The Solicitors Regulation Authority (SRA) will next year conduct ‘thematic reviews’ on its approach to convey-ancing, the financial viability of law firms, and both English firms’ overseas practice and foreign lawyers working over here, it has emerged.
The review of the regulatory approach to conveyancing and holding of client money has arisen out of the ongoing work on financial protection arrangements and the report by Charles Rivers Associates that forms part of it. The SRA says this “has highlighted concerns that our underlying approach to the regulation of conveyancing might not, in itself, be providing sufficient protection to consumers”.
The Council of Mortgage Lenders announced recently that it was investigating alternative methods of transferring funds between banks to reduce their exposure to “unscrupulous” lawyers who collect mortgage monies but do not pass them on.
The Charles Rivers report, the SRA’s own analysis of the financial position of a number of firms and concerns about the impact of the current economic climate on firms has led the SRA to decide it “needs to review the extent to which we have sufficient information about the underlying financial viability and capital adequacy of firms”.
Work has already been done on this as part of the new core duty on financial management to be introduced next year, and the review will build upon this by covering: reporting and notification requirements; the analysis of financial viability and capital adequacy both at a sector and an individual firm level; the SRA’s policies; and the SRA’s regulatory powers.
The SRA acknowledged that the regulation of overseas practice by SRA regulated firms and of foreign lawyers practising in England and Wales has not been looked at “for some time”, despite the significant increase in overseas practice “and the development of increasingly complex underlying business structures to support it”.
The SRA continued: “In addition, our approach to the authorisation of registered foreign lawyers (RFL) needs to be reviewed in the light of the planned introduction of ABS [alternative business structures] in October 2011. This latter issue arises because, at present, in order to be involved in the management of a firm a foreign lawyer needs to become an RFL. The introduction of ABS would provide an alternative route to such an individual and we need to assess the extent to which our current, longstanding, RFL process meshes with the new arrangements.”
These issues often come together at a firm level, as firms with a significant overseas practice often also have numbers of lawyers from those jurisdictions working in this country as well. “The review will require significant input from individuals with experience of overseas practice and with the economic and business skills to analyse the differing business structures and their impact on our ability to regulate effectively,” the SRA said.
Earlier this week, Legal Futures revealed that the SRA is also poised to conduct a thematic review of legal process outsourcing. Thematic reviews aims to inform the SRA’s approach to regulation in specific areas.