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That isn't my understanding at all. Surely a general confidentiality restriction can still be entered into (so it can't be discussed on Facebook etc) but with an exemption allowing either party to report to the SRA. That is akin to the statutory exemption for protected disclosures. Whether the firm determines there is a duty to report will depend on the severity of the allegations and the findings of the investigation. I imagine it is especially rare in our profession for malicious allegations to be made, especially by solicitors.