The SRA has now completed the first stage of its programme of roadshows leading to the introduction of outcomes-focused regulation and alternative business structures in October 2011. The launch in London on 25 May was followed by well-attended events in Bristol, Leeds, Birmingham, Exeter, Cambridge, Newcastle, Cardiff, Liverpool and Manchester.

We are determined to continue our dialogue with the profession on these and other objectives, and we were pleased with the active response we encountered. Improved communication with the profession is one of our priorities and I believe that the roadshows helped us achieve that.

Understandably, as has been apparent from the questions put to us at the roadshows, the question uppermost in many solicitors’ minds is: ‘What should I be doing now so my firm is ready for outcomes-focused and risk-based regulation?’ Uppermost in our minds at the SRA in reflecting on the comments made to us is the question: ‘Have we designed a new regime which is good for clients and solicitors?’

At the heart of the regime will be a new online SRA Handbook, now in draft on the SRA website. The structure and content of the handbook are not set in stone. You can help shape events by taking part in the associated consultation, ‘The architecture of change: the SRA’s new Handbook’.

The consultation is large. We have had to amend our rules so that they can also be applied to ABSs. We must ensure a level playing field between traditional law firms and ABSs with the same conduct rules applying to each, and the new code of conduct is central to that. We have broken the consultation paper down into sections so that it deals succinctly with each set of rules, highlighting the changes.

I suggest that having considered the consultation and the draft handbook, you might focus on the aspects that particularly relate to you and your practice, or about which you have strong views. We depend upon your comments if we are to get this right. We need qualitative, considered advice on those issues that matter most to you. Many local law societies and other interest groups will coordinate responses and are organising events to obtain the observations of their members.

There are 10 principles which set the overarching ethical standards which will apply to everybody regulated by the SRA, and to all aspects of practice. They apply throughout the handbook and preface each set of rules.

Although our overall thrust is towards simplicity, the 10 principles expand on those in the current core duties in the code of conduct because we felt certain issues needed greater emphasis having regard to the risks they pose to clients and the profession. In addition to the familiar professional principles, the 10 principles include new elements emphasising the importance of your relationship with the regulator, the effective governance of risk and financial management of firms, the promotion of equality and diversity, and the protection of client money and assets.

In practical terms, principle 8 – ‘run your business/carry out your role in the business effectively and in accordance with proper governance and sound financial risk management principles’ – is the one most likely to require significant preparation. The management and supervision of firms is covered by chapter 7 of the new handbook. Firms will be required to have a compliance officer for legal practice to oversee and embed adherence to the principles, rules and outcomes, and a compliance officer for finance and administration to ensure compliance with the Accounts Rules. You might wish to start considering who within your firm might fulfil these roles and how they will carry them out.

Many firms are going to need to improve their management skills and processes. Some solicitors will have to become far more risk-conscious, devoting greater attention to keeping their firm on a stable financial keel.

We will set up processes by which we can assess the financial viability of firms and identify issues which might lead to failure. We have to find the right balance; we must not be too intrusive, but at the same time we need an early warning system to identify possible failure.

Firms that have achieved the Law Society’s Lexcel practice management standard, which covers risk management, are likely to find compliance with principle 8 much less challenging than others. Lexcel accreditation offers a range of significant advantages, so now would be an excellent time to start working towards it.

If this subject is new to you, now would also be a good time to attend one of the risk management seminars or workshops that are available. We will not be looking for perfection from the start of outcomes-focused regulation in October 2011, but we will be looking for unmistakeable movement in the right direction.

Mastering risk management is not just a matter of appeasing or pleasing your regulator – it could make a major contribution to the stability and performance of your firm. Even in firms that have dedicated compliance managers, everybody needs to understand what is involved and play their role.

Another reason for giving priority to risk management is that doing so might enable you to address another new rule, which requires you to notify the SRA ‘of any changes to relevant information about you including serious financial difficulty and significant breaches of the principles, rules, outcomes and other requirements of the handbook’.

These requirements for good risk management are not heavy-handed regulation; their purpose is to minimise the need for the SRA to intervene into firms, with all the trauma, inconvenience and cost to the profession that can be involved. Earlier warning of difficulty would enable us to direct firms towards help – to monitor the situation by means of regular contact – and where necessary to guide the orderly transfer of business. We will be giving more information about what we expect in relation to this requirement in our October consultation.

The immediate timetable as we progress towards the introduction of outcomes-focused and firm-based regulation and the advent of alternative business structures is:The new SRA board has now completed its first six months in office. In my next column I will review our performance to date against the objectives we set ourselves, and our priorities over the remainder of the year and beyond.

  • 27 July: closing date of ‘Outcomes-focused regulation – transforming the SRA’s regulation of legal services’ consultation;
  • 20 August: closing date of ‘The architecture of change: the SRA’s new Handbook’ (both consultations can be found on the SRA website);
  • October 2010: start of second consultation on the Handbook and publication of timetable for the transition to outcomes-focused regulation, cost-benefit analysis and equality impact assessment.

I recognise that many in the profession have serious concerns regarding the insurance renewal in October, which I will also address.

Charles Plant is chair of the board of the Solicitors Regulation Authority