Countdown to outcomes-focused regulation begins as SRA publishes Handbook

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By Legal Futures

6 April 2011


Townsend: we are proud of what we have achieved

Solicitors, law firms and would-be alternative business structures (ABSs) today get first sight of the new SRA Handbook, the 563-page guide to practising and running a legal practice.  

The Handbook – delivered on schedule and exactly six months before it is due to come into force – introduces the profession to outcomes-focused regulation (OFR), a new approach to regulation that aims to give lawyers greater freedom in how they deliver their services to clients.  

It will also allow the Solicitors Regulation Authority (SRA) to focus its resources on areas of particular risk, moving away from nit-picking over every minor breach. 

Many of the detailed rules in the 2007 Code of Conduct will be replaced by the professional standards expected of a solicitor and an explanation of how they should be experienced in reality by clients – the outcomes. How they achieve these, however, is for the solicitor to decide. 

Compliance will be judged against 10 mandatory core principles, while the new code provides non-exhaustive, non-mandatory “indicative behaviours” that will tend to prove that an outcome has or has not been achieved. The SRA is promising a far more constructive approach with firms that fall short but are trying to comply. 

As a result of OFR, the new code of conduct within the Handbook is now just 54 pages.  

Among the provisions that will be read particularly closely are the new rules on conflicts of interest – which as we reported recently were heavily reworked from the earlier version of the Handbook – greater powers for the SRA to oversee outsourcing arrangements, and the requirement to have compliance officers for legal practice and for finance and administration, who will be accountable to the SRA.  

SRA chief executive Antony Townsend said OFR is not light-touch regulation. “It is a framework that will allow the SRA to regulate firmly and fairly while legal services providers are given the chance to serve their clients in the best possible way. Our primary concern will be to work with firms to improve standards. Only when failures are serious or a firm does not show the will to improve, will we consider taking formal action.”  

He stressed that nominating a compliance officer does not absolve other partners and staff from responsibility for either their actions or those of the firm.  

ABSs which are licensed by the SRA will be regulated, as far as possible, in the same way as traditional firms. Anyone with a “material interest” in an ABS will be subject to a suitability test, while the SRA’s existing indemnity insurance and compensation fund provisions will apply to ABS in respect of all of their regulated activities.  

A material interest is defined as 10% of shares or voting rights in the ABS or parent company, or having a “significant influence” over the management of either as a result of their shareholding or voting rights.  

The SRA has organised 15 roadshows around England and Wales to explain the Handbook and answer solicitors’ questions. More are being organised because of the strength of demand.  

Mr Townsend said: “We are proud of what we have produced and believe it will open the door to a new era for legal services, with the needs of the client first and foremost. We firmly believe that this is the best way forward for clients of legal services in England and Wales, and for those who offer such services to the public.”

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