SBR changes could cause “irreparable damage” to solicitor brand, warn City lawyers

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13 February 2015


City of London

City solicitors warned of “splintering and destabilisation”

Plans by the Solicitors Regulation Authority (SRA) to relax the separate business rule (SBR) could cause “irreparable damage” to the solicitor brand and “drive significant numbers of the profession” into the unregulated sector, the City of London Law Society has warned.

The society said solicitors could be driven off the roll, to practice “in the new world” as unregulated ‘lawyers’, with the SRA “experiencing a consequential (and potentially significant) decline in clout and revenue”.

The end result of the SRA deregulating to open up provision of legal advice by separate businesses would, the society predicted, be that it would “sooner or later stop being a ‘solicitor service’”.

Responding to the SRA consultation on changes to the SBR, which closed yesterday, the society went on: “Solicitor services may shrink to becoming those services which only solicitors can provide, i.e reserved activities.

“Whether that is good or bad is a moot point, but we would submit that the SRA should not press ahead with these changes, without acknowledging the core role of legal advice in the service which many solicitors provide and the impact of making changes which permit solicitors only to invest, but not start providing that legal advice, in the unregulated sector.”

The society said that given the “far-reaching” implications of the proposals, the SRA’s market analysis was “surprising unscientific and not bespoke”.

City lawyers argued the 60 waivers from the SBR granted to alternative business structures was not an indication of demand for change and was mainly the result of investor owners “already undertaking an activity which happens to be a prohibited separate business activity”.

There was “little evidence” of demand by traditional law firms for waivers from the SBR and only two had been granted.

The City of London Law Society concluded that SRA’s plans were “overly hasty, not based on sound data” and made without a proper assessment of the impact, which could mean the “splintering and destabilisation of the profession”.

The SRA’s proposals were also strongly attacked by the national Law Society, which warned that the legal services market could be “destabilised”.

The Law Society agreed that the scope of the work that law firms undertook within existing rules should be widened, but warned that relaxing the rules could lead to a “growth in the number of unregulated providers”, removing accountability from those providing important services and exposing “vulnerable inexperienced consumers to exploitation”.

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