A full-scale review of the compensation fund will take two years to complete, the Solicitors Regulation Authority has revealed.
Regulators want to weigh up whether existing arrangements provide effective protection for consumers of legal services, as well as address any solicitors’ concerns about the scheme.
The key task will be to assess the impact of alternative business structures (ABSs) and whether the fund can take on the risks of new and potentially much larger entrants to the legal market.
Under the terms of the 2007 Legal Services Act, a separate scheme for clients of ABSs was supposed to come into force at the start of this year. The SRA successfully applied to the Ministry of Justice to scrap the deadline last year.
All firms holding client money currently contribute to the fund, which is to replace money misappropriated after being entrusted to a solicitor.
For 2013, the compensation fund levy has increased by £32 (per individual) and £568 (per firm), to £92 and £1,340 respectively.
The two-year review will include research on the SRA fund, assessment of how other regulators compensate clients and a consultation. Recommendations will then be drawn up and put in front of the relevant bodies.
Helen Herniman, SRA director of post-enforcement, said: ‘We are the only frontline regulator that operates such immediate compensation arrangements and solicitors should take pride in the fact that they contribute to such a fund.
‘The majority of solicitors carry out their duties involving client money with the integrity expected, but unfortunately there's a small percentage which doesn't and they present a great risk to the public.’