in-house lawyers and law firms conducting internal investigations, the SRA has been clear that the principles set out apply equally to solicitors or firms conducting investigations on behalf of another.

It is, therefore, essential reading for all lawyers who design and conduct investigations.

Demonstrating overarching compliance with the guidance will help demonstrate compliance with your regulatory obligations, and should limit the opportunity for criticism by the SRA. It will also help to negate any criticism of an investigation from interested third parties who may be unhappy with the process used or outcome reached. In-house lawyers would be wise to use it as a prompt to revisit their policies and procedures to ensure that investigations proceed with sufficient independence and integrity.

Moreover, there will almost always be tension between a potentially intrusive investigation and the commercial considerations of the organisation.  In this context, the guidance can be used as a tool by in-house lawyers to inform decision makers of minimum steps necessary to conduct an effective and defensible process.  

This Insight was written with the assistance of Tundun Basorun, trainee solicitor at Osborne Clarke.