The Solicitors Regulation Authority is to create a snapshot ‘law firm profiler’ for its staff to help spot early signs of potentially costly law firm collapses.
The regulator wants to get on the front foot when it comes to monitoring the risks posed by each of the 9,000 firms it oversees, after high-profile failures at Axiom Ince, SSB Law and now PM Law.
Under the leadership of new chief executive Sarah Rapson, the SRA plans to change its priorities with a focus on identifying indicators that a firm is in trouble.
Teams will have access to a ‘law firm profiler’ with a single page view of key data. This crib sheet will not only contain details on the size of the firm and its specialisms, but also complaints data and financial information available from Companies House. Under the previous regime, it was generally thought that the SRA should not be involved in ongoing monitoring of firms’ financial performance, but there has been a shift to thinking that preventative action is required, and that warning signs are sometimes visible in firms’ accounts.
Speaking to the Gazette this week, Rapson said work in the coming year will be on ‘getting the basics right’.
‘It is about being more proactive and getting ahead of the risks,’ she said. ‘We are quite reactive in using enforcement and investigations as regulatory tools, but there are other ways.
‘If you wait until you are investigating or enforcing you are probably too late… The organisation has historically been enforcement-led and investigation-led and if that is your big focus that is late and after-the-event. What people want to see is a more pro-active regulator looking for indicators of potential harm earlier.’
The SRA board heard last week that the organisation has already rolled out a programme to improve decision-making in its triage team, including new guidance, training and quality assurance measures so that the right cases are taken forward for investigation.
SRA staff are also being trained on best practice in supporting vulnerable consumers to ensure a kind, considerate and consistent approach.
The financial imperative of identifying risks earlier is clear, given that the likely burden on the compensation fund to pay clients of PM Law is likely to be significant.
Rapson admitted the SRA is ‘stretched too thin’, which has prompted a re-evaluation of the regulator’s priorities and which cases are given prominence.
This could mean a change in approach to prosecuting cases involving alleged abusive litigation, including so-called SLAPPs. The SRA has failed with three prosecutions in this area and it is understood that a revised approach to these cases is being worked on.
Rapson added: ‘We have lost some cases in the tribunal and courts recently and we need to reflect as to whether we are in the right place… it is not like we are not going to be running cases but we will work in a proportionate way.’
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