In a tough period for international firms at the hands of legal regulators, US firm Locke Lord received the largest-ever fine handed down by the Solicitors Disciplinary Tribunal (SDT) in November.
The £500,000 penalty handed to Locke Lord came after one of its former UK lawyers engaged in ‘dubious financial arrangements’ with a client’s bank account. The lawyer in question, Jonathan Denton, left the firm in October 2015.
But details of the SDT’s decision, which was published by the Solicitors Regulation Authority (SRA), disclosed that Locke Lord had ‘failed to prevent’ Denton from using a client account for ‘transactions that bore the hallmarks of dubious financial arrangements’.
Locke Lord said: ‘We regret what has happened, but we are pleased to note that the SRA accepted our position that the firm and its senior officers did not act dishonestly or with conscious impropriety, or turn a blind eye to Denton’s conduct.’
The firm also insisted that ‘steps were taken to review existing practices’ and ‘a number of changes and improvements were made’ following Denton’s departure.
Despite the SRA not finding Locke Lord guilty of deliberate impropriety, the fine and prosecution is further evidence of the regulator’s strong conviction to go after the top bracket of the global legal profession, rather than high-street firms and sole practitioners. In the weeks following the decision, reports circulated that Locke Lord’s associates were disgruntled that they were unaware of the SRA’s investigation until it was disclosed publicly.
A spokesperson for Locke Lord confirmed to Legal Business that those below the level of senior associate at the firm were unaware of the SDT’s probe and said: ‘I doubt that any business would disclose that it was under scrutiny.’
Elsewhere, a former partner of Clyde & Co’s Guildford office, Charles Smith, received a three-month suspension from the SDT in November over an alleged ‘improper’ transfer of funds. The SRA opened its investigation into Smith, who was a consultant at Clydes until recently, in March 2016 after he was accused of instructing or permitting an improper transfer of money from a client account to the firm’s office account. He was asked to stand down as partner by the firm when the matter came to light in 2015.
Meanwhile, Appleby confirmed in October that it had been the victim of a ‘data security incident’ in 2016, before some client data was subsequently leaked to the press, putting the offshore firm at the centre of the Paradise Papers scandal that ran throughout November.
The firm said: ‘It is true that we are not infallible. Where we find that mistakes have happened, we act quickly to put things right and we make the necessary notifications to the relevant authorities.’
Following the breach, Appleby said it has implemented a series of containment and remediation measures, recommended by PwC’s IT forensics team, and engaged a US specialist cyber security team to complete a third-party systematic review of its IT security.
A cyber security specialist told Legal Business: ‘The legal sector needs to take this seriously. It’s only just waking up to it now.’
News of the Appleby data breach broke just four months after DLA Piper became collateral damage following a cyber attack in June. The firm was crippled for days after its systems were hit by what DLA described as ‘a particularly sophisticated strain of malware’.