SRA to ditch reporting requirement for non-material rule breaches

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23 July 2013

Red tape initiative: PC renewal to be made easier

The requirement on law firms to report non-material breaches to the Solicitors Regulation Authority (SRA) is set to be ditched in time for this year’s annual information submission.

The board of the SRA will tomorrow be asked to approve changes to the SRA Handbook following a consultation which found “strong support” for the move.

A report to the board following the consultation on the latest stage of the SRA’s red tape initiative said: “Many thought that the change would result in time savings for firms, allow firms a greater control over the analysis of this type of data and would assist the SRA in freeing up time to concentrate on material breach issues.”

It said the SRA will still be able to require a firm to produce its records of all breaches. “This gives us adequate means to monitor a firm more closely if necessary, as part of a supervision compliance plan that would be put in place as part of any enforcement action.

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“We expect that most firms will wish to retain their records of breaches for a significant period, both from a regulatory perspective and perhaps also for due diligence purposes in the event of a merger or sale of the practice.

“Our view is that it should be left to individual firms to determine the format in which they record breaches and the length of time for which such records are retained, in keeping with outcomes-focused regulation and the needs of individual firms.”

The change will not affect alternative business structures (ABSs) as they are required under the Legal Services Act 2007 to report both material and non-material breaches to the SRA.

While acknowledging the importance of consistent regulation across ABSs and traditional firms, the SRA said in the consultation that requiring the delivery of information on all breaches from over 10,000 firms, primarily because the Act imposes that requirement on a much lower number of ABSs, “is unsustainable and cannot be justified in the context of proportionate, risk-based and cost-effective regulation”.

The board will also be asked to approve a second bureaucratic reform that would mean a solicitor applying for a practising certificate (PC) would not have to declare an insolvency event if they ceased to be a member of that business more than three years before it happened.

The rules would also be clarified that previously declared historic events of any kind need not be declared again if, after the first time, the SRA decides not to impose any conditions on the PC.

If the SRA board votes for these changes and they are then approved by the Legal Services Board, they will be included in version 8 of the SRA Handbook on 1 October 2013

The SRA is planning at least two more rounds of the red tape initiative.

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