Firms involved in a separate business in another profession will be able to act for clients in conflicts with clients of that business.

The SRA this week set out guidance for firms ahead of new regulations surrounding the long-established separate business rule, which come into force from November.

The reforms allow so-called traditional firms the chance to work in the same company as accountants, for example, and compete with existing multi-disciplinary practices.

The guidance covers referrals, which areas of work are covered by regulation and what issues constitute a conflict of interest.

Firms will also be allowed to refer cases to the separate business with which they are attached, but only if it is in the client’s best interests.

The client’s consent to waving their confidentiality ‘must be clear and they cannot be forced to do so’, the guidance states. This request to waive confidentiality must be clear and separate to any other terms.

Solicitors are also reminded the interests of the separate business should not be put before the best interests of the client, and that law firms continue to act independently when required.

Clients should be informed that work carried out by the separate business offers no right of complaint to the Legal Ombudsman, will not be subject to any grants from the compensation fund and is not covered by legal professional privilege.

The guidance adds: ‘This is only a starting point – the test is whether the client has an actual understanding of the differences in regulation and redress and the potential consequences and it is your responsibility to ensure that this is the case.

‘Where there are factors increasing vulnerability, it may well be necessary to explain these issues in more detail to ensure that the client understands the potential consequences.’

Liberalisation of the legal market means other types of businesses are already allowed to own law firms and deliver innovative services, with three of the big four accountancy firms having taken that step.

Crispin Passmore (pictured), executive director for policy at the SRA, said the regulator wants to support this innovation to create a level playing field, allowing law firms to compete with other companies offering these ‘one-stop shops’.

‘We are now looking into what more we should do to give solicitors even more flexibility in future. We have a responsibility to encourage a competitive, vibrant legal sector which ultimately increases choice for consumers.’