The Solicitors Regulation Authority (SRA) is in touch with AIM-listed alternative business structure Quindell, it has confirmed.
There has been widespread speculation about what action the SRA is taking over Quindell, whose share price has nose-dived in recent weeks.
Founder and executive chairman Rob Terry resigned from Quindell’s board of directors earlier this week, relinquishing his rights to acquire nearly 9m shares under a sale and repurchase deal that had seen the company’s share price dive.
A spokesman for the SRA said: “Quindell is a firm that is part of our Regulatory Management programme and we therefore engage with them on a regular basis.”
The SRA’s Regulatory Management (RM) scheme, formerly known as ‘Relationship Management’, targets the top 200 ‘high-impact’ firms.
They are selected not on size of the business but on their impact on the legal services market should they fail, including the impact on consumers.
Quindell’s share price reached a new low of 41.5p on Wednesday before rallying yesterday, a 25% rise taking it to 53.75p by close of trading. It followed the company scotching speculation that it was actively looking to sell its stake in National Accident Repair Services plc.
A poll of 59 RM firms carried out by the SRA revealed this summer that six out of ten thought the scheme had allowed them to comply more effectively with regulation. More than half said the extra responsibilities of being in the scheme meant they spent more time on compliance.
The SRA concluded that the introduction of RM has enabled the regulator “to identify and better understand the risks associated with particular firms. This has been facilitated through more regular interaction between firm representatives and the SRA”.
Dan McCrum, in a blog for the Financial Times this week, questioned whether there are enough large, specialised law firms available to take on Quindell’s caseload, should the business fail.
The firm said in June that it was on track to nearly double the number of staff working in its legal division to 1,500 this year, making it one of the largest legal services providers in the country.
Quindell said it aimed to handle 6,000 hearing loss claims a month, each generating just over £9,000 in base costs, success fee, costs drafting fees and ‘ancillary’ income – nearly 75% of the firm’s income from personal injury.