As part of their recent Looking to the Future programme, the SRA took the bold decision to significantly simplify and reduce the prescriptiveness of its Account Rules. The result of this effort is the replacement of the SRA Handbook, with the slim-line SRA Standards and Regulations, which come into force on 25th November 2019. But what are the changes, and how will these affect law firms? Some of the changes are listed below.
Simplified and condensed
The SRA Handbook, while comprehensive, has been viewed by many as onerous and complex, and hence was well overdue for transformation. One of the most notable changes of the new Standards and Regulations is how much shorter and simplified they are when compared to the Handbook. To achieve this, the SRA has:
a) Reduced the number of rules (from 52 to 21) by removing many highly prescriptive rules with a move to allow law practitioners greater latitude to use their own judgement.
b) Simplified the rules – remaining rules have been considerably reduced in length; for example, rule 20: Withdrawals from a client account, covered nine sections in the original SRA Handbook, but is now only three sections (5.1 – 5.3).
c) Removed all of the old guidance notes.
d) Reduced the number of Principles.
Separate codes for firms and law practitioners
The new SRA Standards and Regulations now have a section for firms (SRA Code of Conduct for Firms) and one for law practitioners (SRA Code of Conduct for Solicitors, RELs and RFLs).
New simplified Accounts Rules
The new guidance includes a simplified set of Account Rules targeted at keeping client money safe. What was previously several pages of highly prescriptive rules have been reduced significantly, including a much cut-down section on the payment of interest, which states, “You account to clients or third parties for a fair sum of interest on any client money held by you on their behalf”, unless a different written and informed arrangement has been made.
Solicitors can carry out ‘non-reserved’ legal work from within a business not regulated by a legal services regulator
The Legal Services Act 2007 defines certain work as ‘reserved legal activities’. These are:
- exercising rights of audience,
- conducting litigation,
- preparing certain documents relating to probate and conveyancing,
- acting as a notary, and
- administering oaths.
If an individual or firm is not authorised by, and subject to, the regulatory arrangements of a legal services regulator under the Act, they cannot perform the above services. Other legal advice or activities (referred to as unreserved activities) – can be delivered by people who are not subject to regulation, particular qualifications or training.
The SRA recognises that not only are people increasingly using services outside of legal services regulation, but that consumer protection law has advanced considerably since the current regulatory model was developed in the 1970s. In addition, the SRA knows that many owners and managers of its regulated firms are not solicitors or lawyers, and multi-disciplinary practices can be made up of solicitors and other business professionals, such as accountants.
From November 2019, solicitors can carry out ‘non-reserved’ legal work from within a business not regulated by a legal services regulator.
In a press release , Anna Bradley, Chair of the SRA Board, said:
“Our new regulations place a sharp focus on the high professional standards that we and the public expect, while allowing solicitors greater freedom in how they deliver their services.
“By stripping away outdated and unnecessary rules and giving solicitors more flexibility to design and deliver their services around their clients, our new regulations are designed to help people access a wide range of high quality services with the confidence that proper protections are in place. That can only be good for both the public and the profession.”
Allowing Solicitors to provide reserved legal services on a freelance basis
One of the most controversial elements of the reforms is the allowing of solicitors to work on a freelance basis without indemnity insurance. According to the Law Society Gazette:
“From November, only SRA-authorised bodies and their principals will need to hold professional indemnity insurance that meets the regulator’s minimum terms and conditions. There is no requirement in the proposals for solicitors who provide unreserved legal activities to hold any PII, while solicitors providing reserved activities must take out ‘adequate and appropriate’ cover.”
The Law Society has many concerns regarding the changes to freelance solicitors’ insurance requirements, stating it may lead to clients being confused and disadvantaged.
The SRA reforms will take time to bed in and it may be many months before we see the consequences of the changes.
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