Freshfields' London office

Freshfields Bruckhaus Deringer is planning to set up a "conduct committee" and introduce heavy, automatic financial penalties for partners that require a warning about their behavior.

According to a person with knowledge of the matter and documents seen by Legal Week, a new "conduct protocol" would mean partners who are subject to an internal investigation process that results in a final warning about their behavior would face an "automatic fixed financial penalty" of 20% of their profit share for a period of 12 months.

The revelations come in the same month that the Solicitors Disciplinary Tribunal (SDT) handed former partner Ryan Beckwith a total £235,000 ($305,000) penalty for inappropriate behavior, following a nine-day hearing into allegations of sexual misconduct.

The firm previously said that it would not make any changes to its policies or protocols as a direct result of the Beckwith verdict.

The new conduct protocol, which, according to the person, was deliberated over by the partnership council within the last two weeks, is designed to "reset the collective understanding around the expected standards of behavior" and to demonstrate the partnership's "commitment to improving our culture."

The proposals, put forward by way of a draft consultation, would entail amendments to the firm's overall members agreement and are, according to the document, designed to meet three broad objectives. These are "aligning the firm's partner conduct and disciplinary process across the firm; supporting the objectives of the culture and behavior program; and meeting the expectations of our clients and regulators."

The conduct protocol will clarify the investigation process for allegations against partners and possible outcomes, and the firm would establish a conduct committee—a subcommittee of the partnership council—to oversee the investigations process and to decide on outcomes.

According to the proposals, the firm will also update its members agreement to distinguish between forced retirement "by reason of misconduct" and other cases, such as underperformance. The amendments would also enable the partnership council to "suspend a partner who is subject to an investigation."

Beckwith was suspended in December 2018 after allegations of sexual impropriety became known to the firm. Beckwith, a former restructuring and insolvency partner at the firm, resigned earlier this month after he was accused of engaging in sexual activity with a junior colleague without her consent.

On the day of his resignation, the SDT found that he had acted inappropriately and in breach of two Solicitors Regulation Authority principles concerning integrity and maintaining public trust.

The conduct protocol, according to the document, will include guidance around what constitutes "improper behavior" and "provide clarity about what circumstances will be considered to mitigate an outcome, and what are aggravating factors."

Senior partner Edward Braham said in a statement to Legal Week: "We are committed to improving behavior and inclusiveness. For more than a year we have been running a global behaviors program to drive culture change, which includes reviewing and adjusting our HR processes, governance and systems across the firm.

"We want to ensure that positive behavior is consistently valued and that inappropriate behavior is called out and acted upon. The plans for a conduct committee and protocol are part of this ongoing program across the firm."

According to the document, the proposals were discussed by the Magic Circle firm's partnership council, which operates as the firm's board and, according to a separate letter, comprises senior partner Edward Braham and "15 selected members." These include London-based financial institutions group co-head Andrew Hutchings and Tokyo-based antitrust partner Jenny Connolly, among others, according to the firm's website.

The Beckwith hearing shone a light on Freshfields' culture, with details emerging such as the regular consumption of alcohol and lavish deal-end parties.

The protocol will, according to the document, allow the conduct committee to "exercise its judgment on the facts of each case"—however, the council has "requested further guidance on what constitutes a disciplinary, as opposed to a managerial, issue requiring escalation" to the conduct committee.

Disciplinary issues will include both individual incidents of serious misconduct, as well as repeated incidents of "unacceptable behavior."

According to the person, the partnership council endorsed the proposal to introduce the automatic fixed financial penalty of 20% of a partner's profit share, with the penalty tied not to the nature of the offence but to the final warning.

The council had also stressed the need for the firm's leaders to "play a part in giving effect to the spirit of the changes."