Two firms applying to the Solicitors Regulation Authority (SRA) to become alternative business structures asked to keep their client money with the Bar Council’s third-party escrow account, BARCO, it has emerged.
Richard Collins, executive director of planning and performance at the SRA, said this was one of the reasons the regulator was planning to allow law firms to use third-party managed accounts.
Mr Collins said he was “surprised, or maybe not” by the amount of opposition to changing the rules on client accounts from “some professional bodies”.
The Law Society has argued that allowing firms to use an alternative to traditional solicitors’ client accounts would be expensive, do little to reduce the risks of misuse, and should be the subject of a separate consultation and impact assessment.
“This fundamentally misunderstands what we are trying to achieve,” Mr Collins said. “BARCO have told us they might get a lot more business as a result of the change and might be able to reduce the cost.”
Mr Collins said the two potential ABSs hoping to use BARCO could have been granted waivers by the SRA, but “waivers are not a good way of doing things” so the regulator started to look at changes in the rules.
Speaking at last week’s Westminster legal policy forum, Mr Collins said the introduction of ABSs had been a “big change” for the SRA “when people had for two or three years been telling us how incredibly dangerous or scary it would be”.
He said this meant there was a “big focus” on the application process and “how we could ensure that the legal services industry was not infiltrated by the Russian mafia”.
Mr Collins went on: “So we set up rules and an application procedure, but it was over the top. At the time it was the only way we would have been able to license ABSs.”
He added that the SRA had been too slow to respond to criticism and make changes.
However, Andy Foster, a member of the Legal Services Consumer Panel, told the forum that the panel “did deeply worry” about a change the SRA is now committed to – relaxation of the separate business rule.
“There may be victims and serious consumer harm,” Mr Foster said. “Time will tell.”