In the event a large firm collapses, the Solicitors Regulation Authority (SRA) expects the market to “gobble” up the pieces rather than leave it to the regulator to sort out, it has emerged.
Speaking to reporters after yesterday’s SRA board meeting, chief executive Paul Philip said the question of whether the regulator could cope with a large firm going down had been discussed internally.
The “unanimous” view was that “the market will gobble up all the work in an instant”, he said.
While there would be no impact on clients in such a scenario, it would however damage the international standing of the profession.
Pre-pack sales of law firms have attracted controversy because of the position unsecured creditors are left in as a result, but Mr Philip said this was a matter for the government.
The recent travails at Slater & Gordon have raised once more the question of a big firm collapsing, but the SRA has not commented on this beyond saying: “Slater & Gordon is part of our regulatory management programme and we are in contact with the firm on a very regular basis. As a regulator, any of our discussions with a firm are focused on protecting the interests of clients.”
Citing this blog by Legal Futures editor Neil Rose, Mr Philip added that he did not believe recent events at Slater & Gordon or Parabis highlighted any weaknesses in the alternative business structure concept; rather they were down to the firms’ business models.
He also suggested that it was time to stop using the term ‘alternative business structure’ as new forms of ownership were now mainstream.
In an earlier version of this story, we wrongly indicated that Mr Philip was referring to a particular firm when making these comments. We apologise for the misunderstanding.