Regulation

Outcome 6.3 of the SRA Code of Conduct requires solicitors to ensure that when referring a client to a financial adviser, the client is in a position to make an informed decision as to whether the referral will be in his or her best interests. This means that firms must conduct and record due diligence on referees, and SRA Principle 8 and Chapter 7 of the Code require systems and controls to ensure that management decisions are implemented throughout the firm.

The Law Society in a press release dated 29 November 2012 urged solicitors to recommend only independent financial advisers, thereby providing further endorsement of the SIFA Directory. As the Society pointed out in the same press release, the consequence of referring clients to advisers who are contracted to sell the products of individual product providers will be that solicitors may become more open to negligence claims or that the profession as a whole becomes embroiled in the type of mis-selling scandal that has plagued the financial services industry in recent times.