Law firms should be able to provide accountancy and other services without setting up separate businesses to help them compete with alternative business structures (ABSs), the Solicitors Regulation Authority (SRA) has proposed.
The regulator has also said that “non-practising solicitors” who provide services to the public from separate businesses should no longer be able to describe themselves in that way.
Under the current rules, law firms can provide education and training activities, along with journalism and publishing, as exceptions to the list of “solicitor services”.
The SRA is now proposing, in a consultation paper on changes to the separate business rule (SBR), that further exceptions should include accountancy – but not auditing – services.
Professional and support services to businesses – including human resources, recruitment, systems support, outsourcing, transcription and translating – would also be allowed.
“We believe that this will help solicitors’ firms to become more sustainable by offering a wider range of services and providing a more level playing field with ABSs,” the regulator said.
“The proposal will also allow clients to access more holistic services. We expect this particular proposal to benefit business clients in particular – bearing in mind evidence that small and medium enterprises struggle to access affordable legal services.”
The SRA said it was “open to suggestions” of additional activities which could be added to the list of exceptions and it would “expect any list to change over time to react to the changes in the market as new activities become ‘solicitor services’.”
The regulator said that between March 2011 and 1 October 2014, it had granted 60 waivers of the SBR to ABS applicants. It said the most common types of work carried out by the separate businesses were insurance/claims services, followed by financial services.
By the end July this year, the SRA said it had only received one report raising concerns “in relation to a possible separate business issue” in relation to the 46 ABSs which by then had waivers.
On the issue of the “non-practising solicitor”, the SRA said the term could be “potentially misleading” and “there must be a serious risk that it implies that the person making it operates under regulated professional standards.”
The regulator warned that a non-practising solicitor “may have not kept up with the law, may have no insurance, and complaints against them will not lie to the ombudsman”. Clients would have no claim on the compensation fund nor would they be able to claim the protection of legal professional privilege.
The SRA said that, under the new rules, solicitors who are on the roll and provide services within a separate business would not be permitted to “describe themselves to clients or potential clients as ‘non-practising solicitors’.”
Summing up the changes, the consultation paper said the ban on links with separate businesses that carry out non-reserved legal activities should be lifted and the focus should instead be on outcomes to ensure consumer protection.
The regulator said the principles behind the current SBR would be preserved, including that clients were clear about the extent of regulation, were not told or led to believe that the separate business was regulated by the SRA, and were only referred to the separate business when it was in their best interests.
In particular the SRA said the new rules would ensure that clients needing a grant of probate were not referred to a separate business for administration of the estate.
Firms would also be barred from referring conveyancing clients for administration services, litigation clients for support services involving a legal activity and family clients for pre-litigation services involving a legal activity, except mediation.
The regulator said its SBR reforms would allow solicitors to set up unregulated businesses, but not use their reputation to “gain a client’s instructions for a particular case, only to then hive off the case to an unregulated separate business”.