Pressure grows on SRA to find alternatives to “sledgehammer” of intervention

Intervention: call for probationary visits of firms where partners qualified abroad

Pressure is growing on the Solicitors Regulation Authority (SRA) to find alternatives to marching in and shutting down law firms in trouble, Legal Futures has discovered.

A report by the Law Society’s regulatory processes committee – which has yet to be approved by its parent regulatory affairs board – has put forward a series of measures aimed at reducing interventions to the absolute minimum consistent with the public and professional interest, and at keeping the cost of intervention more effectively controlled.

Interventions are estimated to cost around £100,000 on average. In the year to 31 March there were 92 interventions, a 31% rise on the previous 12 months.

Possible strategies put forward by the committee include:

  • Identifying in advance firms that might be in financial difficulty;
  • Introducing probationary visits for firms with a majority of managers who had qualified via the Qualified Lawyers Transfer Test (QLTT) route, or were registered European or foreign lawyers;
  • Developing a process for the orderly winding down of practices in difficulties;
  • Handling routine intervention work in-house at the Solicitors Regulation Authority, rather than using outside agents;
  • Reviewing the fees paid to intervening agents and the tendering process; and
  • The SRA providing advice to the profession on the destruction of archive files.

The committee said its research found that few other countries in the world employ interventions to manage risks to the public, and if they do so, not to the extent that they are used in England and Wales. In a report going to this month’s Law Society council, the committee says it has held discussions with senior managers at the SRA, who “appeared receptive to our proposals and thinking”.

Committee chairman Andrew Hopper QC, speaking in a personal capacity, told Legal Futures that there was support for changing the approach to intervention in part because it is so expensive, but also because it is very “destructive” and severely disrupts work that clients need done.

The proposal to monitor firms with a majority of partners who first qualified abroad risks courting controversy; groups representing black and minority ethnic solicitors – who accuse professional indemnity insurers of discriminating against minority lawyers who qualified via the QLTT – argue that once a lawyer has been approved by the SRA, they should be treated no differently from all other solicitors.

Mr Hopper said the proposal was aimed at avoiding inadvertent breaches of the rules. European law enables Italian lawyers, for example, to practise in England and Wales, but there is no equivalent of the accounts rules in Italy.

Earlier this week, speaking in the context of professional indemnity, Law Society chief executive Des Hudson told Legal Futures that the society had suggested to the SRA a year ago that it consider alternatives to the “sledgehammer” of intervention, such as going in to take over control of a firm’s client account.

An SRA spokesman said: “Representatives from the SRA have recently had constructive discussions with the regulatory processes committee and we share some common ground on the need to minimise the number of interventions, particularly in cases where firms are attempting to wind down in an orderly way. It will be necessary, in some instances, for example where dishonesty is suspected, to intervene in the public interest but we aim to do so only where it is appropriate and proportionate. We will read the proposals with interest and consider them alongside our own initiatives in this area.”


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