The Solicitors Code of Conduct is to be rewritten and a swath of detailed conduct rules are likely to scrapped under plans being discussed today by the Solicitors Regulation Authority.

The SRA intends to fundamentally reform the way it regulates, moving from the current ‘box-ticking’ system of detailed rules to ‘principles-based regulation’, similar to the regime used by the Financial Services Authority.

However, the proposals, which are contained in a consultation paper soon to be launched by the SRA, have attracted criticism that the new system will cause uncertainty for the profession.

Under the plans, the SRA will move to the new style of regulation in 2011, to coincide with the introduction of alternative business structures (ABSs). It will set out the principles by which firms are expected to conduct their business and the outcomes they must achieve. But there will be far fewer rules governing the process by which firms should arrive at these outcomes, giving greater flexibility to firms. Any rules that cannot be ‘justified’ will be scrapped, the SRA says.

Firms will be regulated differently according to the risk they pose, the consultation paper says. SRA firm visits will take on a different tone, moving away from investigations of rule breaches towards a discussion about a firm’s risk management systems, with ‘less ticking of boxes’.

There will be more enforcement action based on ‘breaches of principles’ and ‘failure to achieve defined outcomes’, and fewer based on ‘failure to comply with detailed rules’.

The SRA stressed that it would not be lowering the standard required from firms or the level of customer protection.

The SRA will issue guidance on how the new rules should be interpreted. Some elements of the regulatory regime, such as those relating to the indemnity regime and licensing requirements, will still be subject to more detailed rules.

Frank Maher, a partner at Legal Risk in Liverpool, said: ‘I am not sure the profession is ready for yet another upheaval. We have only had the code of conduct since 2007, and there is some concern that there has been a little too much tinkering over the past 12 months… People will fear the lack of clarity.’

A Law Society spokeswoman said it had endorsed the move towards outcomes-focused regulation, but warned this must not become ‘regulation by ambush’. Solicitors must be given guidance on what would be acceptable, she said, adding that it was ‘very ambitious to expect this to be introduced in 2011’.

She added: ‘It is important that this is done right rather than rushed to meet an apparently arbitrary deadline.’

The SRA will shortly launch a ‘high-level’ consultation on the changes, and will then consult on a revised code of conduct in April/May 2010, with the new code to follow in 2011.

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