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In conversation with the SRA – the Standards & Regulations

Posted by Gary Yantin, director of best practice at Legal Futures Associate VinciWorks [1]

Loyal: Don’t be afraid of your regulator

In a recent webinar, I had the pleasure of interviewing Jatinderpal Loyal [2], policy associate at the Solicitors Regulation Authority (SRA) to discuss its new Standards & Regulations, set to replace the SRA Handbook on 25 November.

Jatinderpal is the lead on the SRA’s regulation of financial services, the accounts rules and client protection arrangements. He works closely with law firms and compliance advisers, the Ministry of Justice, the Financial Conduct Authority, and other legal regulators as the SRA progresses the implementation of the Standards & Regulations.

During the interview, Jatinderpal discussed the core changes under the Standards & Regulations, the reasons for those changes, guidance on compliance and more. Here are some of the highlights from the conversation.

Note: this article contains only the highlights from the conversation and the text has been edited for readability. You can view the full webinar and related resources here [3].

Why did the Handbook need updating?
We first set out our new regulatory approach in our ‘Looking to the Future’ policy statement in 2014 and updated in 2015. We said then that we need to make sure we are keeping pace with a fast-changing legal services market. Our reform programme is designed to make sure we are meeting the needs of the public by regulating solicitors and law firms in the right way.

We said that we wanted to:

Since publishing our policy statement, we have developed our approach in detail through a rigorous programme of research, stakeholder engagement and several consultations.

What was the process for creating the Standards & Regulations?
We engaged extensively with stakeholders since we first published our position paper. Most importantly, we consulted very widely. We held four formal consultations:

We then sought approval of the Standards & Regulations from the Legal Services Board, which did so in November 2018.

What challenges did you experience in the process?
During a consultation process, people will always raise issues for us to think about. This is good though, as we then have to reflect and consider our options.

Whenever there is a programme of reform, one of the key challenges is to make sure that people are kept up-to-date whilst managing business as usual. A key aim for our reform programme has been to seek to minimise disruption to those we regulate by ensuring firms that are compliant with our current regulatory arrangements will still be compliant with the new arrangements.

How do you suggest firms adequately prepare?
In the main, firms and individuals who are compliant with our current principles and codes, and who do not want to change arrangements, will not need to do so.

The new provisions provide greater flexibility, but firms and individuals do not need to unnecessarily change their arrangements. So this is more about reflecting and looking at the culture in firms.

Firms should ask themselves questions like, ‘Are people in a firm aware of what’s going on?’, ‘Do systems and processes need to be refreshed?’ and ‘Do firms have the right people doing the job?’

What is the main goal of the guidance being provided? Why is it not included in the rules?
Our regulatory arrangements will be supported by new guidance to help those we regulate. The guidance will not create any new regulatory arrangements. It is there to help support solicitors in the judgments they make and comply with our regulations.

Our guidance will also explain the application of core provisions without needing to turn to the original legislation. The guidance can be added to and adapted in future as and when the need arises.

We have developed our initial guidance in areas we think it is essential, but any future guidance will be driven by the needs of the profession, rather than by us. So, alongside the publication of our new regulatory arrangements, we will set up a feedback mechanism for the profession to request any further guidance it needs.

We will also work with other bodies that are well placed to offer guidance and support to those that we regulate. Already, this includes the City of London Law Society, The Law Society of England and Wales, the Council of Bars and Law Societies of Europe (CCBE), the Law Centres Network, and a group of the larger accountancy-based multi-disciplinary partnerships.

What would you say are the top five changes that people should be aware of?
I would say the top five changes are:

What are the key changes in the accounts rules?
Simple accounts rules which focus on key principles and requirements for keeping client money safe, including:

This will put the focus on what is important and allow firms greater flexibility to manage their business. The accounts rules are also simpler and easier to understand, with the aim of increasing compliance and reducing compliance costs.

Further, the new rules provide the option for firms to hold limited types of client money outside of client account where this is the only type of client money held and the client has been informed in advance. The exemption relates to money held for the solicitor’s fees or disbursements for which the solicitor is liable (for example, counsel’s fees).

If the firm holds other types of client money – for example, those for which the client is liable, such as stamp duty land tax – all client money must continue to be held in client account in the usual way.

Is there one final key message ahead of November?
Don’t be afraid of your regulator. It’s not just about how law firms do business with their clients, it’s how they do business with us.

So individual solicitors, ranging from the sole practitioner in the rural areas to solicitors in in the big City firms, talk to us if you’re seeing things that are not right, or if you just want to talk about how you might provide services in different way going forward.

In the time that we have until November, it’s a chance to reflect as a business and as an individual. Changing culture is really key; you don’t need to look at rules and regulations to change behaviours or culture. But if you need to have an MOT, now is a perfect time to book yourself in with people like you to start thinking about how Standards & Regulations training [4] can be provided to firms and how can we provide support in terms of looking at processes and systems.

VinciWorks has just released five customisable courses to help firms train all their staff, including support staff, on the Standards & Regulations. The courses include quizzes to test knowledge and understanding throughout the course. You can try the Fundamentals course here [5].