The Law Society has suggested that the Solicitors Regulation Authority should invite firms to bid for work from failed firms to cut the cost of interventions, the Society’s chief executive revealed last night.
Desmond Hudson (pictured) was addressing the Conveyancing Association, following the SRA’s revelation earlier this week that it had already used up 10% of its entire annual budget intervening in failed firms.
The SRA said it had spent £1m on Yorkshire firm Atteys and £800,000 on Birmingham firm Blakemores after both practices failed to find a buyer.
By Easter, said Hudson, the SRA will have used up the amount budgeted for spending on interventions, the cost of which ultimately falls on the profession.
Instead of paying other firms to handle the files of failed practices, Hudson suggested that the SRA invite firms to bid to take on their caseloads.
In the wake of the demise of Atteys and Blakemores and the high-profile collapse of Manchester firm Cobbetts in January, Hudson warned: ‘We need to be careful about talking about a crisis, as banks listen.’
‘Banks already have a negative view of our sector currently, especially if your practice is exposed to personal injury work or legal aid,’ he said.
In the continued poor economic climate, Hudson warned firms to give careful thought to the role and obligation of their compliance officer for finance and administration (COFA).
‘Regulators may look to COFAs as a new weapon in their armoury,’ he said, and may want to know about the adequacy of a firm’s capital reserves, its distribution of profits and financial resilience.
‘If I were a COFA I’d look at these issues and discuss them with the senior manager,’ he added.