Hudson: SRA needs to provide “safe harbour” guidance to make OFR work

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By Legal Futures

10 August 2011


Hudson: SRA needs to share its approach to enforcement

The benefits of outcomes-focused regulation (OFR) could be thrown away if the Solicitors Regulation Authority (SRA) fails to provide “safe harbour” advice on how law firms plan to comply with the new rules, and transparency on how it will deal with breaches, the Law Society has warned.

Chief executive Des Hudson said uncertainty could lead to firms treating as rules the “indicative behaviours” in the new Code of Conduct, which are only meant to be non-mandatory examples of the types of activity which could show compliance with the code.

Writing in the latest issue of the Law Society’s Legal Compliance Bulletin, Mr Hudson said the principles-based nature of OFR – which goes live on 6 October – could provide a mechanism for “cost-effective, efficient and less prescriptive means of regulating our profession”.

This would give firms “more freedom to run their businesses in a way that responds to the clients’ needs” – even if that just means delivering information in a manner other than in writing, as currently required.

However, he said chief among the “risks, uncertainties and challenges” of the new framework is the lack of “safe harbour” advice – a means by which firms can seek out and rely upon guidance from the regulator. The SRA has so far resisted pressure to provide this reassurance.

Mr Hudson continued: “Second is the need for the SRA to share its approach to enforcement – what will be ‘prosecuted’ and what will be dealt with by ‘education’ and self-correction?”

Without this, firms may fall back on meeting the indicative behaviours to ensure they comply and “far from seeing flexibility in firms’ approaches, we may see a uniformity of response that could be disappointing”.

He added that support and flexibility from the regulator will be particularly important in the early days of the new regime.

“I also think that there are some ambiguities which have yet to be resolved: questions remain around the SRA’s application of its powers in foreign jurisdictions as well as the lack of assurance from the SRA regarding implementation of its enforcement powers and the lack of clarity in how the SRA plans to resolve them.

“This is hugely important because if OFR fails, then there is a significant reputational risk to our profession.”

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