SRA aims to ease the path for MDPs

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8 May 2014

Perfect match: SRA aims to encourage MDPs to join ABS crowd

Non-reserved legal activities within multi-disciplinary alternative business structures (ABS) should be taken out of regulation by the Solicitors Regulation Authority (SRA), it proposed yesterday.

One of the key limbs of the SRA’s radical restructuring of regulation, the move to lessen the burden of regulation on MDPs is a response to their limited take-up of ABSs to date, despite high hopes that more solicitors would join with other professions.

As it outlined last month, the SRA fears the existing heavy-handed regime is a deterrent to more MDPs becoming ABSs and has unnecessarily delayed applications so far.

Under the MDP proposals, where an ABS that is an MDP provides non-reserved legal services through staff that are “professionally regulated other than as lawyers”, the SRA will waive regulation of those activities. Under the current rules, all activity carried out by the ABS would be regulated by the SRA, not just the reserved activities.

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The SRA gave the example of an accountancy practice that wanted to become an ABS and already provided advice that covered issues relating to tax law, which is ‘legal activity’ under the Legal Services Act. As the rules stand, upon obtaining an ABS licence this would fall under SRA regulation. Other professional services MDPs likely also to be caught included chartered surveyors, management consultants and wealth managers.

The authority admitted the rules had not envisaged that non-reserved legal services were already regulated elsewhere. Imposing SRA regulation on them could lead to duplication, confusion, and disputes, the SRA said, conceding it has “already led to delays in processing ABS applications”.

It also acknowledged that a “work around” to avoid being caught by the separate business rule, where MDP ABS applicants split their businesses into separate legal entities then applied for a waiver of the rule, had led to extra expense and “can deprive clients of the type of holistic services that the [Legal Services Act] was designed to help achieve”.

As well as benefiting consumers, the SRA said, encouraging more MDPs to become ABSs would “offer opportunities for solicitors themselves to reach wider markets and bring in investment”.

The consultation ends on 18 June. If adopted, the changes would come into effect in October 2014.

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