The Solicitors Regulation Authority cannot be blamed if firms choose not to honour the ‘spirit’ of the ban on referral fees, the executive responsible for policy, risk and standards has said.
Richard Collins, executive director, told a conference that it was up to politicians, not regulators, to adjust legislation if they feel the aims of the ban are not being achieved.
Since referral fees were prohibited in April, a number of joint ventures between insurers and personal injury law firms have been announced. The latest came this week when the AA confirmed its alternative business structure status and a link with Bristol-based firm Lyons Davidson.
Collins conceded it was ‘ironic’ that the insurance sector had argued so strongly against the referral fee ban yet has seen the most benefits.
But he rejected the idea that the SRA should do more to enforce the intentions behind the ban.
‘We can enforce the word of the law but not the spirit,’ he told the Westminster Legal Policy Forum yesterday. ‘We cannot be held to account for the spirit to be compliant.’
Collins said there had been examples of applicants for alternative business structure licences proposing joint ventures being asked to change their business model. On some occasions the SRA warned it would not issue a licence if amendments were not made, he said.
Collins said he did not want to downplay the legislation that brought in the ban, but admitted enforcement is the ‘second in our list’ of priorities compared with dealing with the financial stability of law firms.
However, this autumn the SRA has sent 900 letters to firms it considers may have been reliant in the past on cases purchased through referral fees.
Collins said visits to some of these firms will follow in the coming weeks, with ‘a number of cases’ currently being investigated and enforcement action expected in 2014.
But he said the SRA has no intention of altering its stance on up-front payments or gifts offered by law firms for cases.
The Ministry of Justice has already banned claims management companies from offering so-called ‘inducements’, and the justice secretary Chris Grayling has indicated he wants to speak with the SRA about extending the ban to solicitors.
Collins added: ‘I can see why you personally might say it’s wrong of solicitors to do it, but to meet the hurdle we need to get over [to merit a ban] we would need to see evidence of risk [to clients].’