The Law Society has called on regulators to collect specific complaints data on alternative business structures after failing to persuade the government to create a separate compensation fund for ABSs.
The lord chancellor is expected to remove the ‘sunset’ clause in the Legal Services Act to allow ABSs to remain in the Solicitors Regulation Authority’s Compensation Fund indefinitely. The clause had been due to expire at the end of this year and the Society unsuccessfully argued to have it extended by a fixed period of two years.
But Chancery Lane is still concerned that the fund – paid for by fees from solicitors and firms – is not designed to protect clients of the types of new businesses being created. The solicitors’ body wants the SRA to prepare immediately for ABSs to be treated differently.
In a statement, the Society said the forthcoming review of the fund should make provision to record data on the types of claims made and the type of entity generating the most claims.
It added that the SRA should test whether a single fund is appropriate to cover non-solicitor principals and regulated activities that potentially include work outside the scope of traditional legal activities.
The fund has also been exposed to new claims following the transfer of cover for firms previously provided by the assigned risks pool. The Law Society suggested examining whether current management arrangements are adequate given this expanded role.
An SRA spokesman said an imminent review of the compensation fund will provide reassurance to prospective clients, no matter what the type of entity. ‘Our review of compensation arrangements will be wide-ranging and all encompassing; we will look at all matters involved and act accordingly.
‘This includes concerns raised regarding the impact of ABSs on the legal services market.’
He added that some statistics on the size and types of firm were available to be shared with the Law Society, providing they did not contravene the regulatory remit.
Compensation Fund levies rose sharply earlier this year, from £60 to £92 for individuals and from £772 to £1,340 for firms.