SRA eyes rule waivers to stimulate innovation

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15 December 2016

SRA: waiver regime would give firms safe space to innovate

SRA: waiver regime would give firms safe space to innovate

The Solicitors Regulation Authority (SRA) has published a blueprint for simplifying its system for granting waivers to regulations in order to promote innovation, which it suggests will particularly benefit small firms.

The policy would also include a ‘no enforcement’ tool “to guarantee a firm that we will take no enforcement action” if innovations “bring the firm into technical breach” of the rules.

This would likely only happen “on a rare few occasions in relatively limited situations”, it anticipated. Setting aside enforcement action would be similar to the Financial Conduct Authority’s regulatory ‘sandbox’, and the SRA gave the example of the Civil Aviation Authority allowing Amazon to test drones for parcel delivery despite it being against the rules.

A consultation issued yesterday said: “We would only use this tool for cases where we believed it was justified in light of the particular circumstances and characteristics of the innovation, but where we were not able to issue waivers. It would only apply to our regulatory action, and is not intended to limit any other liabilities, including to consumers.”

Currently, the SRA receives between 100 and 150 applications for waivers each year, 60% of which are granted.

A new waiver policy would bridge the gap until proposed reforms to streamline the Handbook were introduced, which would give the authority the ability to waive any requirement that was not required by legislation.

Details of all new waivers would be published on the SRA’s website “to ensure fairness and transparency”, the authority said. A spin-off could be that “the waiver permits an innovative approach to doing business which others could benefit from”. A quarterly review of applications would be conducted in-house.

The SRA presented the consultation as part of its ‘SRA Innovate’ initiative, which was announced at the end of last year and has included removing restrictions on multi-disciplinary partnerships and third-party managed accounts.

The ‘innovation space’, first announced in March, was described as “a safe space for existing firms, as well as new entrants to the legal services market, to pilot, in a controlled way, new ideas that are likely to benefit the public”.

More flexible waiver arrangements could benefit small firms and sole practices – and because they are more heavily represented among such firms, black, Asian, minority ethnic, and older solicitors – said the regulator: “Small firms can suffer a disproportionate impact from the cost of complying with prescriptive rules, which may be subject to regular revision.”

Paul Philip, the SRA’s chief executive, said: “I want us to do more to get out of the way of new thinking and new ideas. Firms of all types – our entrepreneurial sole practitioners through to large firms – want to try different ways of offering the services that people are looking for.”

In the summer the Law Society called for a ‘sandbox’ approach to regulatory reform that would allow innovation to be tested safely.

The consultation is open from 14 December 2016 until 8 March 2017.

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