The Solicitors Regulation Authority has warned that it will not provide law firms with ‘safe harbour’ guidance to deal with the forthcoming referral fee ban.
In a discussion paper released yesterday, the regulator says solicitors and firms should be able to work out from the legislation behind the ban which arrangements are acceptable. The ban comes into force for all personal injury cases from next April. Given the interest in the issue, it is likely the SRA will publish further guidance setting out the legal interpretation of what is caught by the ban.
A consultation with the profession revealed that prescriptive direction was required along with a move away from outcome-focused regulation.
The paper said: ‘For this reason defined mandatory outcomes and indicative behaviours that reflect the provisions of [the Legal Aid, Sentencing and Punishment of Offenders Act] will most likely form the basis of our approach.
‘Where necessary, the SRA will seek to develop case studies and learning tools to assist compliance.’
Particular concern was raised by elements of the profession about collective marketing or advertising arrangements. The SRA said the onus will be on firms to show that payments made for advertising services remain ‘reasonable’, with any attempt to hide such fees in complex arrangements likely to fall foul of regulators.
The authority says it recognises that alternative business structures are an option for firms that want to circumvent the ban, but it could not take a view on whether this will be healthy for the legal services market.
If an ABS meets its authorisation requirements as set by the SRA, the regulator will not oppose such arrangements. The regulator will now work on its formal proposals and will seek to make any changes necessary to the regulatory framework in early 2013.