That will be principles based and outcome focused then!

Print This Post

16 February 2010


Posted by Alan Bannister of Vizards Wyeth, a Legal Futures Associate

Bannister: SRA is skipping an unnecessary step

Those of us with recent experiences of the Financial Services Authority’s (FSA) changing approach to regulating its industry firms, should be forgiven a wry smile on reading SRA board chairman Charles Plant’s article on ‘outcomes-focused regulation’ which appeared in the Law Society Gazette on 11 February 2010. Solicitors’ firms should be careful not to assume they understand automatically some of the buzz words and phrases he uses.

‘Principles’, ‘culture’, ‘outcomes focused’, ‘flexible’ – all of these words have a common theme, namely uncertainty, and the SRA will need to manage their firms concerns most carefully when dropping a rules-based system in favour of one that shifts the burden of interpretation onto individual firms. When the FSA looked at changing its regulatory landscape, it introduced ‘principles based regulation’ (PBR). That didn’t work sufficiently because different firms interpreted the principles in their own way and often missed the point. A famous example was principle 6: ‘A firm must pay due regard to the interests of its customers and treat them fairly.’

What constituted ‘fair’ changed from firm to firm and in most cases did not meet the FSA’s ideas of what ‘fair’ meant. This led to what are known as ‘thematic visits’ to firms, the publication of huge screeds of literature on the subject, including the FSA’s six desired outcomes for ‘Treating Customers Fairly’ (TCF) and a 38-page paper on what ‘culture’ meant. Most unwelcome was the enforcement action taken by the FSA, which has to date levied fines of millions of pounds on firms found wanting in this area.

For the smaller and medium-sized firms, PBR was problematical not only because it removed certainty but also because of the additional time and resources required to get to grips with what the principles meant for them. Larger firms that had effectively run their businesses in line with the requirements of the Combined Code (now the Corporate Governance Code) objected less as the concept was familiar to them.

The result was that the FSA last year moved to outcomes-focused regulation, but without so far publicising much by way of what outcomes they are seeking.

At least the SRA seems to be skipping an unnecessary step in the process to achieve better results for clients. It is to be hoped that it is a lot clearer in its intended outcomes than arguably the FSA has been, and in so doing take the lead in what clearly is becoming a more customer-focused world.

Tags: , , ,



Leave a comment

* Denotes required field

All comments will be moderated before posting. Please see our Terms and Conditions

Legal Futures Blog

The ethics of the SRA’s social media warning notice

Mena Ruparel

Social media portals are regularly used by firms and those who work for law firms in both professional and personal capacities. Their informal nature and the fast pace of use makes it all too easy for regulated people to get carried away with online discussions or comments which can fall foul of the regulator. This is more likely to happen on social media platforms as these are virtual, accessed in the solicitor’s own time and space. It can be easy to forget that solicitors are regulated just the same at 11pm on their home computer as they are at 3pm in the office or at court.

September 15th, 2017