Anna Bradley speaks at the compliance conference with Paul Philip, chaired by journalist Daisy McAndrew
The Solicitors Regulation Authority (SRA) has not kicked changes to client account – and the interest solicitors earn on it – into the long grass, its chair warned solicitors yesterday.
Delegates at the regulator’s annual compliance conference in Birmingham also heard that it would be looking to take new powers to demand information from law firms.
Speaking at a plenary session together, chief executive Paul Philip – who retires next week – said “the key issue for me as I depart the organisation is this whole idea of holding client money.
“If solicitors didn’t hold client money, the cost of regulation would drop like a stone. There’s absolutely no doubt about it.
“The board has agreed that, although we’ll focus in the short term on delivering the Axiom directions [imposed by the Legal Services Board in the wake of its report on Axiom Ince], it will be returning to whether or not solicitors really should be holding client money in this day and age of electronic banking – and most certainly, if they do in some shape or form, whether or not they should be collecting interest from client accounts is still very much on the agenda.”
Chair Anna Bradley added: “I’ve read people say it’s been kicked into the long grass. It’s not. It’s simply that the organisation, for reasons we’ve just discussed – both the Axiom directions and also SSB – has got its plate very full with urgent things it needs to do first. So that’s what we are focused on doing.
“The bigger conversation is something the board would like to see us take forward or open up again. And we look forward to having that conversation with our new chief executive when she arrives.”
In the meantime, other changes canvassed in last year’s consumer protection review will be put out for consultation shortly.
Mr Philip said that the regulator needed data to assess risk. “One of the weaknesses that you might argue about the SRA is we don’t know enough about the practices of law firms,” he explained.
“We don’t know how much work they do in particular areas. We don’t often know certain metrics about the way in which the business works. And in order to be better at identifying risks and patterns, in order to do something proactive, you need more data.”
As a result, the SRA will be consulting on new rules that will allow it to demand law firms provide information that they do not have to at the moment.
Other reforms will include changing requirements on submitting accountant’s reports and the circumstances under which one person can hold both compliance officer roles – an issue at Axiom Ince.
Mr Philip added: “The real issue here comes back to regulatory theory about what is proportionate, how much intervention by the regulators required in order to provide sufficient consumer protection.
“The overall argument is that, in the light of the events of Axiom Ince and SSB, whilst there are arguments about what the regulator did, there are most definitely arguments about the regulatory model becoming far more intrusive, far more proportionate people might argue in relation to the risk that consumers face.”
Mr Philip described the Solicitors Qualifying Exam as the “lasting legacy” of his nearly 12 years at the helm of the regulator.
“We think it’s gone really well. The quality of the assessment is really high. There were two objectives from SQE. One was ensuring the quality of solicitors and the knowledge base as they joined the profession. We felt that the previous system was broken and that the standard deviation between providers was just too wide.”
The second objective was to try and increase social mobility. “The number one cohort that does really well on SQE is apprentices rather than graduates. There’s something like 500 apprentices already qualified through this route.
“So we are really pleased that that’s happening and we are starting to see a degree of social mobility in the profession.”
He defended the difficulty of the exam, which has been the subject of criticism from some students – the pass-rate for SQE1 recently fell to an all-time low of 41% [1]. However, across the history of the SQE, the first-time pass rate for SQE1 is 54%, and 66% overall, and 80% for SQE2.
“There will always be this discussion about whether it is too hard. But being a solicitor is an important part to play in society and we think it’s important that we have a robust assessment of those qualifying as solicitors. So actually from a personal perspective, I think it’s going really well.”
Ms Bradley added that a recently completed review showed that employers have growing confidence in qualifying work experience and were positive about SQE overall.
“From candidates, it’s a bit more mixed and there are some questions relating to the nature and the difficulty of the exam. So we think there’s a bit of work for us to do to explain why it’s designed the way it is and what benefits that brings.”