SRA Code of Conduct in Practice - Conflicts of interest

Learning Outcomes

This article covers conflicts of interest under the SRA Code of Conduct in practice, including:

• Distinguishing own interest conflicts from client conflicts and the default prohibition on acting where a conflict or significant risk exists
• The two narrow exceptions for client conflicts—substantially common interest and competing for the same objective—and the mandatory conditions: informed written consent, effective safeguards, and reasonableness
• The fact that own interest conflicts can never be cured by consent and typical scenarios where they arise
• The interaction between confidentiality and disclosure duties (including para 6.5) and acting against former clients where material confidential information is held
• Designing, implementing, and monitoring effective information barriers and retainer limits
• Applying the rules in common contexts: conveyancing, borrower–lender, joint ventures, wills and estates, and contentious work
• Practical decision-making: spotting early indicators, declining or ceasing to act, and documenting justification and client communications
• Evidencing informed consent and keeping records to satisfy regulatory scrutiny and SQE2 problem questions

SQE2 Syllabus

For SQE2, you are required to understand the rules and practical application of conflicts of interest as set out by the SRA Code of Conduct, and to be able to spot potential conflicts, apply the exceptions, and explain appropriate professional action, with a focus on the following syllabus points:

• the distinction between own interest conflicts and client conflicts
• the general prohibition on acting where a conflict or significant risk exists
• the recognition and application of the two Code exceptions that allow acting in certain client conflicts
• the additional safeguards and documentation required if relying on an exception
• the implications of breaching conflict rules in practice scenarios
• how confidentiality, disclosure and para 6.5 (adverse interests) interact with conflicts
• firm-level systems to identify conflicts and the need to justify decisions contemporaneously

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. What is the difference between an own interest conflict and a client conflict?
2. What are the two situations where a solicitor may act despite identifying a client conflict?
3. True or false: A solicitor can proceed with acting where there is an own interest conflict if both clients provide their informed consent in writing.
4. What practical steps must a solicitor take if relying on the substantially common interest exception?

Introduction

Conflicts of interest are strictly regulated by the SRA Code of Conduct. For SQE2, you must be able to recognise conflicts, apply the correct legal principles, and explain appropriate professional steps in real and hypothetical scenarios. Solicitors who breach conflict rules risk disciplinary action, reputational harm, and potential financial claims.

A conflict may arise between your duty to one client and your duties to another client (a client conflict), or between your duty to a client and your own interests (an own interest conflict). The default rule is simple: you must not act where a conflict exists or there is a significant risk of conflict. Only in narrowly defined circumstances can you continue to act.

In practice, conflicts appear across all areas of work: conveyancing (acting for seller and buyer, borrower and lender), disputes (opposite sides or co-defendants), wills and estates (gifts to the solicitor, family disagreements), and corporate matters (joint ventures, shareholders with diverging interests). The Code for Firms mirrors these obligations and requires managers to have effective systems to identify and manage conflicts risks.

Key Term: own interest conflict
An own interest conflict arises where a solicitor’s duty to act in the best interests of a client conflicts or risks conflicting with the solicitor’s own personal or professional interests.

Key Term: client conflict (conflict of interest)
A client conflict (conflict of interest) is a situation where the duties owed to two or more clients in the same or a related matter conflict or there is a significant risk of such a conflict.

Worked Example 1.1

A solicitor holds shares in a company. A new client instructs the solicitor to bring a negligence claim against the company. Can the solicitor act?

Answer:
No. This is an own interest conflict. The solicitor’s personal financial interest in the company conflicts with their duty to act in the best interests of the new client. The Code absolutely prohibits acting in these circumstances—there are no exceptions, regardless of consent.

Spotting a Conflict

You must identify not just actual conflicts, but significant risks of conflict. The risk must be more than remote or theoretical. Early indicators include: a need to negotiate terms between joint clients; different bargaining power or vulnerability; one client’s private information being relevant to the other; financial interests of the firm, its owners, or staff being engaged; and a likelihood that you may have to withhold information from one client to protect another.

Key Term: significant risk
A significant risk of conflict is a real, practical possibility of conflict arising—not a merely fanciful or hypothetical concern.

The General Prohibition

You must not act where there is an own interest conflict, a client conflict, or a significant risk of either. The Code’s rules apply whether you act for individuals, businesses, or multiple parties. Attempting to "manage" or "mitigate" a conflict is not a solution. Except as set out in the Code’s two specific exceptions for client conflicts, you must decline or cease to act.

There are no exceptions to an own interest conflict. Client consent cannot waive it. Typical own interest conflicts include: being a beneficiary of a client’s will you are drafting, acting where your employer is involved as a party, seeking to limit your liability without explaining that limitation to the client, or continuing to act to defend your past errors.

The Two Exceptions to the Client Conflict Rule

The Code permits continuing to act for two or more clients if (and only if) one of two exceptions applies, and all additional conditions are satisfied.

1. Substantially common interest: The clients share a clear common purpose and consensus about how to achieve it within the matter or a relevant aspect.
2. Competing for the same objective: Two or more clients are genuinely competing for an "objective" (for example, both are bidding for the same asset in an auction) and have agreed appropriate safeguards.

Each exception has strict conditions:

• All clients give informed consent in writing;
• Effective safeguards are put in place to protect confidential information (e.g., ethical walls);
• The solicitor is satisfied it is reasonable to act for all clients.

Key Term: substantially common interest
A situation where clients have a clear shared purpose in a matter/aspect and agree how to achieve it, so are not in opposition.

Key Term: competing for the same objective
Where two or more clients are rivals for an asset, contract, or business opportunity, and only one can succeed (e.g., rival auction bidders competing through an auction or tender process).

Key Term: informed consent
Consent given or evidenced in writing after the client understands the relevant facts, risks, alternatives (including separate representation), and limitations on information sharing and future representation.

Key Term: information barriers (effective safeguards)
Firm-wide measures to prevent the flow of confidential information between teams, such as separate fee-earners and support teams, physical and IT segregation, access controls, training, and audit trails.

When assessing whether it is reasonable to act, consider the clients’ sophistication and bargaining power; vulnerability; whether material negotiations are needed; the extent and sensitivity of confidential information; expected benefits (speed, cost, convenience); and your ability to disengage swiftly if conflict crystallises.

Worked Example 1.2

You act for two companies interested in bidding for a property at auction. Both wish to instruct you for the bid itself. May you act for both?

Answer:
Possibly. This is "competing for the same objective." You can act only if both clients give informed written consent, you implement robust safeguards (e.g., separate teams for each), and you are satisfied that acting for both is reasonable.

Practical Safeguards

The Code expects you to go further than merely obtaining consent. Effective safeguards may include:

• Separate, ring-fenced teams acting for each client (including segregated support staff and IT access);
• Clear retainer terms defining the limits of representation and the information that will or will not be shared;
• Internal training and written protocols prohibiting cross-team discussions;
• Secure document management with permission-based access and audit logs;
• Ongoing monitoring by a supervising partner and the firm’s compliance officer to ensure the barrier is effective; and
• A plan to cease acting immediately for all affected clients if an actual conflict arises.

When Does the Exception Not Apply?

• Own interest conflicts can never be overridden by client consent or information barriers.
• No exception will apply if the clients are on directly opposing sides of a dispute or if negotiation is required between the parties; the need to negotiate substantive terms is a strong indicator that you should not act for both.
• If at any time actual conflict arises in a matter where you were acting under an exception, you must immediately cease to act for all affected clients.

Worked Example 1.3

Two business partners are setting up a company and agree all terms between themselves. They ask you to act in drafting shareholder agreements for both parties. Can you act?

Answer:
Yes, if they genuinely share a substantial common interest and agree all relevant terms. You must obtain informed, written consent from both, put appropriate information safeguards in place, and assess whether it is reasonable to act given their circumstances.

Property and Finance Contexts: Common Pitfalls

Acting for seller and buyer at arm’s length is rarely appropriate because negotiations and divergent interests almost always arise. Acting for borrower and lender may be permitted in straightforward residential transactions on a standard, non-negotiated mortgage, where both parties share a substantial interest in ensuring good and marketable title. In such cases, retainers must reflect that you act for two clients and you must be alert to conflicts arising later (for example, where you become aware of undisclosed plans to sublet contrary to the lender’s terms).

Where a non-borrowing co-owner gives security over the family home for business borrowings of the other owner, independent legal advice is usually required due to the risk of undue influence and a significant conflict of interest. You should consider whether you can act at all for both clients; if you do, ensure robust safeguards and separate advice consistent with recognised practice guidance.

Worked Example 1.4

A first-time buyer instructs you to purchase a home with a standard high-street mortgage. The lender asks you to act for it too. Can you act for both?

Answer:
Often yes, provided the mortgage is on standard terms and there is no need to negotiate facility or security documents. Obtain informed consent from both, be clear you act for two clients, and ensure you can continue to act if circumstances change. If a conflict later emerges (e.g., a known planned sublet contrary to lender terms), seek consent to disclose; if refused, cease to act for both or at least one client.

Information Sharing, Confidentiality and Former Clients

Confidentiality and disclosure duties run alongside conflict rules. You must keep current and former clients’ affairs confidential (subject to law or consent). When acting for a client, you must disclose to that client all information material to the matter of which you have personal knowledge, unless an exception applies. If you hold confidential information for a current or former client that is material to a new client’s matter and the new client’s interests are adverse to the former client, you must not act unless either (a) effective measures eliminate any real risk of disclosure, or (b) the former client gives informed, written consent.

Key Term: adverse interest
The new client’s interests are adverse where they are or are likely to be opposing the current or former client in the matter, such that material confidential information about the former/current client is relevant to the new client’s case.

Common examples include: a firm previously acted on a lease dispute and is later asked to act for a prospective purchaser of the same property; or a firm interviewed a potential client whose matter did not proceed and later is asked to act for the opponent. In both cases, if material confidential information is held, you should normally decline unless an exception under the confidentiality rule applies.

Worked Example 1.5

You once advised Company A on defects in a commercial lease. Months later, a new client asks you to act on the purchase of the same property. Your knowledge of the defects could materially affect advice to the buyer. Can you act?

Answer:
Not unless you can put in place effective measures that result in no real risk of disclosure, or Company A gives informed, written consent. Given the materiality, best practice is to decline unless consent is obtained.

Worked Example 1.6

You act for both a borrower and the lender. The borrower privately tells you they intend to grant a sublease despite a mortgage term prohibiting subletting without consent. What do you do?

Answer:
Discuss with the borrower that you owe duties to both clients and seek their consent to disclose this material fact to the lender. If consent is refused, you must cease to act to avoid misleading the lender and breaching duties of confidentiality and disclosure. Do not disclose without consent (unless permitted or required by law).

Own Interest Conflicts in Private Client Work

A classic own interest conflict arises when a solicitor is asked to draft a will including a significant gift to the solicitor or an associated person. The safest and normally required approach is to decline to act and recommend that the client obtains independent advice. Similarly, acting as executor and purchasing an estate asset (self-dealing) creates serious conflict risks.

Worked Example 1.7

A long-standing client asks you to draft a will leaving you a substantial legacy. What is the correct approach?

Answer:
Do not act. This is an own interest conflict. Advise the client to take independent legal advice and arrange for another firm to draft the will if they wish to proceed. Client consent cannot cure an own interest conflict.

Criminal and Disputes Contexts

Acting for opposing parties to litigation is prohibited. Acting for co-defendants or multiple respondents is often unsuitable because a conflict may emerge, for example where mitigation for one client implicates the other. Even if separate, ring-fenced teams could theoretically be formed, the practical risk of conflict in contentious matters is high and you should be ready to decline or limit the retainer to avoid conflicts.

Exam Warning

A client conflict can only arise between current clients. Where a former client is involved, analyse confidentiality under para 6.5: if you hold material confidential information and the new client’s interests are adverse, you must not act unless there are effective measures or the former client gives informed, written consent.

Documenting the Decision and Ongoing Review

Whenever a potential conflict is identified:

• Conduct and record a conflicts check at the outset and whenever circumstances change;
• Analyse whether the risk is significant and whether an exception applies (client conflicts only);
• If relying on an exception, obtain informed consent in writing, explaining risks and alternatives, and put in place effective safeguards;
• Record your reasons why acting is reasonable and monitor the matter for changes;
• If an actual conflict crystallises, cease to act promptly for all affected clients and consider whether explanation can be given without breaching confidentiality;
• Keep attendance notes and copies of consent letters; ensure the firm’s compliance officer and matter partner review and approve the approach.

Para 7.2 requires that you can justify your decisions and actions if challenged. Managers must ensure the firm has systems to identify conflicts, train staff, and maintain a central conflicts and former-client information register.

Worked Example 1.8

You are instructed by two founders to incorporate a company and draft the shareholders’ agreement. At first there is alignment, but a month later they disagree about vesting and exit provisions. What should you do?

Answer:
Reassess the conflict position. The need to negotiate substantive terms on behalf of both founders indicates a significant risk of conflict. Unless both truly maintain a substantial common interest and agree all material terms, you should cease to act for one or both and refer them for separate representation.

Evidence of Informed Consent

Informed consent must be specific and recorded. Your letter should:

• Identify the clients and the matter/aspect to which consent relates;
• Explain the nature of the conflict risk and how it may affect each client;
• Describe what information can and cannot be shared and the safeguards;
• Clarify that if an actual conflict arises, you will cease to act;
• Invite the client to take independent advice, especially where bargaining power is unequal or the client is vulnerable; and
• Require written confirmation (signed or otherwise evidenced in writing).

Generic terms of business are unlikely to evidence informed consent to a specific conflict; the consent must relate to the particular matter or aspect.

What If Things Change?

Conflicts analysis is a continuing obligation. A matter that began under an exception may later fall outside it (for example where negotiations arise or information emerges that cannot be shared). At that point, you must cease to act and consider the confidentiality constraints on explaining your withdrawal. You may not disclose confidential information to justify your exit unless the client consents or disclosure is required or permitted by law.

Exam Warning​

Even if you think you can act under one of the exceptions, record the reasons for your decision and keep consent documentation. The SRA expects to see this if your approach is later challenged.

Breaches and Consequences

Breach of the conflict rules is a serious disciplinary offence. Typical consequences may include:

• SRA regulatory action (rebuke, fine, suspension, or referral to the SDT);
• Claims for negligence or breach of fiduciary duty (e.g., loss caused by conflicted advice);
• Orders to perform or unwind undertakings and transactions where relevant;
• Invalidation of fee arrangements and disgorgement of profits; and
• Reputational harm to you and your firm.

A pattern of failures can amount to a serious breach requiring prompt reporting to the SRA under the reporting and notification obligations. Firms must maintain systems that reduce the likelihood of such breaches and deal effectively with them if they occur.

Revision Tip

Questions may require you to distinguish between own interest and client conflicts in practical scenarios—be precise with your terminology and the steps taken. If in doubt, decline to act, explain why, and help the client obtain separate representation.

Key Point Checklist

This article has covered the following key knowledge points:

• The distinction between own interest and client conflicts under the SRA Code.
• "Significant risk" means a real possibility, not a fanciful one; screen for it throughout a matter.
• The general prohibition on acting where a conflict or risk of conflict exists, subject to narrow exceptions for client conflicts.
• There are no exceptions to the own interest conflict rule—even with client consent.
• The two client conflict exceptions: substantially common interest and competing for the same objective.
• Strict compliance with requirements for informed, written consent, effective safeguards (information barriers), and reasonableness where an exception applies.
• The confidentiality–disclosure interplay and para 6.5: do not act where you hold material confidential information of a current/former client whose interests are adverse, unless effective measures eliminate real risk of disclosure or you have the client’s informed consent.
• Practical safeguards include separate teams, IT and physical segregation, clear retainer limits, and ongoing monitoring.
• You must cease to act immediately if an actual conflict arises; do not disclose confidential reasons without consent or legal basis.
• Recordkeeping and justification: document conflicts checks, reasons to act, consents, safeguards, and reviews.
• Breach of these prohibitions is a serious professional and regulatory matter with disciplinary, civil and reputational consequences.

Key Terms and Concepts

• own interest conflict
• client conflict (conflict of interest)
• substantially common interest
• competing for the same objective
• significant risk
• informed consent
• information barriers (effective safeguards)
• adverse interest