Risky Business: What Young Lawyers Should Know About Ethics and Risk Management
As a newly minted member of the Bar, you might be eager to take on your first case as a fully-fledged lawyer and finally put into practice all that you have learned and observed from your supervising partners and senior colleagues as a practice trainee. You might even be poring through every article or resource that you can find with tips and advice on how to survive and succeed in your first few years of practice.
In addition to investing time in continuous education on substantive law, it is important to also carve out time for professional ethics and risk management – integral aspects of legal practice and being a lawyer.
With your Practising Certificate comes great responsibility – to the courts, your clients, your colleagues, and fellow members of the Bar. Here are five tips for young lawyers (and young lawyers at heart!) to keep in mind when it comes to fulfilling your ethical obligations:
1. Appreciate the importance of the Professional Conduct Rules
Be diligent in familiarising yourself with the Legal Profession (Professional Conduct) Rules (PCR). The PCR should be a lawyer’s first port of call when doubts arise over whether a particular approach or action is ethically permissible, as well as determining whether further guidance (e.g., from the Advisory Committee to the Professional Conduct Council) is needed on a particular issue.
2. Never assume your seniors know more than you do
Understanding and grasping the sheer volume of a lawyer’s ethical and professional obligations while acclimatising to the rigours of legal practice can seem like an overwhelming and insurmountable task.
Seek guidance from your seniors. However, if you land yourself in an ethical dilemma where you need to choose between compliance with ethical obligations and disobeying instructions from a senior colleague or partner, you ought to raise such concerns to your firm’s risk manager or partner as soon as possible.
Claiming that you were simply following your partner’s instructions is not an excuse or mitigating factor for breaching your ethical obligations.
3. Just because everyone is doing it, does not mean it is ok
As a young lawyer, you will inevitably encounter new and unfamiliar pressures – from honing your legal skills, getting up to speed on your cases, meeting billing requirements, to establishing a good reputation and relationship with your colleagues and your clients while meeting their demands.
These everyday stresses can sometimes result in ethical obligations being sidelined. It becomes tempting to overlook certain ethical rules or even cut corners in the name of efficiency.
Do not allow yourself to succumb to pressures to take shortcuts when performing tasks in the course of your practice. It may have potentially deleterious consequences for your professional reputation and even that of your firm, including being personally liable for breaches of ethical and professional obligations.
If you observe any instances of misconduct in the course of handling a matter or you are asked to participate in that misconduct, take the necessary steps to alert the appropriate persons in your firm. You can also seek guidance on a confidential basis from the Law Society’s helplines.
And, if you happen to make a mistake, do not attempt to cover it up but be honest about your actions and take responsibility for them. Inform your partner, assess the mistake, propose an appropriate solution, and take the necessary steps to rectify it. Mistakes happen and demonstrating maturity in terms of how you handle them would serve you in good stead as you progress in your career.
4. Screen your clients
Legal practice is, at its core, a business, and lawyers are understandably under pressure to secure as many client engagements as possible to sustain their practice. Young lawyers, in particular, may face added pressure to prove their value to their firm and actively seek out opportunities to represent a client.
While it is indeed tempting to represent any client who walks through the door of your firm, it is good risk management practice to carry out relevant background checks on your client and ask yourself if you should be representing a particular client. This is where “Know Your Client” (KYC) obligations come in.
KYC procedures and a lawyer’s anti-money laundering and terrorism financing obligations are set out in Part VA of the Legal Profession Act and the Legal Profession (Prevention of Money Laundering and Financing of Terrorism) Rules. These regulations serve to assist lawyers with identifying high-risk clients or transactions to avoid inadvertently committing a money laundering or terrorism financing offence.
The Law Society has helpfully consolidated the various measures, legislation and Practice Directions on anti-money laundering and counter-terrorism financing which can be accessed at this page. A sample client due diligence checklist can also be downloaded at this link. This checklist can be adapted to suit the needs of your firm or practice.
If a prospective client’s business seems a little too good to be true, it is always best to err on the side of caution. Screening your clients and carrying out your due diligence will help you avoid potential disciplinary or even legal sanctions – whether on the grounds of negligence, money laundering or terrorism financing – at a later stage.
5. Run conflict checks (early and often)
It is the fundamental responsibility of all lawyers to consider conflicts before accepting instructions. Conflict checks should be made in conjunction with the entire client onboarding process, including KYC and overall risk assessment of the matter.
Pay close attention to the rules on conflicts of interest set out in Rules 20, 21 and 22 of the PCR – this is an ethics issue that tends to arise most frequently in practice and is incidentally one of the most common queries received by the Advisory Committee.
Refer to the Conflicts of Interest Toolkit (login required) developed by the Law Society which helps legal practitioners better recognise, avoid, and manage conflicts of interest situations that are commonly encountered in practice.
The consequences of a conflict of interest for a law firm and the lawyer can be significant, ranging from reputational damage, defending a claim by a client, to possible disciplinary action.
As a general guide, full consideration must be given to possible conflicts:
- At the start of a client relationship, where there are no formal instructions yet;
- When formally instructed on a new matter;
- When new parties, either a new client or counterparty, are added to an existing matter.
Conflicts of interest can also arise when you move from your current firm (Firm A) to join another firm (Firm B) as a lateral hire. For example, Firms A and B represent clients who are on the opposing sides of a very contentious dispute. This scenario raises the possibility of a conflict of interest arising if in the course of your time as a lawyer with Firm A, you had access to confidential information pertaining to this case. In such a scenario, you would need to be mindful of and adhere to the applicable ethical obligations and rules to ensure that you or firm does not end up being disqualified from representing the client.
At the same time, do note that not all conflicts are legal conflicts. Be alert to your firm’s policies on commercial conflicts.
Sometimes, a law firm may take the position that it should decline to accept instructions (even if there is no legal conflict) because it does not want to jeopardise an ongoing relationship with a client or does not want to act adversely against a certain party that the firm is trying to cultivate a business relationship.
Corporate clients pose additional challenges on who is your client.
Always ensure that the interests of the person (representing the corporate client) conveying the instructions are aligned with the corporate client’s interests. Be mindful of corporate structures and the involvement of individuals who are shareholders, directors, or employees as they can complicate and blur the line of who is the client.
Increasingly, corporate clients are seeking to impose their own external counsel guidelines (ECGs) on law firms (click here to read an earlier article on ECGs). Be mindful of these guidelines when taking on new instructions as many ECGs try to limit the firm’s ability to do business with competitors, with broad definitions of conflicts of interest.
ECG conflicts parameters often include affiliates of the corporate client and prescribe how conflicts of interest should be managed.
Finally, when running conflicts checks, take care to ensure the names of the parties to the matter are spelt properly. Failing to correctly identify the opposing parties may result in your firm having to withdraw from representing a client if the conflict check is found to be unclear at a later stage in the matter.
We hope that these tips help allay some of the common concerns that a young lawyer might face when it comes to ethical issues and risk management in legal practice. At the same time, these tips reinforce the importance of acquainting yourself with the applicable ethical and professional obligations. For a young lawyer looking to thrive in legal practice, it is important to implement strong risk management habits early in your career and adopt a commonsense approach to your practice to ensure that you are always on top of your professional and ethical obligations.
Finally, it would do well for young lawyers to remember that taking the time to develop good risk management practices and adhere to your ethical obligations is ultimately an investment in your professional development and reputation.
We have also prepared an infographic on five ethics and risk management tips that young lawyers ought to know. Download the infographic here.