The Solicitors Regulation Authority remains on course, subject to Legal Services Board approval, to license and regulate alternative business structures (ABSs) from 6 October 2011.

I am aware that this is not what all solicitors want to hear. Concern has been expressed, in particular about whether smaller and high street firms will be disproportionately affected and driven out by cheaper and less personal alternatives, and whether external investors will exert improper pressure on how ABSs are run, thereby harming the interests of clients.

Our fundamental position is that the public are entitled to the same ethical and minimum standards of service from all providers of legal services – preserving the best traditions of the solicitors profession. Our intent is to achieve the same degree of consumer protection for clients of both traditional law firms and ABSs. The principal risks to consumers from the two types of firm will, after all, be largely the same. Any suggestion that applicants who run ABSs should be subject to different regulatory requirements to traditional firms is incompatible with our duty to treat all solicitors and firms equitably.

It is not the regulator’s function to shield certain sectors from competition. Our primary role is to protect the interests of consumers of legal services. Provided the necessary consumer and public protections are in place, the SRA’s view is that the advent of ABSs will more likely than not benefit consumers by stimulating competition and consequently innovation.

In keeping with this approach, both traditional firms and ABSs will be required to have two statutory officers – a compliance officer for legal practice (COLP) (or, for ABSs, head of legal practice) and compliance officer for finance and administration (COFA) (or, for ABSs, head of finance and administration). In some cases the two positions may be held by the same person. In ABSs they will be a key bulwark against inappropriate interference from non-lawyer owners.

The COLP will be responsible for ensuring compliance with the rules in general and statutory obligations. The COFA will be responsible for ensuring compliance with the accounts rules – and be obliged to report breaches to the SRA.

Both must be of sufficient seniority and responsibility, and have access to all necessary systems and information, to enable them to fulfil their roles. They will be a crucial part of the firm’s governance and compliance arrangements.

Together, they will have the obligation to ensure that the firm, and everyone in it, complies with its regulatory obligations. However, they will not be a substitute for managers’ responsibility for the firm overall.

The process by which the SRA recognises and licenses an individual or firm to practise law – known as ‘authorisation’ – will be robust. Its purpose will be to allow only those who are capable and willing to act ethically, and deliver good outcomes for clients, to deliver legal services. Our approach to authorisation will be risk-based. The process will be more rigorous and evidence-based than at present and include greater use of due diligence checks.

When an application is made by a new firm we will analyse its proposed structure, governance and systems for compliance within the firm’s business model. We will have wide powers to require additional information and make further investigations before deciding whether to grant authorisation.

We may refuse an application for various reasons, including: where we are not satisfied that the managers/interest holders are suitable as a group to run or control a business providing regulated legal services; where the level of external ownership is too high; where the management or governance arrangements are inadequate; where we do not believe that the firm will comply with the regulatory arrangements; or if information provided to us is inaccurate or misleading or a material change has not been notified.

Authorisation may be conditional to mitigate perceived risks to consumers and our regulatory objectives. Conditions may arise from concerns about: the extent of external influence; a perceived need for more frequent reporting; or risk issues emerging from a business model or from proposed arrangements to obtain business. We may restrict the firm from acting in certain circumstances, to manage the risks of any conflict of interest. Conditions may be imposed on application or at any other time.

We will take into account relevant information regarding a manager, employee or ‘interest holder’. This will include information regarding any relatives, affiliates and associates who the SRA has reason to believe may influence how they will exercise their role.

We may revoke or suspend authorisation where it was granted on false or misleading information or the body has failed to provide information requested; or if the managers and interest holders are no longer suitable as a group to operate or control the business; or for any other reason in the public interest. This would allow us to respond to evidence of an unsuitable association.

Approval of the key players in an ABS will be an important step when assessing its fitness to be licensed. This will be required both at the initial licensing stage and when there are changes in ongoing businesses.

The SRA has developed a robust suitability test, which will cover a comprehensive range of factors, including criminal offences, non-disclosure of information, inappropriate behaviour, financial conduct and regulatory findings.

It will be applied to all individuals and corporate bodies whose integrity and bona fides must be established to ensure their suitability to play, from a regulatory perspective, a significant role in a firm. These will include: all partners in a partnership, members of an LLP and directors of a company; owners of a firm who have or propose to acquire a material interest of 10% or more, either on their own account or cumulatively; and COLPs and COFAs.

I hope this summary of the intensive preparations being made for 6 October next year demonstrates that the SRA is firmly focused on safeguarding professional standards and the interests of the clients you serve. I urge all law firms to consider how they will meet the challenges presented by the new market, taking advantage of its flexibilities to develop quality legal services of the kind consumers demand.

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