Solicitors should be able to practise from unregulated firms, SRA suggests

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27 November 2015

Paul Philip

Philip: “all we’re doing is kicking off the debate”

Practising solicitors should be allowed to deliver advice to the public from unregulated firms, subject to restrictions, the Solicitors Regulation Authority has suggested as part of a phased review of how it regulates both individuals and organisations.

In a pre-consultation paper, the regulator also said plans to introduce third-party escrow accounts for solicitors would feature in a review of the accounts rules next spring.

Paul Philip, SRA chief executive, told Legal Futures: “All we’re doing is kicking off the debate. We’ll see where we get to.”

Under the plans, published yesterday, consumers would be able to choose between seeing a practising solicitor in a firm regulated by the SRA or as a “regulated individual working in an unregulated business” providing unreserved legal activities to those other than their employer.

Mr Philip said there would be restrictions on solicitors working for unauthorised bodies, including the right to hold client money. He said that in many cases they would “probably not be able to hold” client funds.

Access to the Compensation Fund would be limited, and there would be responsibilities on individual solicitors in terms of professional indemnity insurance, though it was not explained in the paper how this would work.

“All solicitors are obviously subject to the core professional principles at all times,” Mr Philip said. “Our proposals are that they should be able to provide services outside authorised bodies, with checks and balances.

“Consumers need to understand the protections, and make informed choices. There would have to be appropriate consumer protection, but not as burdensome as it is for authorised entities.”

In the position paper, the SRA said: “Solicitors will be free, under our proposed new approach, to practise in the wider legal services market, delivering non-reserved legal services to the public outside of firms that we regulate.

“We do not consider that these changes will represent in any way a reduction or ‘watering down’ of the solicitor brand. On the contrary, the changes should strengthen it.

“With increased visibility and accessibility of solicitors, people can choose a qualified professional when that is what they want or need. Ultimately, the ‘solicitor brand’ will stand or fall on whether it remains relevant, and in particular if the reputation for excellence is matched by actual consumer experience.

“Our proposed changes will improve access to regulated services for the public and business users – who will have increased access to the high standards of professionalism delivered by solicitors.”

The proposal on unregulated firms is part of a wider review of the 2011 Solicitors Handbook, being carried out by the SRA. Mr Philip described the current Handbook as “too big, too bulky and too prescriptive”.

In the paper, the SRA said the first phase of its handbook review would focus on “the rules about how solicitors and firms can practise and the behaviours, conduct and standards expected of them”.

Among them are the core principles, and the SRA promised to explore whether 10 was the right number, whether they were “fit for purpose” and whether some of the content should be transferred to the Code of Conduct.

The regulator said it would also seek to amend the accounts rules to “formalise appropriate protections” so that firms could use third-party escrow accounts.

The SRA consulted on the issue earlier this year and originally hoped to implement the change this month. The regulator said this would now form part of a “comprehensive review” of the rules, promised for next spring.

The second phase of the Handbook review will include the rules on discipline.

Mr Philip added that none of the changes would come into force before the spring of 2017. “This is a pre-consultation document. We’re telling the world about our direction of travel.”

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