“We opposed these proposals because not only would they put in-house counsel at risk of a conflict of interest with their employers, they would also have meant counsels were answering to two regulators, increasing the cost of doing business,” it said in a statement.

“Crucially, legal professional privilege could have been eroded if in-house teams fell under the SMR. If investigated, in-house lawyers could have been uniquely unable to provide evidence to the FCA that they had acted properly, because the advice they give their employer is privileged. A logical outcome of this could have been organisations no longer seeking the advice they need from their own legal teams.”

However, the FCA last week announced it was dropping the proposals to include the legal function into the SMR, a move that has seen The Law Society “breathe [a] sigh of relief”.

“We’re delighted that the FCA agrees with The Law Society that general counsels should not be included in the SMR. This will ensure lawyers remain free to provide full and frank advice to their employer without the risk of a conflict of interest emerging,” Law Society vice president Simon Davis said.

“We will study the FCA’s consultation in detail, but today we simply welcome the fact they have taken our suggestions on board.”

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