SRA hanging in-house lawyers out to dry with unclear ABS rule, Law Society claims

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Local authorities: SRA should provide more guidance to in-house lawyers on ABS requirement

Solicitors Regulation Authority (SRA) is acting unreasonably by leaving it to in-house lawyers to decide whether the law requires that their legal teams become alternative business structures (ABSs), the Law Society has claimed.

The SRA has proposed that organisations whose in-house solicitors provide reserved legal activities to people other than their employer – such as insurers, associations and local authorities – will need first to consider whether section 15(4) of the Legal Services Act 2007 requires them to become an ABS.

Section 15(4) says in-house lawyers offering reserved legal activities to “the public or a section of the public” must do so from an ABS. The SRA said difficulties with defining this meant it could not establish a clear line to delineate the circumstances when it applied.

However, in response to a short consultation on the issue, the society said this approach does not provide sufficient clarity, “with the result that in-house lawyers/organisations will still face uncertainty about whether or not they require authorisation by the SRA as an ABS”.

It continued: “We recognise that this is a difficult issue, but the SRA is effectively placing responsibility for interpretation of section 15 of the Act back on to the profession. This is unreasonable and we believe that the SRA should revisit this issue.”

The society said the SRA’s approach will “inevitably lead to different organisations coming to different conclusions about whether a particular approach is legitimate. As the aim of this consultation and the SRA’s proposed amendments is to provide clarity, the SRA should provide clearer guidance to firms”.

This was particularly important given that “the SRA would certainly have to take action in respect of any regulatory breaches which may be a consequence of breaking the law”.

The society pointed out that section 15(9) enables the Lord Chancellor to clear up much of the uncertainty by defining by order what does or does not constitute section of the public. Chancery Lane urged the SRA to press the Lord Chancellor to do so.