SRA approach to referral fee ban receives LSB green light

SRA: told to be transparent about ABS applications around referral fee ban

The Legal Services Board (LSB) yesterday put the seal of approval on the Solicitors Regulation Authority’s plans to regulate the referral fee ban.

The news came as the Law Society pressed the LSB to provide reassurance that the way referral fees are regulated will be consistent across the entire legal profession.

The LSB formally approved the changes to the SRA Handbook that will from 1 April introduce two new outcomes – that those regulated by the SRA should not pay or be paid a “prohibited referral fee” as set out in the Legal Aid, Sentencing and Punishment of Offenders Act 2012 – supported by three new indicative behaviours.

These will require regulated persons to have effective systems in place for assessment whether any arrangement complies with statutory and regulatory requirements; to retain records and management information so they can show that any payments received are not prohibited referral fees; and to ensure that any payments made for services, such as marketing, do not amount to the payment of prohibited referral fees.

The LSB decided that the SRA’s approach provides “clarity to the regulated community and consumers” and also in line with the LSB’s own guidance on referral fees, published in May 2011, in respect of having outcomes that take account of consumers and their interests and needs.

The LSB also cautioned the SRA to be transparent about its approach to authorising alternative business structures that appear to result from the ban and that it should make a case-by-case evaluation “rather than [take] a blanket approach”.

Meanwhile, responding to the LSB’s draft 2013/14 business plan, the Law Society noted that the LSB’s approach is  designed to ensure consistency between regulators on regulating referral fees. “We look for reassurance  that this will be the case, as inconsistency in approach could lead to unfair competition between those regulated by different approved regulators.”

The society continued: “We were disappointed that the government’s referral fee ban will not be extended more widely – for example into the area of conveyancing. Referral fees are not in the public interest. All approved regulators should consider whether authorised persons should be permitted to pay these fees.”

Meanwhile, the LSB has named the new members who will replace David Wolfe QC and lay member Nicole Smith, former deputy chief executive of the Electoral Commission, whose terms expire at the end of this month. They are Anneliese Day QC, who practises from 4 New Square, and specialises in professional liability, commercial and construction work; and Terry Babbs, a one-time head of trading standards at Leicestershire County Council who until last year held various senior roles at Tesco, including head of legal, policy and consumer affairs.

Finally Frances Harrison, a former head of policy research and development at the National Consumer Council, has been added to the Legal Services Consumer Panel. A member of the Financial Services Consumer Panel, Ms Harrison also sits on the Finance and Leasing Association’s code of practice monitoring group as well as the Registry Trust’s consumer panel. She is a vice-chair of Brighton and Hove Citizens Advice Bureau.


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