“Radical changes” to the authorisation and supervision of alternative business structures (ABSs) are on the cards after the Solicitors Regulation Authority (SRA) expressed concern that the number of applications from multi-disciplinary practices (MDPs) has been “in the tens rather than hundreds”.
Its executive director of policy, Crispin Passmore, said the way ABS licensing brings within the scope of SRA regulation unreserved legal activities already offered by non-lawyers in a non-legal business – such as tax advice given by accountants – was making the application process difficult and “may even have put some off altogether”.
Problems with MDPs getting through the system have previously been flagged up by the Legal Services Board.
In his first speech since joining the SRA, Mr Passmore said that where an ABS carries out non-reserved legal activities through non-legal professionals, “the SRA is considering how we could get to a position that the activities will not be SRA regulated subject to appropriate safeguards or conditions”.
These conditions could be, for example: the activity not being led or supervised by people authorised by the SRA; the activity being subject to suitable alternative regulation; and the client being aware that the activity is not SRA regulated and instructing the ABS on that basis.
He said: “This is entirely consistent with the duty to promote growth that the SRA is likely to acquire from the current Deregulation Bill, as well as being consistent with the gamut of regulatory objectives under the Legal Services Act and the better regulation principles.
“It is intended to increase consumer choice, drive value for money and promote access to justice. Lawyers that compete and thrive in this market will be contributing to a strong and independent legal profession.”
Mr Passmore said that while “in many ways” ABSs are changing the face of legal services, “not least because of the way that traditional law firms have responded”, MDPs have been notable by their absence.
“It is exactly the type of business that the Act was expected to facilitate: a ‘one-stop shop’ for consumers; opening up access to legal services, increasing competition in the market, driving down costs and improving value for money.”
He asked: “Is there a risk that we are perceived as only being happy with firms that look like law firms? Could this deter interest in the market for people who want to innovate and work in different ways?
“The numbers of applications have been in the tens rather than hundreds which should cause any forward-thinking regulator to at least check if it has inadvertently deterred applicants.”
The plan is to consult in the “early summer” with a view to bringing in any changes by the end of the year. The SRA is also creating a reference group to help with the development of the reforms.
Mr Passmore said this work has wider ramifications for the SRA’s commitment to a level regulatory playing field.
“It is often pointed out that big City firms and small firms, for instance, are like chalk and cheese. They face different issues, as do firms that focus on retail consumers as opposed to corporate consumers. The SRA already recognises this with its use of regulatory managers. And our thematic work focuses on specific issues that affect certain segments.
“So do we need a more nuanced approach to how we regulate? We do think there is a need to continue to develop the current model of regulation, particularly given the pace at which the legal market has already diversified and become more plural. It’s too early to say exactly what that looks like.
“However, we think that there is scope to consider different provisions for different types of firms, alongside different supervisory approaches, recognising the variety of firms, services and consumers.”