Blacklaws: Misguided proposals
The Solicitors Regulation Authority (SRA) has stuck to its guns on allowing solicitors to practise from unregulated firms and enabling freelance solicitors to do more in its application to the Legal Services Board (LSB) for approval of a new Handbook.
The Law Society responded by renewing its attacks on both proposals, saying the SRA had produced no strategy “to mitigate the risk that multiple solicitor brands would result in consumers and the public being misled and losing confidence in the system”.
Introducing its application, the SRA said it would no longer refer to its rules as the ‘SRA Handbook’, which “suggests a stagnant rulebook”, and would instead adopt an “alternative name that conveys a more flexible collection of principles, codes and rules”.
The regulator went on: “We will finalise the collective name of the new rules following user testing.”
The SRA said that since the October 2011 Handbook was introduced, it had reduced the number of pages by more than 600 to around 400, and the latest changes would result in a further reduction of 75%.
The centrepiece of the new Handbook is an eight-page code of conduct for individuals and a six-page code for firms.
The SRA said “significant policy changes” included new accounts rules, a new requirement for firms to have an authorised person who has practised for three years (replacing the old ‘qualified to supervise’ rule), and transitional arrangements for the introduction of the Solicitors Qualifying Examination.
The regulator said its application contained additional transparency rules, obliging practising solicitors working in unregulated firms to explain their insurance arrangements (if any) and that their clients would not be able to claim on the Solicitors Compensation Fund.
The new rules would allow freelance solicitors to provide services to the public directly, without having to set up a sole practice.
Freelance solicitors must work without employees or partners, and not through a service company. They could only hold client money where it was for payments on account of costs and disbursements.
They must have “adequate and appropriate” indemnity insurance for all their work, whether reserved or not, rather than being subject to the SRA’s minimum terms and conditions. In return their clients can claim on the compensation fund.
The SRA said that, in response to concerns that they would be allowing “inexperienced solicitors to provide legal services on their own”, a rule would be introduced that a freelance solicitor must have practised for at least three years.
The regulator said that under the new regime law firms which kept client money relating only to fees and disbursements incurred on their clients’ behalf, such as counsel’s fees, would be exempt from the requirement to keep a client account.
However, they must comply with other aspects of the new accounts rules.
The SRA said law firms were already allowed to hold money in third-party managed accounts.
Under the new rules, such accounts must be operated by payment service providers regulated by the Financial Conduct Authority and firms must demonstrate that they have “suitable arrangements” for monitoring them.
Christina Blacklaws, president of the Law Society, said the SRA “appears to be pursuing a deregulatory agenda based on flawed premises and at the expense of consumers”.
She went on: “The misguided proposals now being considered by the oversight regulator fail the litmus tests for regulation: they jeopardise the public interest and risk weakening the rule of law.
“The proposals are not supported by robust impact assessments or cost-benefit analysis appropriate for rule changes that will fundamentally change the legal services landscape.
“We urge the LSB to reject the SRA’s ill-conceived scheme to create a dangerously complex marketplace for legal services. Flexibility for solicitors should never come at the expense of protection for consumers.”