On 14th June 2018, the SRA published the latest of its long-awaited regulatory reforms, which have been four years and four consultations in the making. The reforms formed part of the Looking to the future programme which aimed to produce more streamlined rules focusing on high professional standards, greater public accessibility and facilitating firms to do business.
As part of this, the Handbook is to be made more accessible and it has been reduced from 300 to approximately 130 pages.
The major reforms
Codes of Conduct
From April 2019 there will be a brand new SRA Handbook containing two codes of conduct: one for individual solicitors and one for firms.
The condensed codes are also expressed differently. “Standards” (with accompanying toolkits) replace the current “outcomes” and “indicative behaviours”, which often seem like a minefield and more rule-like than they pretended to be. The aim is to make the Codes much more digestible and straight forward.
No excuses for not being familiar with the Codes of Conduct!
The Code for Individuals is separated into the following eight sections:
- Maintaining trust and acting fairly
- Dispute resolution and proceedings before courts, tribunals and inquiries
- Service and competence
- Client money and assets
- Referrals, introductions and separate businesses
- Conflicts, confidentiality and disclosure –
- Co-operation and accountability
- Providing services to the public or a section of the public
The Code for Firms sets out the standards and controls that are to be in place in nine sections. All managers of a firm (“manager” means a partner, member, director, or sole principal) are jointly and severally responsible for compliance with the Code for Firms.
Specific reference is also made to compliance officers in section 9 and the requirement that they must take “all reasonable steps to ensure compliance with the firm’s authorisation and regulatory arrangements”. This is in keeping with the current Authorisation Rules.
A notable amendment is that supervisors will no longer be required to have three years post-qualification experience. However, any regulated firm must have at least one manager or employee who is three years qualified – gone is the proposal to allow newly-qualified solicitors to set up shop on their own.
The core Principles have also been streamlined and cut from ten to six. The “axed” Principles have been shifted to elsewhere in the Codes –a demotion, you might say.
We have always taken the view that if you can demonstrate compliance with the Principles, you cannot go far wrong. Print them out, pin them up, make them visible.
The current rules bizarrely allow non-solicitors to provide legal services in unregulated businesses, but solicitors cannot. The SRA has identified this as a risk to the public, in an age where the unregulated sector is gaining traction for “unreserved” legal work.
Under the new Handbook, solicitors will be permitted (some might say encouraged) to practise in “unreserved” practice areas (i.e. everything except court advocacy; litigation; obtaining probate; conveyancing; administering oaths) in unregulated businesses. They will still be bound as solicitors by the individual Code of Conduct and will not be able to hold client money, but they will not be required to have indemnity insurance.
Despite the Law Society’s protestations that this will create a confusing two-tier solicitor profession, and risks damaging the trust in legal services, the LSB is expected to sign off the new arrangement.
Solicitors will also be permitted to work on a freelance basis providing reserved legal services. “Freelance” means practising solo but not as a sole practitioner. They must be at least 3 years qualified, will not be allowed to hold client money or employ staff and they must have appropriate indemnity insurance.
Simpler Accounts Rules
The Accounts Rules will receive a much-needed overhaul, focusing on the main objective of keeping client money safe.
The SRA pulled back from messing with the definition of “office money” – it had been proposed to include payment on account of costs.
In a potentially significant move, firms will not have to operate a client account if the only money they hold is in relation to fees and disbursements they have incurred on the client’s behalf.
Furthermore, firms will be allowed to used Third Party Managed Accounts (TPMAs) to hold client money instead of operating their own client account. We are bound to see new providers entering the market.
But wait, there’s more! – Transparency and accessibility
In addition to all of the above, the SRA has also published its “Better information, more choice reforms”, which aims to instil greater consumer confidence through the availability of clear pricing and information. All SRA-regulated law firms will be required to publish detailed information in relation to the prices they charge in several common practice areas by December 2018. The list is bound to grow over time.
Some will continue to find the drive to fewer rules creating more anxiety, because as lawyers we are trained to follow rules. But principles based regulation isn’t going away any time soon and the new version of the Handbook demonstrates that the SRA is trying to complete the work started by the 2011 Handbook.
This also fits with the SRA’s innovation drive – fewer rules means wider scope to do things differently. Taken together with the SRA Innovate initiative and the relaxed waivers policy announced last week, and the SRA cannot be accused of not failing to commit to their mission to ‘get out of the way’.