Reserved activities rule removed after SRA assurance that it is not looking to regulate the unregulated


Crispin Passmore

Passmore: “changes give firms more flexibility”

Law firms no longer need to carry out reserved activities in order to be regulated by the Solicitors Regulation Authority (SRA) – but the regulator has offered assurances that it will not seek to bring the currently unregulated into its net as a form of quasi-accreditation.

The Legal Services Board (LSB) had considered rejecting the SRA’s application to remove its power to revoke a firm’s authorisation where a firm has “no intention” of carrying out reserved activities.

But in a recently published decision notice, the LSB said firms applying for authorisation would no longer need to include a statement about the reserved activities for which they were seeking authorisation.

Despite an admission from the SRA it had never actually revoked a firm’s authorisation for failing to carry out reserved work, the LSB – echoing the opposition expressed by the Law Society – had been concerned about the possibility of unregulated firms becoming regulated by the SRA, and whether this was effectively “sanctioning the extension of regulation by the SRA”.

The LSB said its legal advice was that, under the Legal Services Act, authorisation “confers an entitlement, not an obligation to carry out reserved legal activities”, and there was nothing “inherent in the concept” that required an intention to carry them out.

“The removal of the rules does not of itself, therefore, facilitate the regulation of legal services that do not currently need to be authorised under the Act, nor does it implement a substantive policy that ought instead to be the subject of public debate and primary legislation.”

LSB said it had also taken legal advice on whether the new rules would “create a form of quasi-voluntary accreditation scheme” that could be considered unlawful, and concluded that they would not. The oversight regulator said the removal of the requirement for firms to carry out reserved activities did not “of itself alter the fundamental choice” for firms to become authorised.

The LSB said the SRA had complained that firms which may not be able to show they are conducting reserved activities at a particular time might be deterred from seeking authorisation as an alternative business structure, which could restrict consumer choice.

It added that although some firms might see regulation by the SRA as a “badge of honour for commercial benefit”, the consequences would be that all its activities were subject to SRA scrutiny.

Overall, the LSB said there was not “sufficient evidence of significant risk that removing the rules in themselves will lead to a gradual expansion of regulation by the SRA. In this regard, we are reassured by the SRA’s commitment to review the impact of these changes and, most importantly, not to market the rule change as a quasi-voluntary accreditation scheme”.

Crispin Passmore, executive director of policy at the SRA, said: “This is another step towards an open and competitive legal market that works for consumers and the public. Regulation boosts public confidence in legal services but over-regulation gets in the way and increases costs.

“These changes give firms more flexibility to decide where to focus their business at any point in time and are part of wider package of reforms to simplify what we do and how we do it.”

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