The Solicitors Regulation Authority today confirmed it will not extend its tight deadline for responses to a string of consultations proposing wide-ranging and controversial reforms of regulation.
The news came as The Law Society renewed its attack on key elements of the plans, which include radical changes to professional indemnity insurance, the compensation fund, multidisciplinary practices and accountants’ reports.
Reform of PII, including the proposal to slash minimum cover for small firms to £500,000 and cut run-off to three years, are expected to be approved at an SRA board meeting on 2 July, just two weeks from now.
Earlier this month former Society president Linda Lee wrote to local law societies and practitioner groups highlighting the fact that the SRA allowed only six weeks for responses to the reforms, which were announced on 7 May. The closing date for responses is today, with most of the changes expected to take effect from October.
Lee, chair of the Society’s Regulatory Affairs Board, warned that the plans will have an ‘adverse impact’ on the profession for several reasons. These include the fact that smaller firms doing conveyancing and other high street work will find themselves less well protected and may still be required to purchase PII at a higher level.
Echoing those warnings today, Society chief executive Desmond Hudson said: ‘We consider that six weeks is too short a time period to consult on and assess the consequences of such far-reaching changes. To use the example of PII, firms, insurers and brokers will simply have insufficient time to adjust their businesses in time for the 1 October implementation which could mean that no cover will be provided for lenders in residential house transactions. Yet these changes could see the immediate removal from panels of hundreds of firms.’
He added: ’Unfortunately, the announcement has raised expectations among some firms that they will benefit from cuts in premiums and less reporting obligations. The reality of the proposals may be different; under the threat of regulatory sanctions, firms will have to demonstrate that they have purchased sufficient insurance above the new lower limits to cover risks which are currently covered in their policies. For some firms, removing the need to submit an accountant’s report will be a saving, albeit the COLP or COFA will have to certify compliance. Many firms will have to continue to produce the report as a requirement for their clients, COFA and PII insurers or their bankers.
’The lending institutions have already made clear that if the removal of client protections proposals go ahead, lenders will act swiftly to minimise their exposure to risk. This could mean a substantial reduction in the number of firms which act on their panels and introducing greater controls on those they retain or even moving work away from ”high street” firms.
’More time needs to be given to allow the market to produce new insurance products and to educate firms and consumers who, if these proposals go ahead, will find themselves facing greater exposure to risk.’
Chancery Lane is also concerned about the seeming dearth of analysis and evidence underpinning the proposals. ‘There has, so far as we can determine, been no impact assessment nor equality and diversity impact assessment to date,’ said Hudson.
The Society’s consultation responses can be read here.