Controversial client protection rules for freelance solicitors approved

Blacklaws: Concerned by the LSB’s lax approach to regulation

The Legal Services Board (LSB) has approved client protection arrangements to back the new breed of freelance solicitors, despite opposition from the Law Society and Legal Services Consumer Panel.

Under the Solicitors Regulation Authority’s (SRA) new Standards & Regulations regime, coming into force in November, freelance – formally called self-employed – solicitors will be allowed to provide reserved legal services to the public, subject to certain restrictions.

The latest changes – approved by the LSB this week – mean that their clients will have access to redress from the SRA’s Compensation Fund where they have lost money as a result of the solicitor’s dishonesty or failure to account for money they received and held. But civil liability losses will not be covered.

Clients of the other new type of solicitor – who will be allowed to deliver unreserved work to the public from unregulated organisations – will not have access to the fund.

Self-employed solicitors will also have to take out and maintain “adequate and appropriate” professional indemnity insurance (PII) to cover both the reserved and unreserved legal services they provide – but will not have to be at the level set by the minimum terms and conditions of insurance with which law firms have to comply.

The regulator told the LSB that this was in line with existing rules for solicitors who work for non-commercial bodies, such as law centres, and that clients were protected by both general consumer law on unfair terms and the regulatory obligations that already apply to solicitors to act in the best interest of their clients.

The LSB added that draft SRA guidance it had seen would provide “more clarity” to solicitors who were unsure about what would constitute adequate and appropriate insurance – the uncertainty this could cause was a concern of both the Law Society and Legal Services Consumer Panel.

“The LSB has also borne in mind that the SRA will require self-employed solicitors entitled to provide reserved legal services to notify it of their status and that their status will be listed on the SRA register.

“The SRA will therefore be able to monitor those solicitors and take individual action as necessary, whilst monitoring general impact and trends.”

Both the Law Society and consumer panel also complained to the LSB that the SRA changed its initial position that freelance solicitors would have to take out PII when they were just handling unreserved work, and said the shift would weaken consumer protection.

The SRA told the LSB that this accusation came down simply to a lack of clarity in its earlier use of the term ‘freelance’, which it said it had always intended to apply just to self-employed solicitors doing reserved work.

The LSB said that this was what it had understood when approving the Standards & Regulations, but added: “The LSB does expect the SRA to review its regulatory arrangements and particularly the associated guidance, to ensure that its expectations are clear and that if there are any references in its guidance to freelancers that it is clear what category of solicitors this applies to.”

The statutory test for rule changes is whether there is a reason to refuse the application, and the LSB said there was not.

In response, the Law Society accused the LSB of ignoring consumer and professional views.

“We are increasingly concerned by the LSB’s lax approach to regulation,” said president Christina Blacklaws.

“Regulation exists to protect the public, so we expect the LSB to listen to the public, and to the profession. We are hugely disappointed that the LSB has approved this rule change based on draft SRA guidance that is not in the public domain, and which has not been finalised.”

Ms Blacklaws said that, if issues emerged further along the line, “the LSB will – not for the first time – be in a position where it is unable to revoke its approval”.

She added: “That’s seriously poor practice from a regulator that’s meant to hold other regulators to account.”

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