SRA sticks to its guns over referral fee ban guidance

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24 January 2013

Collins: interactive information process

The Solicitors Regulation Authority (SRA) is confident of its interpretation of the referral fee ban but simply cannot give the level of clarity over which business models will comply that many want, the official leading the work said yesterday.

Speaking at the SRA board meeting in Birmingham – at which the proposed approach to implementing the ban was approved – Richard Collins, executive director of policy and standards, also emphasised that the ban’s effectiveness in meeting its public policy objectives was a matter for the government and not the regulator.

Respondents to the SRA’s October consultation disagreed with aspects of the draft guidance published with it, in particular that commissions received for arranging after-the-event insurance would contravene the ban, the extent of the information that needs to be provided for there to be a referral, and the SRA’s view that the ban applies to claimant work only.

Mr Collins said the draft guidance was based on external legal advice and “so this is the line we will continue to take”. Ultimately it could be tested in the Solicitors Disciplinary Tribunal (SDT) or the courts, he said.

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He told the board that despite the strong message from consultees that solicitors and others wanted as much certainty as possible over what would and would not be permitted under the ban, “clarity at the level people are seeking is not possible”. It would be a matter of fact in every case and there are “an infinite number” of possible business models, he explained.

He promised an “interactive process” with the profession, meaning that as the SRA encounters different schemes and other issues, it will release information on its views and approach. This will include case studies on compliant and non-compliant business models.

Responding to ongoing concerns about the use of alternative business structures (ABSs) to ‘get round’ the ban, Mr Collins indicated that so long as a model complied with the requirements for ABSs and with the legislation banning referral fees, then that was as much as the SRA was concerned with. “It is a matter for the government if the ban doesn’t have the impact it wanted,” he said.

There was also discussion about whether firms that breach the ban would face a sanction that recouped the money they made from doing so. David Middleton, the SRA’s executive director of legal and enforcement, said that while the SRA’s own sanctions guidance provides for this, the SDT’s does not. However, in such cases, he said, the SRA would press the tribunal to take such an approach.

The changes to the Code of Conduct will now be sent to the Legal Services Board for approval, and, assuming this is received, a seventh edition of the SRA Handbook will be published before 1 April, when the statutory ban will come into force.

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