Solicitors will be allowed to practise from unauthorised businesses following a major shake-up of regulation announced today by the Solicitors Regulation Authority.

They will also deal with a much-reduced handbook which slashes the complexity of existing rules in favour of an overview of obligations and standards. The Law Society reacted with dismay, saying the proposals could leave clients unprotected if something goes wrong. 

For the first time, the revised handbook will have one code of conduct for solicitors and another for firms. The regulator says this will provide clarity to firms about the systems and controls they need to provide good legal services to the public.

Accounts rules will also be reformed to allow greater use of third parties for handling client money. According to the SRA, there is already been interest from potential providers to offer this service.

The plans are not expected to be implemented earlier than autumn 2018.

The SRA admitted the decision to allow solicitors to choose where they work received a mixed response following a consultation last year, but chief executive Paul Philip (pictured) said the move will be good for the profession, open up career opportunities and benefit the public.

‘It will help to tackle the issue that too many people and businesses simply cannot afford to access the help of a solicitor when they have a legal problem,’ he said. ‘Removing restrictions on where solicitors can work will give the public more choice, increasing access to high quality legal services at a price they can afford.’

The Law Society has been a prominent critic of these plans, saying they could create consumer confusion and harm, and are based on insufficient evidence of any significant damage generated by the current restrictions. There are also questions over indemnity insurance cover and redress for clients who are unhappy with the service provided.

Crispin Passmore, executive director at the SRA, told a press conference yesterday: ‘Clients can already go and access legal services in unregulated businesses. All we are doing is adding a solicitor into that.

‘If anybody thinks that is going to make thing worse they clearly have less trust in solicitors than I have.’

The handbook currently has a 30-page code of conduct and more than 400 pages of rules. The draft code of conduct extends to just six pages. The SRA believes the current system is ‘long, complex, onerous and costly to apply’ and that there is support for simplification. The revised rules and principles are still subject to further consultation this autumn, but the emphasis is on a less inflexible form of regulation and on putting greater trust in professional judgement.

The SRA said: ‘Our view is that solicitors and firm do not need pages and pages of detailed and prescriptive rules to do the right thing.

‘Our focus is on principles and what matters – maintaining the high, consistent professional standards that the public expect. They also provide the clear basis for us to take action where solicitors do not meet their responsibilities and fall short of these standards.’

The wording of certain principles will be amended. For example, the obligation ‘not to allow your independence to be compromised’ is amended to the obligation to ‘act with independence’. Acting with honesty and with integrity – terms that one High Court judge recently said were synonymous – are included in the same principle, but can be pleaded separately in disciplinary action against a solicitor or firm.

The other proposed principles are: to uphold the rule of law and the proper administration of justice; act in a way that upholds public trust and confidence in the solicitors’ profession and in legal services provided by authorised persons; act in a way that encourage equality, diversity and inclusion; and act in the best interests of each client.

The principles concerned with running a business effectively are dropped, being deemed to have only a tenuous connection with in-house lawyers or solicitors working in unregulated entities.

As for accounts rules, the SRA said the current minute detail of how firms should run their accounting systems creates logistical problems over compliance for some and makes it difficult for many firms to comply at all.

‘Such complexity often ends up resulting in technical breaches,’ said the SRA. ‘It drives confusion, cost and non-compliance rather than good practice.’

The regulator will go ahead with proposals to allow solicitors to use third-party managed accounts, with no restrictions on the types of monies firms can hold in them. New rules around this reform are likely to come into force in autumn 2018.

The definition of client money and client liability is set to change. under the proposals, firms that do not wish to operate a client account can create an exemption from doing so where the only client money they hold is in relation to fees and disbursements for expenses incurred on the client’s behalf.

In a statement today, Law Society president Robert Bourns described the SRA’s deregulatory agenda as ‘frankly baffling’. He said: ’The SRA’s role is to regulate solicitors to ensure consumers are protected - yet here it is opening the door for some solicitors to work in unregulated entities, sweeping away long standing rules referencing conflicts of interest, proper professional indemnity insurance and access to the compensation fund (underwritten by the profession) so if something does go wrong consumers could struggle to recover any losses.’