SRA: clients may not need “detailed information” where work is referred to firms’ separate businesses

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29 October 2015

Crispin Passmore

Passmore: new rules aim to create “level playing field”

Clients may not need detailed information about separate businesses when work is referred to them by their law firm owners, the Solicitors Regulation Authority (SRA) has said.

The SRA said the amount of information provided under the reformed separate business rule (SBR) depended on the likelihood of confusion in the consumer’s mind over how each firm was regulated.

Andy Foster, a member of the Legal Services Consumer Panel, warned this week that unless lawyers got to the grips with the need for consumers to give informed consent under the new rules, the issue could come back to “bite the profession”.

In a guidance note published on its website, the SRA advised solicitors: “The more obviously ‘separate’ the business, and the further away its activities are from legal activities that consumers might expect to be provided by a lawyer, then the less detail will need to be provided.”

It gave the example of ‘G Properties’, an estate agency owned partly by law firm ‘W & Co’.

“The two businesses do not share premises, staff, publicity or a website, although referrals occur between them. G Properties do engage in some legal activity that is routine for estate agents – for example, providing draft leases to residential landlords.

“However, cases are never ‘split’ between the two firms and W & Co only refer clients for estate agent activities.

“There would seem to be little risk of consumers being confused as to the nature of regulation of the different entities. So, for example, it should be unnecessary for G Properties website or other publicity to state that G Properties are not regulated by the SRA.”

The SRA said that when referring clients to G Properties, the law firm could refer to the fact that it was an estate agent and not regulated by the SRA, but would not “generally not need to involve detailed information about differences in regulation”. However, the nature of the links between the businesses must be made clear.

In the same way, in the personal injury world, a law firm could refer clients to a car hire service, which was part of the same group of companies.

The SRA said that “detailed information about regulatory redress” would not be needed, so long as the client had agreed to details being passed to the car hire company, it was in his or her best interests and he or she understood the links between the two businesses. The rules relating to introductions to third parties, under chapter 6 of the Code of Conduct, must also be complied with.

Factors which required more specific information to clients included whether the businesses shared the same or a similar name, premises or staff, whether there were linked websites or publicity and whether individual matters were split between the two businesses.

The SRA gave the example of ‘R Solicitors’, owning ‘R Estates’. The firms shared a website, with R Estates administering the estates and referring clients to R Solicitors for the grant of probate.

“The website itself will need to explain clearly that R Solicitors are regulated by the SRA and that R Estates are not.

“However, there will be a need to go further and obtain the client’s informed consent to the matter being divided between the firms and provide specific information as to the differences in regulation and redress.”

Crispin Passmore, executive director for policy at the SRA, said: “The legal services market is big business and more and more firms providing legal services are looking to innovate, to create different ways of delivering what consumers want.

“We want to support this innovation, so we have amended the rules to create a level playing field, allowing law firms to compete with other companies offering these ‘one-stop shops’.

“We are now looking into what more we should do to give solicitors even more flexibility in future. We have a responsibility to encourage a competitive, vibrant legal sector which ultimately increases choice for consumers.”

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