The chief executive and chair of the Solicitors Regulation Authority (SRA) have hit back over criticism of their plans for a comprehensive rewrite of the handbook.

Among the changes would be a move to allow solicitors to practise from unregulated firms for the first time, which the Law Society argued earlier this week would pave the way for a two-tier profession and leave consumers unprotected.

Paul Philip, chief executive of the SRA, said at a press briefing after yesterday’s board meeting that some solicitors would welcome the freedoms the rewrite would bring.

“Others believe the system is not broken and does not need to be fixed. The main problem in the market is that the vast majority of people cannot afford to use solicitors. What are the drivers of that cost? Regulation and indemnity insurance.

“We believe that by allowing solicitors to work outside an authorised entity, it will make a contribution to improving access to legal services and enforcement of civil rights.

“Consumers will need to understand what protections they have, and what they don’t have, on legal privilege and indemnity insurance.”

Mr Philip said that nowhere in last week’s report by the Competition and Markets Authority (CMA) was there any evidence of detriment to consumers by using the unregulated sector.

He denied that the SRA was diluting the solicitor brand by changing regulatory arrangements to open up the market and improve competition.

“Everything we’re doing is to maintain high professional standards for solicitors. Are we reducing the solicitor brand? Absolutely not.”

Mr Philip described the handbook rewrite as “radical” and said the Law Society’s views would be considered, along with the others.

He added that he did not believe allowing solicitors to practise in unregulated firms was “such a big leap”. He said the question was whether the change helped members of the public to access advice from a properly trained solicitor with high standards rather than an unregulated adviser who was not even a professional.

Enid Rowlands, chair of the SRA, said the regulator did not share the view that nothing was broken; the CMA reports had highlighted areas where services were not being delivered.

“We need competition to ensure services are reliable and accessible. A 400-page rulebook is likely to dampen competition and reduce the scope of services. A more principles-based approach will make competition more likely. Small businesses and individuals need help for a whole range of reasons, but they don’t access it.”

Both Mr Philip and Ms Rowlands cited the CMA report’s backing for the legal regulators to be fully separated from their representative bodies.

Mr Philip said that, given the referendum, it was natural that the government’s attention was “elsewhere”, but it had launched a consultation on reforming the rules for alternative business structures last week and separation was the “second half” of the Treasury ‘better deal for consumers’ proposals.

Earlier the SRA board approved a reduction in this year’s practising certificate fee for solicitors from £320 to £290. The SRA set compensation fund contributions at £32 for individuals and £548 for firms.

However, the PC fee depends on a decision by the Law Society council today on the net funding requirement for the Law Society group. It will then need the approval of the Legal Services Board.

Tags: Solicitors Regulation Authority, unregulated firms

Row over insurance cover in liberalised regulation regime

Law firms could be left in an insurance gap and clients out of pocket in cases of negligence if plans to drop barriers to lawyers switching regulators are given the green light, the solicitors’ trade union said on Friday.

In yet another round of sniping in the war of words between the Law Society and the Solicitors Regulation Authority, the arcane role of run-off insurance cover for law firms was put in the spotlight.

The SRA has proposed that lawyers should be allowed as much flexibility as possible in choosing which authorised regulator should oversee them. The Law Society has said that it supports in principle the authority’s aim “to encourage a competitive market by removing unnecessary barriers”.

However, the organisation’s chief executive, Catherine Dixon, warned that switching regulator “must not be at the expense of client protection. We are concerned that the SRA’s proposals could leave existing and past clients of firms that switch regulator without appropriate cover.” Dixon added: “We cannot be confident that other regulators’ professional indemnity insurance requirements can appropriately accommodate an unknown number of solicitor firms coming under their umbrella.

“We will therefore be requesting that any changes to the regulatory framework which enables solicitors to change regulator ensures that PII arrangements protect our clients’ interests.”

An SRA spokesman said that the authority had raised client protection issues in its recent consultation on proposals for switching regulators. “Our aim as always is to strike the right balance on removing unnecessary restrictions on firms without reducing the protections in place for users of legal services.”

Competition and Markets Authority (CMA) produces interim report of the legal services market.

https://www.gov.uk/cma-cases/legal-services-market-study

“It is therefore possible that an alternative regulatory model may improve competition if it is successful in reducing the emphasis on regulatory titles.”

The CMA also came out in favour of the legal regulators having “full independence” from the providers they regulate.

Senior director for the legal services market study, Rachel Merelie, said: “Consumers in this market are often not equipped with the right information before they make important purchasing decisions – which often come at critical points in their lives…

“Without greater transparency, individual and small business consumers find it difficult to compare and choose providers of legal services. For many of them this is an infrequent purchase and a lack of experience or prior knowledge makes it very challenging to assess what represents good value.

“As a result, they tend to rely on recommendations from family or friends in choosing providers without checking for themselves what the market has to offer. This is unlikely to drive effective competition.

“The lack of competition may remove a crucial incentive for such firms to compete on price and quality as well as innovate and may help to explain why there have been long-standing concerns over the affordability and accessibility of legal services.”

The Law Society today warned government that now is the ‘wrong time’ for a shakeup of legal services regulation – stressing that the profession will be focusing on supporting its clients through a period of unprecedented change in the wake of last week’s Brexit vote.

Speaking before giving evidence to the House of Commons Justice Committee, chief executive Catherine Dixon pledged that Chancery Lane would work with solicitors, clients, the public and government to support a ‘calm transition’ after the UK voted to leave the EU.

She alerted MPs to what she described as ‘the dangers of picking away at the finely balanced legal services sector when the sector, constitution and economy are going through a period of such unprecedented change’.

She also outlined some of the sectoral issues which will need to be addressed in the event that Article 50 is triggered.

These include: maintaining single market access; enabling solicitors to continue to practise across the EU; maintaining financial services passporting arrangements; ensuring the mutual recognition of judgments; maintaining extradition arrangements including the European Arrest Warrant; and maintaining England and Wales as the jurisdiction of choice, and the use of English and Welsh law across the globe.

The prospect of separation of the SRA and Law Society – along with other legal regulators from their representative bodies – was raised by the Treasury last year, with a consultation expected to be published this summer.

Dixon disagreed with her SRA counterpart Paul Philip during the evidence session over which body should ‘own’ professional standards, legal education and entry into the profession, and the awarding of the professional title of solicitor.