SRA receives green light to license ABSs

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By Legal Futures

16 June 2011

Townsend: SRA stuck to challenging timetable

The Legal Services Board (LSB) is to recommend to the Lord Chancellor that the Law Society – through the Solicitors Regulation Authority (SRA) – become an alternative business structure (ABS) licensing authority.

As well as the ABS application, it has also approved the new SRA Handbook and the outcomes-focused approach to regulation that it will introduce on 6 October.

SRA chief executive Antony Townsend said he was pleased that the SRA has adhered to the challenging timetable set by its board some 18 months ago: ‘The Handbook is the culmination of a great deal of collaborative work between the SRA and our stakeholders. It is a key part of our new regulatory regime, putting the needs of clients at the heart of regulation, and offering greater freedoms in the delivery of legal services.

‘We are also delighted to win the LSB’s approval for the licensing authority application, which will now go forward for parliamentary approval.  We believe that it is in the public interest for us to regulate ABSs, as this allows us to ensure that these new business are subject to the same rigorous professional standards as those expected of traditional law firms.’

Mr Townsend said the SRA remains on track to be ready to license ABSs from 6 October, “but this is subject to the parliamentary timetable and process”. As first reported by Legal Futures, LSB chief executive Chris Kenny has admitted the regulations to enable the SRA to start licensing ABSs then are unlikely to be in place in time, although those for the Council for Licensed Conveyancers will be.

During the process of considering the Law Society’s application, there was disagreement between the LSB’s three statutory consultees over the continuing existence of the separate business rule, which prevents law firms and ABSs from carrying out most unreserved legal activities beyond the SRA’s regulatory reach.

The Office of Fair Trading (OFT) said a balance needs to be struck between providing consumers with the necessary levels of protection and ensuring that any protective measures do not restrict competition by lessening choice and flexibility of service.

It invited the LSB to consider introducing a “sunset clause” on the rule, which “would allow for their review at a later date with a view to assessing their necessity and proportionality in light of any evidence of a possible detrimental effect on competition”.

However, both the Lord Chief Justice, Lord Judge, and the Legal Services Consumer Panel supported the continuing role of the rule. The Law Society also opposed the OFT’s approach, saying there is a “clear consumer and public interest benefit” in retaining it.

In its response to the OFT, the SRA refused to amend the rule, which it said does not impose “unnecessary restrictions”, pending the LSB’s current review of the list of reserved legal activities.

It said: “An extension to the [reserved legal activities] would facilitate the lifting/liberalisation of the separate business provisions whilst maintaining the necessary level of consumer protection.”

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