Solicitors allowed to practise from unregulated firms “could face pressure to compromise professional obligations”

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28 September 2016

Loughrey: “Pressure from the firm on the solicitor may come from a lack of understanding

Loughrey: Pressure from the firm on the solicitor may come from a lack of understanding

Solicitors could “come under pressure to compromise their professional obligations” if they are allowed to operate from unregulated firms where they are outnumbered, the deputy head of Leeds University law school has argued.

Professor Joan Loughrey, author of the first academic study of compliance officers for legal practice (COLPs), said her research showed that it “could be difficult for solicitors to adhere to their individual code of conduct in firms in which they are in a minority and the remainder of the personnel are not qualified lawyers”.

She said the research, based on interviews with 15 alternative business structures (ABSs) and nine other law firms, found that in two ABSs where COLPs were in a minority as solicitors, there was “resistance to the requirements of professional regulation, and resulting tension and conflict”.

Solicitors Regulation Authority (SRA) plans to allow practising solicitors to operate from unregulated firms have come under fire from a range of organisations, such as the Law Society, the Legal Services Consumer Panel and the Legal Ombudsman.

In her response to the regulator’s consultation on reform of the Handbook, Professor Loughrey went on: “Pressure from the firm on the solicitor may not constitute a deliberate disregard of the SRA’s rules, but a lack of understanding of what these require of the individual solicitor and a refusal to accept the solicitor’s interpretation of these requirements. The pressures are likely to be the greater the more junior the solicitor.”

Professor Loughrey suggested that the SRA carry out research on the experience of solicitors “where they are a small minority, perhaps even alone”.

She went on: “It seem highly probable that the pressures upon solicitors and their professional ethics in such contexts could be substantial, with a consequent threat to professional values and conduct.

“Given this, and given the proposed reduced level of consumer protections for consumers dealing with such solicitors, compared to solicitors in regulated entities, the risk such a reform poses to the ‘solicitor brand’ or, to put it another way, the reputation of the profession, seem substantial.

“Moreover, the risk of consumer confusion is high. As the SRA acknowledges, consumers are already confused about the levels of protection they have when the deal with legal service providers. This proposal complicates the situation further.”

Professor Loughrey said experience in the financial sector showed that imposing disclosure requirements “could well be ineffective at clarifying for consumers the reduced levels of protection they face when dealing with solicitors in unregulated firms”.

She argued that disclosure might work for the “hypothetical rational man”, but was not the solution for consumers, particularly vulnerable one.

“Consumers could get precisely the same services from two different solicitors yet have very different levels of protection should things go wrong. It is difficult to see how this serves the consumer or public interest.

“It risks undermining the reputation of the profession. When individuals deal with a professional they place their trust in the individual but it is possible that they also place their trust in the profession as a whole.

“They may expect that if their trust in the individual solicitor they have chosen is misplaced, the profession will address this. If it transpires that there are differing levels of protection depending on the type of solicitor they are dealing with, they may be disappointed.”

Professor Loughrey warned that it would be “very difficult” to see how not making professional indemnity insurance a regulatory requirement for individual solicitors could benefit the consumer.

“Placing the onus on the consumer to choose the level of protection that is optimal for them places a heavy burden on the consumer and existing evidence suggests it is difficult for consumers to make a fully informed unbiased choice in these matters.

“This proposal would cause further fragmentation of consumer protections and risk greater consumer confusions.”

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