The time has come for solicitors to reconsider some long-standing rules - like the need for accountants' reports - writes Simon Young


With the expected passing of the Legal Services Bill into law later this year, and the bedding in of the Solicitors Code of Conduct 2007, the time is ripe to consider the future regarding the rules of the profession when they can be carried across into alternative business structures (ABSs) from 2011 onwards.



It is time to look at what may be sacred cows due for slaughter - rules taken for granted for too long which have outlasted their usefulness in the public protection context. To start the ball rolling, may I suggest that the biggest waste of money every year is the cost of the client account audit and the associated accountants' report.



Say that the average cost is about £10,000 per firm. With around 9,000 firms out there, that means a total cost of nearly £100 million. If there are any official statistics, they would add to the debate. If there are none, does that not show how long this has gone unchallenged?



How useful is this money? How many defaulting firms are detected from the exercise? How much attention is paid to the report? Many accountants take the view that they want to report minor breaches - even where the fault is not the firm's and no client has been harmed, usually as result of bank error - because they believe the Solicitors Regulatory Authority (SRA) will look askance at clear reports. Or is it that they are (naturally) trying to justify their fee for what they regard as a tedious box-ticking exercise whose protection could be successfully evaded by any solicitor with half a financial brain? Granted, accountants are potentially liable in negligence if they allow themselves to be hoodwinked - but how many successful claims have there been?



It is hard to evaluate the practice fully because its deterrent value is intangible. But would it not be just as much of a deterrent if the SRA could call for a spot audit at unpredictable intervals? If the £100 million figure is even remotely right, what would the SRA's reaction be if the suggestion were made that the practice be discontinued, that the profession should gain half the benefit, but that the SRA should have £50 million a year to spend on other investigative and policing efforts?



Going on from there, what about the concept of client account itself? Is it, in these days of electronic transmission of funds, still valid? Might other approaches replace it? Many businesses rely on bonding arrangements for money deposited with them. Admittedly, those are usually lesser sums, but would that not suffice for dealing with, for example, disbursements? For larger sums, how about pooled arrangements for the holding of escrow funds by professional organisations, using the interest to offset other practising expenses? Yes, firms would lose out on the 'profit' made on interest - though how long the government will allow the keeping of this is doubtful - but think of how much could be saved in the cash office running expenses. The solution would need work but the thought process should be undertaken.



Finally, now that the law has caught up with our provisions on anti-discrimination, what possible justification is there for retaining a professional rule on this subject? What is the logic in members of the profession being (uniquely?) liable to double jeopardy in the event of an incident of discrimination? Why should it be a breach of professional rules to fail to have a written policy on this subject?



No one quarrels with the concept that the public should be fully protected, nor that that should apply to ABSs as to standard practices, but now is surely the time to reconsider some of the fundamental tenets of our regulatory framework.



Simon Young is a solicitor and director of Lawyers Compliance Limited (www.lawcompliance.co.uk)