Unnecessary ABS approval rules to be scrapped in latest regulation bonfire

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17 April 2015

Philip: reducing bureaucracy

Philip: reducing bureaucracy

The rule which requires the Solicitors Regulation Authority (SRA) to approve the individuals who own companies that in turn own alternative business structures (ABSs) is set to be scrapped, it announced yesterday.

The requirement for firms to keep a record of non-material breaches of the SRA Handbook may also go.

Issuing a consultation on a wide range of relatively small changes mainly to lift the burden of regulation, the SRA said this ABS ‘fitness to own’ rule went further than Parliament required and was not consistent with Legal Services Board’s guidance on ownership tests.

“In our experience of authorising ABS, they add complexity, delay and cost but do not significantly reduce the risk of unsuitable ownership. We have waived these requirements in certain cases and would be willing to consider any requests for a waiver until a decision is made post consultation…

“The corporate owner would still require approval… and therefore any concerns about individual managers in the corporate owner which affect the suitability of the body to own a legal business, can be considered as part of that separate authorisation decision.”

If approved after the consultation, the change will come into force in November.

The consultation also acknowledged the continuing grumbles over the requirement on COLPs and COFAs to record non-material breaches. It proposed changing the guidance to make it clear that the record need not be in any particular form, and that there does not have to be separate record of each breach of which a record already exists in the firm’s papers.

More broadly, it asked: “Given that the SRA is primarily concerned with ensuring that breaches are appropriately identified, acted on and reported where appropriate, we would be interested in gathering views as to whether the rule requiring firms to record breaches assists firms in doing so, or whether we should introduce a rule change removing this requirement.”

Other proposed changes include:

  • Deeming approval for COLPs and COFAs who are lawyers and managers in firms of no more than four partners, although the firms will have to notify the SRA of their identity;
  • Removing the requirement that candidates for approval as a manager, owner or compliance officer have to make a separate declaration from the firm that the information supplied about them is correct and complete;
  • Removing the requirement for firms to carry out reserved legal activities or face having their authorisation suspended;
  • Closing the loophole that means the SRA cannot impose conditions on the renewal of a practising certificate in the situation where the applicant is a member of a partnership that has entered into administration but where there has not yet been an individual voluntary arrangement, partnership voluntary arrangement or declared bankruptcy;
  • Asking whether the rules and/or guidance on outsourcing is preventing firms from taking advantage of cloud computing in particular, with a focus on the requirement that the SRA be granted the power to enter the premises of the outsourced provider;
  • Introducing a new outcome that requires solicitors to have in place appropriate arrangements for monitoring, reporting and publishing workforce diversity data; and
  • Allowing those undertaking new legal apprenticeships to qualify as solicitors.

SRA chief executive Paul Phlip said: “We are pressing hard to look at ways in which we can reduce bureaucracy. These latest proposals have been developed as a result of suggestions from the profession and following discussions with various stakeholders.

“We are also delivering on our commitment to do more for small firms, and the proposal to simplify the nomination process for compliance officers is targeted specifically at them.”

The consultation ends on 11 June and the results will be put to the SRA board in July.

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