Regulation in the City of London has hardly been out of the headlines for some months – most notably in relation to financial regulation, but also in relation to the legal sector. One of the SRA’s key tasks over the next few months is to ensure that we have the right tools to regulate all kinds of legal firms – from the City giants to the sole practitioner in the high street.

For decades, the focus of regulatory compliance was on loss of client funds and risk to the Compensation Fund. There are relatively few complaints against the big corporate firms. This is largely because their clients are usually used to dealing with lawyers – they often have their own in-house legal teams – and the penalties of messing up a big deal are enormously high. Corporate clients usually know if they are receiving good service. Unlike most ‘ordinary’ consumers of legal services, they have substantial purchasing clout and the means to seek redress in the courts.

This goes some way to explaining the relative absence of complaints against the corporate sector, and the relative absence of dialogue between the regulator and City and large corporate firms. But that needs to change. Corporate lawyers have told us – and we agree – that when they consult or deal with the SRA, they should be talking to people who have a ready understanding of their kind of business. Although many SRA caseworkers, technical and financial specialists and field advisers have worked in private practice, it is usually the case that their experience is in high street firms. And it is in no one’s interests that the regulation of big corporate law firms should be seen to be inadequate – confidence in the excellence of the corporate law firms in England and Wales is important for our economy.

Senior corporate lawyers have also told us that they are seeking a collaborative approach, based on a high degree of openness and trust. They feel that personal contact with appropriate experts, enabling detailed discussion of complex issues, is needed. We agree, and we have started a dialogue with corporate law firms to achieve that end.

I hope that distillation of what has been said to us indicates that the SRA understands the chief concerns. The SRA does recognise the need to support the reputation of the corporate sector, like all sectors of the profession. It also appreciates the need to have a balanced portfolio of skills that enables it to effectively regulate all sectors of the profession.

So how should we address the concerns of corporate lawyers? I emphasise that our work on what is desirable – in the overall public interest, not just that of the SRA or the corporate sector – is being pushed forward with urgency. However, we have not yet reached a definitive position. In this column, I want to flag up the principal issues that we think have to be resolved.

Before going any further, it is essential that the SRA, which operates in the public interest, is perfectly clear about the case for adopting a different approach to one kind of firm when compared with others. We are not talking about letting one sector off the hook, or about an inappropriate ‘cosy relationship’ with certain firms; nor are we talking about relaxing the fundamental ethical principles of solicitors – those must apply whatever the sector. What we are talking about is ensuring that the regulation we undertake is appropriate to the organisation which we are regulating and the kind of practice it undertakes.

Alternative business structures (ABSs) will bring a much greater emphasis on the regulation of firms, rather than individuals, and the introduction of external capital. This will be the legal equivalent of Big Bang. We will need to ensure that any change of approach to the regulation of the corporate sector is appropriate to the new world of ABSs.

The recent Smedley review calls for a more robust, engaged dialogue between the corporate sector and the SRA, with the SRA skilled-up to deal with big corporate issues. We agree with this approach, but the review’s proposals for new structures within the SRA to regulate the corporate sector would cost a few million pounds. This comes at a bad economic time. The recession is hitting both the commercial revenue of the Law Society and causing a sharp increase in work for the SRA, where we have worked hard to contain our costs. The profession, itself under immense pressure, must also pay for setting up the Office for Legal Complaints and for the Legal Services Board.

The SRA will press forward with its strategy to improve regulation across the legal sector, from the high street to the City. We will be publishing proposals on these issues over the next two months, including a response to the Smedley report. Difficult choices on resources and priorities will be required.

Peter Williamson is chairman of the board of the Solicitors Regulation Authority