SRA puts 1,200 firms on financial stability watchlist – how many more will join them?


SRA: some firms refuse to acknowledge that they are in financial trouble

The Solicitors Regulation Authority (SRA) now has 1,200 law firms on its financial stability watchlist, with more likely to join it shortly, it has emerged.

It follows the recent request for financial data from 1,500 practices that work in areas experiencing particular economic pressures, such as personal injury or legal aid, as well as around 500 ‘high impact’ firms – those whose failure would have a significant impact.

Some 700 of these firms were already under ‘active supervision’ because they were in trouble, and of the rest, 1,000 have so far responded; half had indicators of financial difficulty.

These 500 firms will now be contacted as part of supervisory engagement and according to the level of risk they pose.

The data requested focused on areas such as net profit (at the last financial year end), total borrowings, and highest and lowest bank balances for each of the last three months.

Mike Haley, SRA director of supervision, said: “We contacted these firms not because we know they are experiencing financial difficulties, but to build our understanding of the current position so that we can target our resources at those who most need our help. Engaging with firms at the earliest opportunity is the best thing to do, and this will allow us to know where we need to do this.

“We’ve already had numerous examples of better outcomes for firms and clients when firms in financial difficulty have come to us. By surveying firms in this way, we are able to make our approach even more risk-based, and hopefully avoid the disruption caused by intervention.”

The 300 firms that have failed to provide the requested information “will be encouraged to provide it before potential enforcement action is initiated”.

Mr Haley said: “Sadly, some firms refuse to acknowledge that they are in financial trouble until it is too late, which causes problems for clients, and can also lead to investigations into conduct.”

Tags:




Leave a Comment

By clicking Submit you consent to Legal Futures storing your personal data and confirm you have read our Privacy Policy and section 5 of our Terms & Conditions which deals with user-generated content. All comments will be moderated before posting.

Required fields are marked *
Email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Reports

Our latest special report, produced in association with Temple Legal Protection, looks at the role of after-the-event (ATE) insurance in commercial litigation post-LASPO. We are at a time when insurers, solicitors, clients and litigation funders work ever more closely to create funding packages that work for all of them, with conditional fee and even damages-based agreements now part of many law firms’ armoury.

Blog

21 November 2019

Analysing the October PII renewal

Our clients that renewed during this period recorded an average fee increase of 7.5%. The partner size segment that experienced the largest growth in percentage terms was 11-25 partners, at 11.3%.

Read More

Loading animation