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Unnecessary ABS approval rules to be scrapped in latest regulation bonfire

Philip: reducing bureaucracy [1]

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:

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.