SGM threat recedes as SRA refutes suggestions that it changed ABS stance

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By Legal Futures

25 March 2011

Townsend: SRA offered Law Society assurances and nothing more

The Solicitor Sole Practitioners Group (SPG) has backed away from its threat to call a special general meeting and postal vote of the profession to gauge support for alternative business structures (ABSs).

Meanwhile, the Solicitors Regulation Authority (SRA) has refuted suggestions that it shifted position on how it will regulate ABSs ahead of this week’s Law Society vote.

SPG honorary secretary Clive Sutton said the group “continues to be opposed to the principle of ABS”, but added: “So far as canvassing the profession’s views, the committee feels that they have done everything reasonable up to now to involve the profession in the issues, but do not feel that a full special general meeting and resolution amongst membership is justified at this particular time.

“That position may change in the light of any potential developments in the way ABS is introduced and the profession’s reaction to it and so the group will keep the question of the special general meeting under review.”

SRA chief executive Antony Townsend told Legal Futures that the application to license ABSs approved by the Law Society council is the same one that was approved by the SRA’s board last week.

The SRA held discussions with the Law Society in the week between the two votes, but Mr Townsend stressed that they were not negotiations, which he said would not be appropriate for a public interest regulator.

Briefing the press on Wednesday after the council vote, Law Society chief executive Des Hudson indicated that the society had wrung changes out of the SRA and reached “an agreed position” with the regulator.

Mr Townsend said the SRA had instead offered “further assurances” – such as that it would publish a policy statement on ensuring consumers are aware whether they are dealing with the regulated or unregulated part of an ABS – but there had been no change in SRA policy on this so-called “ring-fencing”.

He added that the SRA had “agreed to work with the Law Society” to refine the application of its fitness-to-own test to ensure that “foreign criminals” are not able to take a stake in an ABS.

It also emerged at Mr Hudson’s briefing that the SRA had exercised its power of veto over Legal Services Board plans for the general regulatory chamber of the First-tier Tribunal to hear appeals by ABSs against regulatory decisions, rather than the Solicitors Disciplinary Tribunal, the destination of appeals by traditional law firms.

The society had lobbied hard on this point, arguing that law firms and ABSs should be treated the same. However, Mr Townsend said the SRA had made the decision for reasons other than Law Society pressure.

He explained that the SRA had remained neutral on the issue and been prepared to go along with the board. However, it did so on condition that it could recover costs before the chamber in the same way that it does before the SDT. Mr Townsend said assurances on this had not been forthcoming, meaning the SRA had exercised its veto.

Mr Townsend said the SRA had made “quite a lot of changes” to the proposals to regulate ABSs as a result of suggestions received in its consultations over the past year, “some of which came from the Law Society”.

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