24 Jul 2018

At the latest stage in the four-year “Looking to the Future” reform programme, the SRA has confirmed that it intends to go ahead with the introduction of a new regulatory regime, which we expect will create both opportunities and challenges for firms.

What is the SRA proposing?

Amongst other things, the SRA’s proposed new rules will:

  • allow in-house solicitors to give legal advice to their employer’s clients (not just their employer)
  • allow solicitors to provide reserved legal activities such as litigation on a freelance basis in certain circumstances
  • introduce a shorter rulebook (of 130 pages) and separate codes of conduct for individuals and for firms
  • shorten and simplify the Solicitors Accounts Rules and introduce an option to hold client money in a third party managed account; and
  • require firms to publish information on prices and what these cover for certain types of legal services such as employment tribunals and conveyancing

What are the opportunities and challenges?

A number of opportunities will present themselves to new and existing SRA-regulated firms. With solicitors permitted to provide much commercial legal advice via a non-SRA authorised firm, some new firms may decide not to become regulated from the outset. Existing firms may take the decision to split into regulated and unregulated divisions, to reduce compliance costs and administration.

New law firms may find themselves able to practise (albeit in a limited fashion) prior to obtaining SRA authorisation, which has in the past required a lengthy wait before a new firm can open its doors to business.

One potential stumbling block is that the SRA believes that legal privilege will not attach to communications, with regulated individuals practising in non-regulated entities.

It is yet to be determined exactly how the pricing information required to be published will be conveyed, but firms are wary of the proposal given that pricing can vary enormously from matter to matter.

What happens next?

The next step is for the reforms to be submitted to the Legal Services Board for approval, which is expected towards the end of the summer. The website and price transparency rules are intended to be introduced in December 2018. Implementation of the other reforms is anticipated to be around April 2019.

It would be wrong to suggest that nothing will change before implementation next year. The SRA is already demonstrating the ethos of the proposed reforms, as was shown in its decision to allow HR consultancy firm Croner to provide legal services via in house lawyers without the need for the firm to be authorised. Croner satisfied the SRA that its plans served to protect and promote the public interest, and improve consumers’ ability to access justice. The SRA therefore waived the requirement that the firm be authorised, and it is now able to provide written advice and employment tribunal litigation support via solicitors employed by it. This significant development is a sign of things to come, moving away from the status quo of firm-based authorisation, which the SRA says prevents solicitors from working within flexible structures and from effectively competing with the unregulated sector.

We recommend that firms regulated by the SRA add the opportunities and challenges posed by these reforms to their Board agenda.

To discuss the opportunities or challenges further, please get in touch with your usual Fox Williams contact.

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