Philip: Pages of complex bureaucracy do not benefit anybody
Solicitors will be able to set up their own law firms as soon as they qualify – rather than have to wait three years as now – under the latest wave of changes to the SRA Handbook proposed by the regulator today.
The second major consultation on the rules rewrite by the Solicitors Regulation Authority also includes provisions to allow freelance solicitors to offer reserved legal activities and an 11-year period after the new Solicitors Qualifying Examination (SQE) comes into being, for those who have already started out on qualifying under the current regime to continue on that route.
The first phase of the handbook rewrite, which began in June 2016 [1], saw a contraction of the code of conduct from 30 pages to seven, and the controversial idea of allowing practising solicitors to deliver unreserved services to the public from organisations that were not regulated by the SRA.
The new Handbook – which will come into force in autumn 2018 at the earliest, but probably in 2019 – is set to be around 130 pages in total, compared to the current 401.
Under the current rules, a law firm must have a manager who is ‘qualified to supervise’. They need to have undertaken SRA-specified training – 12 hours of management skills – and been entitled to practise for at least three years.
The SRA described this as confusing: “It conflates technical competence, supervision arrangements and running a business.”
While noting the argument about the need to ensure an individual has developed the technical and business competences to run a business, the SRA said the current rule “does not provide any guarantee of competence”.
The consultation said: “The effect of the rule is to create a barrier to market entry, by preventing solicitors establishing their own firms as soon as they qualify.
“Having sought to address barriers to entry through liberalising the requirements for training contracts, and permitting solicitors to practise unreserved legal services in a non-[Legal Services Act]-regulated entity, it would seem counterproductive to retain this provision unless it is needed in order to protect consumers of legal services.”
The regulator argued that there would be several safeguards in place to provide “a more targeted and proportionate way” of addressing the risk that newly qualified solicitors set up their own firm without some experience.
These include the power to refuse to authorise a recognised sole practice or firm, the requirement not to act outside of competence, the new approach to continuing competence, and the rule that means firms must have “effective business controls” in place.
Solicitors can only provide reserved legal services as a recognised sole practice or in a firm, a position that was supported by the majority of respondents to last year’s consultation supported the status quo.
But the SRA reported that “a number felt that we were being unnecessarily restrictive particularly in denying individual practitioners (who often face significant costs) more flexible ways of providing services and sharing expenses – for example in a chambers-style arrangement. This freedom is of course already open to practitioners at the Bar”.
It said: “We consider that such arguments have force and that provided the appropriate consumer protections are in place we should allow more flexibility.”
So it proposes to allow solicitors to provide reserved legal services to the public as individuals – so they cannot have employees or partners or operate through a service company – and would need to be engaged personally by the client.
They would be required to maintain indemnity insurance and should not be able to hold client money except in respect of fees and disbursements.
“This would simplify the current situation where there is a complex series of exemptions for solicitors who want to work in areas such as certain insurance services, law centres and doing pro bono,” the SRA said.
On the SQE, the SRA said it would permit candidates who have started to train before it comes into force – including starting a qualifying law degree but excluding apprentices – and who complete their training in the following 11 years, to be exempt from the requirement to qualify through the SQE.
However, they will generally not be allowed to ‘mix and match’ old and new qualifications.
The 11-year cut-off date “would permit most candidates who have started to train to complete the current route to admission on either a full or part-time basis”. The SQE is currently slated to come into being in September 2020.
Other proposed changes include:
- Making the character and suitability test less prescriptive so that the SRA can consider each application on a case-by-case basis, taking into account all the individual circumstances;
- Applying the suitability test at the point of entry to the profession, rather than at the student stage – students will be able to ask for an indication of whether they would pass the test and whether, if not, rehabilitation by the time they qualify will change the situation;
- Removing the need for a solicitor owner or manager to seek SRA approval before moving firms or roles;
- Non-trading companies would no longer have to seek authorisation as law firms from the SRA so they can become managers or owners of other firms. But the underlying firm would then need to become an alternative business structure as they would have a non-authorised owner;
- Removing the rules of solicitor property selling; and
- Banning solicitors from offering claims management or immigration services from unauthorised businesses.
The consultation also includes a revised enforcement policy that “aims to provide more clarity about how, and when, the SRA will, or will not, enforce”.
Factors it would take account of when considering action include intent, harm caused, patterns of behaviour, vulnerability of the client, seniority of the solicitor, and any remedial action taken.
SRA chief executive Paul Philip said: “This is a simpler Handbook with a sharp focus on what matters – high professional standards and appropriate public protections.
“Pages of complex bureaucracy do not benefit anybody. Our approach rightly puts the onus on professional judgement and ethics. Most solicitors do a good job and earn the trust people place in them. But a small minority do not.
“Our enforcement policy makes clear when and how we will act if things go wrong. It is essential that both the public and the profession can have confidence that we hold solicitors to account and act in a fair way.”