SRA shows muscle with referral fee ban investigations
Townsend: 29 firms without indemnity insurance plan to close
The Solicitors Regulation Authority (SRA) has launched “forensic investigations” into 10 law firms that may have breached the personal injury referral fee ban, in a move that will be seen as a warning to the profession.
In his report to tomorrow’s SRA board meeting in London, chief executive Antony Townsend revealed the authority has so far “engaged” with 45 firms and visited 25 to assess whether suspected breaches of the ban had taken place.
The authority wrote this autumn to about 900 firms whose caseload consists of more than 50% PI work to remind them of their duty to comply with the ban. Last month it issued a warning notice to the profession to be mindful of general regulatory obligations as well as the ban.
Mr Townsend said in his report: “Visits continued during November to the higher risk firms. The sample includes a variety of size and type of firms, covering various personal injury referral schemes. The focus of our engagement with firms has been on how firms obtain new personal injury work and what information and advice is given to clients about any referral arrangements.”
In other enforcement activity, the SRA has written to 141 firms that failed to obtain professional indemnity insurance cover by the 1 October deadline and are within the 90-day extended policy period (EPP), which this year replaced the assigned risks pool.
In the final 60 days, firms may not take on new instructions and must shut down when it expires if they have not found cover by 29 December. The SRA has designated a supervisor to help firms draw up a wind-down plan. So far, 136 of the 277 firms that entered the extended period have secured a new indemnity insurance policy.
The director of supervision, Mike Haley, said: “We’re aware of the different plans some of them have, such as merging with another firm or selling their business, but all need to know that when the EPP ends, they will no longer have insurance and therefore will not be able to undertake any reserved legal activities.”
In his statement to the SRA’s board, Mr Townsend reported that as at 12 November, 29 firms in the EPP planned to close.
In relation to the others, he said: “We intend to adopt a tough regulatory approach to ensure that firms shut down by the end of the period.”
Meanwhile, the SRA is undertaking a ‘data matching exercise’ using data provided by insurers to identify those firms which failed to notify the authority by 1 October that they were having difficulty finding a new insurer. Mr Townsend anticipated “disciplinary investigations and possible interventions in 2014” would result.
The long-running COLP/COFA appointments saga was approaching its end and should be completed by the end of this month, Mr Townsend said – 16 months after the original 31 July 2012 deadline for nominations.
There were still 55 investigations within the enforcement team, “mainly relating to delay and failure to disclose material information as part of the nomination process”, and most of them awaiting adjudication that was “likely to result in an internal sanction”.
There have been four interventions into firms where failure to nominate compliance officers was one of the grounds. The most serious disciplinary sanction has been a ‘rebuke’ made on four occasions, while less serious outcomes have included handing out 64 ‘findings and warnings’ and 224 ‘letters of advice’.
Tags: COFA, COLP, compliance officer for finance and administration, compliance officer for legal practice, professional indemnity insurance, referral fee ban, Solicitors Regulation Authority
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