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SRA gives green light to freelance solicitors

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Last week, the SRA announced a series of decisions on the outcome of its Handbook reforms. Marzena Lipman, policy adviser at the Law Society, gives an overview of the changes.  

On 14 June, the SRA published the outcome of the consultation Looking to the future: phase two of our Handbook reforms, which ran last autumn. It marks the end of the major programme of Handbook reforms, carried out under two phases of consultations, and paves the way for far-reaching changes to the way solicitors and their firms currently practise.

Overhauling the Codes

The SRA decided on a new reduced set of seven principles, two separate Codes of Conduct, and simplified Accounts Rules. The changes mean that the current Code of Conduct will be replaced with two shorter, less detailed Codes – an individual solicitor code and a firm code. The new Codes will not have the outcomes or indicative behaviours in the present Code, with much of the detail expected to be moved to new guidance. In addition, the current Accounts Rules will be simplified and shortened, with changes to the definitions of client money and client account, and the introduction of third party-managed accounts.

Solicitors in non-authorised firms

The SRA will proceed with its controversial proposal to allow solicitors to deliver unreserved legal activities from non-SRA-regulated firms, with an exception for immigration, financial services, and claims management work. Solicitors practising in unregulated firms will only need to abide by the new individual Code of Conduct for solicitors. They will not be required to pay into the Compensation Fund nor hold professional indemnity insurance (PII). This proposal will impact on the way the profession is currently structured and how it practises.

Freelance solicitors

The SRA also decided to go ahead with the proposal to permit ‘sole solicitors’ (freelance solicitors) to act outside the protections of a recognised sole practice to deliver reserved and non-reserved services. In response to concerns, the SRA has decided to require freelance solicitors to maintain PII cover for both reserved and non-reserved work, though they will not be required to comply with the SRA’s minimum terms and conditions. They must have three years’ practising experience prior to delivering reserved legal work as a freelancer. They will not be able to hold client money nor employ people.

Further changes

The SRA took on board concerns in relation to the proposal to remove the ‘qualified to supervise’ rule, which would have allowed solicitors to open a firm immediately after qualifying. It decided to tighten the current rule up rather than abolish it.

Other changes were also announced and are set out in the table below.

Our concerns

The changes pursue a less prescriptive approach to regulation, with the Handbook’s size reduced by about two-thirds. The SRA argues that the intention behind the changes is to simplify the regulations, make them less prescriptive, and give solicitors more flexibility and freedom in the way they choose to practise.

The Law Society has serious concerns about the impact of some of the changes on the profession and clients, in particular, allowing solicitors to deliver services from non-authorised entities and as freelancers. We believe the proposed measures will increase uncertainty for the profession, erode vital client protections, lower standards and diminish the solicitor brand. 

Next steps

The SRA will now be submitting an application for a rule change approval to the Legal Services Board (LSB). Subject to the LSB’s approval, the SRA anticipates implementing the changes in April 2019.

We are evaluating the changes and will be sending out a more detailed member assessment in due course.

Overview of further changes

Authorising individuals 

The character and suitability assessment will be streamlined for managers, owners and compliance officers who have already been authorised by another legal services regulator overseen by the LSB. 

Authorising firms

 

The practising address for law firms will be widened beyond England and Wales to the UK. Any SRA-regulated firm will need to have at least one manager or employee with three years’ experience. The new authorisation rule that requires firms to intend to deliver legal services, means that in the future firms with corporate manager owners would most likely need to be authorised as an alternative business structure. Immigration and claims management work outside a regulated firm will be banned.

Specialist rules

 

The Property Selling Rules will be removed from the Handbook. The SRA will issue guidance on sole agency and sole selling rights.

The revised Financial Services Rules will not allow solicitors to provide regulated financial services to the public outside non-LSA-regulated firms. Overseas Rules have been amended, with some rules being removed, in particular for areas where local rules or regulatory systems are better placed to deal with issues.

Training regulations

 

The solicitors qualifying exam (SQE) is set to be introduced, at the earliest by 2020. All those starting the qualification process from then onwards must take the SQE. Those who have already started to work towards qualification through the existing routes will have 11 years after the SQE is introduced to qualify this way. The transition period for Qualified Lawyers Transfer Scheme candidates will be extended by an extra 12 months. The SRA also decided to retain early character and suitability decision for aspiring solicitors. This is so potential students can understand at an early stage the potential consequences of issues for their admission.

Updated enforcement strategy

 

The strategy will be supported by guidance. The new approach aims to provide greater clarity for both the profession and the public and help the SRA to focus on the most serious matters.

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