Solicitors and law firms are to be allowed to own or manage businesses in other professions that are not subject to legal service regulation.
The Solicitors Regulation Authority yesterday approved reform of the separate business rule, which has previously kept regulated firms and businesses in other professions distinct.
The move was opposed by the Law Society and the Junior Lawyers Division, which argued that encouraging the growth of an unregulated legal services market would harm standards of practice and service.
But members of the SRA board heard that the ‘dam has already burst’ on lawyers and non-lawyers working as one entity as they voted in support of changes to regulation rules – particularly with the advent of alternative business structures.
An SRA paper said that in practice the market under the current regime has developed to combine alternative and solicitor services, under arrangements which operate outside the separate business rule.
‘This [change] grows the opportunities for solicitors to innovate and take part in growing part of the legal market, which is good for quality and good for consumers,’ said Crispin Passmore (pictured), executive director for regulation and education.
Board member David Willis, a former partner at international firm Herbert Smith Freehills, added: ‘The current position is unsustainable and I was surprised it didn’t get more support. There is no point in us as a regulator harking back to a world that existed 20 years ago.’
SRA chief executive Paul Philip said the reforms were about ‘loosening the grip’ on law firms, but he stressed that safeguards will be retained for practices wanting to own a separate business.
Under new rules, which still have to be rubber-stamped by the Legal Services Board, it must be made clear to clients what services are offered by the firm and what by the separate business.
The separate business must not carry out reserved legal activities or immigration work, and clients may be introduced to the separate business only if they have given consent. Separate businesses must not be represented as regulated by the SRA.
The SRA started consulting on the reforms last November and the responses largely supported the changes.
The Legal Services Consumer Panel called for a balance between encouraging a wider range of services at a potentially decreased cost, while ensuring no detriment to clients.
The City of London Law Society urged the SRA to go further in exploring the question of where solicitors can practise, an issue which the regulator will re-examine at the end of the year.