Changes to the SRA Handbook would dilute client protections.
Engage with a solicitor’s firm and you can rely on a number of certainties. The advice you are given – and the things you say – will be confidential. The person who is giving you the advice is well-trained and well-regulated.
On the rare occasion the advice turns out to be wrong you have recourse – through the Legal Ombudsman (LeO) and the compensation fund solicitors pay into. You can also rely on the fact that your solicitor is insured and, if they are junior, properly supervised.
But all that is at risk because of proposed changes to the Solicitors Regulation Authority’s Handbook – changes that could leave clients exposed and some legal transactions deprived of vital protections.
The proposals could result in two tiers of solicitors – those working in a regulated entity and those who are not. The regulated sector would continue to operate with full client protection, including full professional indemnity insurance, offering clear redress in the event of things going wrong.
Advice from solicitors in unregulated entities may not be legally privileged – which means vital protections for clients, that keep what passes between them and their solicitor confidential, would be under threat. This represents not only the erosion of a cornerstone of the justice system, but also undermines the reputation of our profession abroad.
The same solicitors may not have PII, are not subject to the same conflict rules as those solicitors in regulated entities and, as such, their clients will have significantly less protection.
And it is not at all clear whether clients of solicitors in unregulated entities would have access either to the compensation fund or the LeO if things went wrong.
The SRA’s proposals risk undermining the status of solicitors at home and abroad, potentially impacting on the significant contribution of the legal sector which is worth £25.7bn and is an important export worth £3.6bn net to the UK’s bottomline.
Newly qualified solicitors generally welcome the support and guidance from more experienced solicitors and this is also a key driver of quality of service. Changes to supervision requirements could also mean that newly qualified solicitors with limited experience and without the support of more senior solicitors may be able to set up their own unregulated firms or indeed work in an unregulated firm without support.
This could place clients as well as newly qualified solicitors at risk, and arguably impact negatively on the standing of the solicitor profession.
Unregulated entities will not be subject to the SRA rules of conflict and confidentiality. This means that unregulated entities will be able to act in situations where regulated entities would not. This creates complexity for individual solicitors in unregulated entities who will have to comply with the SRA solicitors’ code and common law requirements on conflict.
Plus, plans to ‘simplify’ accounts rules – during the course of transactions solicitors firms often have to hold substantial amounts of client money – will in reality cause new risks and new confusions.
All this leaves an overly complicated and confusing picture for buyers of legal services who will get different protections depending on whether the solicitor works in a regulated or unregulated entity.
To compound this the proposals are vague in places. For example, it is not at all clear how they might impact on sole practitioners.
It is hard to understand why the SRA thinks it is a good idea to dilute client protections and create a two-tier market, to undermine key rights and routes to recourse, and the reputation and operation of the very profession they are there to regulate.
The SRA says its proposals are radical. Possibly, but the Society is concerned about their impact on solicitors, clients, and the justice system. We will share these concerns with members this summer and respond robustly to the SRA consultation. We urge solicitors to give us their views by emailing firstname.lastname@example.org.
Robert Bourns is president of the Law Society