The Solicitors Regulation Authority’s (SRA) red-tape challenge could introduce “significant risks” if registered foreign lawyers are automatically allowed to become the owners and managers of smaller firms, the Law Society has warned.
It was one of a number of concerns raised about the SRA’s bureaucracy cutting initiative in a response that saw Chancery Lane unequivocally support just three out of 10 recommendations. It made a number of additional suggestions for Handbook rule changes of its own.
A proposal that registered European lawyers (RELs) and registered foreign lawyers (RFLs) be deemed approved as suitable to become managers and owners of law firms met with approval from the society as having “significant advantages” in relation to large practices “with a large number of partners and… major overseas practices”.
However, in the context of smaller practices, it could lead to “significant regulatory risks” because the “relatively light” requirements governing them means they may not “have sufficient knowledge of the regulatory system and requirements, particularly if strong COLPs and COFAs [compliance officers for legal practice and financial administration] are not present”.
This shortfall in knowledge could “lead to danger for the integrity of practices” and the SRA should consider scrutinising, “in particular, practices with a small number of owners and managers who are RELs and RFLs”, the society asserted.
Earlier this month three RELs were sanctioned by the Solicitors Disciplinary Tribunal, in one of the first cases of its type.
Overall, the society said it was “encouraged by the intention” behind the SRA’s red tape initiative and without reservation backed proposals to allow COLPs and COFAs to apply to fulfil the same role in related entities without being a manager or an employee. It was also fully in favour of removing a qualifications rule requiring the need for student re-enrolment after four years, and another that would enable applicants who do not need to take any of the qualified lawyers transfer scheme assessments to progress straight to admission.
But on the remaining red tape challenge proposals, the society either objected or had reservations.
It particularly objected to scrapping a requirement that authorised training providers have to seek reauthorisation every three years. Some trainees could receive “sub-standard training”, it claimed, pointing to anecdotal evidence that some training contracts were “not meeting the present basic requirements”.
The society questioned the proposal that would allow local authority solicitors to charge charities for legal services, which has drawn a fierce response from leading lawyers in local government, with one accusing the Law Society of “blatant protectionism” in favour of private practice firms.
The society also made a number of suggestions for Handbook rule changes that it said would “assist individuals and practices, and reduce the burden of regulation on them”. These included lifting the unpaid client account limit, which currently requires “burdensome” bureaucracy for sums over £50, and an increase in the two-day time limit for client money to be paid into a client account.