By Neil Rose


The Solicitors Regulation Authority (SRA) has uncovered 'significant levels of non-compliance' with the referral fee rules, it emerged this week.



A third of firms visited as part of the referral fee compliance project had signed agreements which required the solicitors to act contrary to clients' best interests and may also compromise their ability to act independently - although in most cases there was no evidence of this actually happening.



Dubious provisions included not taking instructions directly from clients and relying on limited information provided by an introducer; disclosing confidential information to the introducer without client consent; and agreeing not to take further work directly from any client referred, but only through the introducer.



The 52 firms visited as part of the programme were largely selected on the basis of risk. The SRA's board, meeting in Birmingham, was told that it was not a survey of compliance by solicitors generally.



A paper before the board, produced for its interim review of the rules, said: 'We have concerns about the extent to which some firms were reliant on introducers for the supply of clients. One firm pays around 32% of its profit costs to conveyancing introducers that provide nearly all of its work and, as a result, is operating at a significant loss that threatens its continued existence.'

The visits also revealed concerns over whether the solicitors had complied with the disclosure requirements and a number of other conduct issues, such as breaching the rules on commission derived from after-the-event insurance sales, and not passing on to clients rebates on the costs of disbursements, such as search fees.





The SRA will decide in December whether any reform to the rule is required after further enforcement and information work is completed.



Law Society chief executive Des Hudson said: 'We will work with the SRA to make sure that the rules concerning referral fees are in the best interests of the profession and public. Ensuring consistent application of the current rules is clearly in everyone's interest.'