The Solicitors Regulation Authority (“SRA”) has reissued its warning about high-yield investment schemes. The warning notice can be found here.
The intention of this notice is to remind law firms about the potential risks associated with being involved with such schemes. These schemes have been around for many years and are becoming more and more sophisticated. The SRA plans to issue more guidance soon for the purpose of highlighting the risks to the public.
The background to all of this is that risks are high where law firms are approached to be involved in order to add credibility to an investment scheme. This can, for some potential investors, add a degree of security that the investment is safe and valid, when clearly it should do no such thing. Where law firms are being asked to act as a bank, doing so would be a breach of the SRA Accounts Rules. Rule 14.5 of the current Rules states that a law firm MUST NOT provide banking facilities through a client account. Therefore, any client bank account transactions must relate to an underlying transaction or to a service being provided in line with the law firm’s normal regulated activities.
If you are approached, whether as a law firm or an individual, and the returns seem amazing or the deal just sounds odd, it’s probably too good to be true. Stick to your gut feel and do not get involved.
Stick to providing legal services as you know best and comply with the your Handbook and Rules. Further opinions on the proposed changes have been published on The Law Society Gazette and can be found here.