The Law Society and Council for Licensed Conveyancers (CLC) have clashed on plans by the Solicitors Regulation Authority (SRA) to make it easier for law firms to switch regulator.
Catherine Dixon, chief executive of the society, warned that the plans “could leave existing and past clients of firms that switch regulator without appropriate cover”. However, her counterpart at the CLC, Sheila Kumar, said the status quo was “not justifiable”.
Under the current rules, SRA firms transferring to the CLC are treated as closing down, triggering a requirement to purchase six years of run-off cover separately at a cost which could amount to two or three times their annual indemnity insurance premium.
In its consultation on the issue, the SRA proposed waiving this requirement.
The CLC said the SRA was “simply catching up with what the Legal Services Act permits”, and called on it to dismantle barriers “completely” as part of its review of professional indemnity insurance that is promised for later this year.
Ms Kumar added: “Requiring firms that transferred from SRA regulation to take out run-off cover when they were continuing in business and had ongoing indemnity insurance was not justifiable. It has acted to stop practices being able to choose a regulator that is tailored to their work.”
However, Ms Dixon said: “The Law Society supports the SRA’s aim to encourage a competitive market by removing unnecessary barriers to switching regulator – but this must not be at the expense of client protection.
“We are concerned that the SRA’s proposals could leave existing and past clients of firms that switch regulator without appropriate cover.”
Ms Dixon added that that law firms should only be able to switch regulator without triggering the run-off requirement if they secured indemnity insurance equivalent to the SRA’s minimum terms and conditions for six years “to cover claims arising from matters concluded before the switch”.
Meanwhile, the Bar Standards Board (BSB) is seeking lawyers interested in setting up alternative business structures to take part in a pilot which will pave the way for the first licences.
The BSB has said it expects licence the first ABSs in October this year, following approval from the Ministry of Justice. Firms wishing to take part in the pilot should contact it by the end of this month.