LSB backs end to minimum salary and to IFA referral requirement
Kenny: SRA commitment to monitor impact of minimum salary change
Controversial rule changes that scrap the minimum salary for trainee solicitors and allow solicitors to refer clients to tied financial advisers were approved last month by the Legal Services Board (LSB).
In both cases the LSB found that there was no reason to refuse the applications by the Solicitors Regulation Authority (SRA).
On the minimum salary, which the SRA , the LSB said it took account of the detailed economic and equality impact assessment completed by the SRA. The decision notice sent by LSB chief executive Chris Kenny said: “The LSB noted the overall findings that although it was a complex picture and precise impacts were hard to predict, the proposed change on balance would not have a negative impact.
“The LSB was pleased to see that the application included a commitment to monitor the impact of the change and look forward to seeing the results of this monitoring in due course, possibly within the context of a wider assessment of the effectiveness of the SRA’s regulatory action to improve equality and diversity in the profession.”
Mr Kenny said the LSB also accepted the SRA’s reasons for acting before knowing the outcome of the Legal Education and Training Review (LETR), which included that the minimum salary should be dealt with separately from the wider discussions about reform of the education and training process, and that changes to the training regime arising from the LETR will not take effect for some time.
On financial services, following a decision in November, the SRA applied to change to the Code of Conduct so that solicitors have to put clients “in a position to make informed decisions about referrals in respect of investment advice”, ending the previous requirement that they are referred to an independent intermediary.
Mr Kenny said the LSB was “mindful” of concerns that the change could impact on the independence of the law firm and the risk of an increase in negligence claims because of inappropriate referrals. The SRA countered that its research showed no evidence to suggest that independence will be compromised and that it will monitor the ways in which the legal profession interacts with financial advisers.
The LSB decision said: “It has been noted that the revised outcome does not prevent solicitors from referring clients to independent financial advisers and the new wording is consistent with chapter 9 of the SRA Code on Fee sharing and referrals.
“The SRA will assess whether the changes can be shown to have a causal link with increased numbers of negligence claims against law firms and increased numbers of claims on the Solicitors Compensation Fund because of inappropriate introductions… The LSB takes assurance from the commitment by the SRA to review the impact of the changes.”
Meanwhile, the Costs Lawyers Standards Board (CLSB) has been issued with a warning notice that the LSB is considering whether to reject its proposals to regulate trainee costs lawyers.
The LSB said it is “not sufficiently clear” that the CLSB has the “requisite powers” to do this, and further “the CLSB has not provided sufficient evidence to explain the extent of the regulatory problem that it is trying to address”. It continued: “We have therefore come to the view that… the proposals are not proportionate or targeted at a problem which requires regulatory intervention.”
The LSB now has a year – extendable by a further six months – to make a decision on the application.
Tags: financial services, Legal Services Board, minimum salary
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