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The SRA has a duty to lead by example

How can the regulator expect to maintain the confidence of the profession when it doesn’t take issues raised by the profession seriously, asks Susanna Heley

The SRA’s regulatory reform programme is continuing apace. A new version of the handbook is due to be published at the end of October and a number of important changes are currently being considered by the LSB.

If the changes are approved as drafted, they will be the first step in the SRA’s plan to reform the accounts rules as well as introducing changes to make it easier for multi-disciplinary practices to be approved as alternative business structures.

Filing reports

The immediate change of interest to firms is that there will no longer be a requirement to file unqualified annual accountants’ reports with the SRA. Firms will still be required to obtain a report, but there will be an exception for those firms whose client account has contained only funds received from the Legal Aid Agency during the accounting period.

The SRA’s current plan is that changes to the circumstances in which a report must be qualified will be introduced from next April. Given that SRA figures suggest that around 60 per cent of reports are qualified, firms will need to consider those changes extremely carefully with their reporting accountants.

Although the SRA has abandoned some of the recommendations from its consultation earlier this year, most notably the proposed requirement that COFAs were to sign a statement certifying compliance annually, a rework of the accounts rules and the reporting accountant requirements are still a central part of its reform plans moving forward. The SRA found a significant majority of respondents to the consultation did favour reform of the system, even where they disagreed with the SRA’s specific proposals.

Firms in general and COFAs in particular will need to keep a close eye on the plans for reform. Despite the overhaul of the code of conduct and the introduction of the handbook in 2011, there have been few significant changes to the accounts rules since 1998. Established procedures have developed in that time and previous reform plans have sought to maintain the status quo; to clarify rather than amend. All indications are that this will no longer be the case. The SRA is looking at a fundamental review of the rules governing the holding and use of client funds.

The SRA is simultaneously reviewing whether the requirement for every firm to have a COLP and COFA are necessary and proportionate, particularly in relation to small firms where, in practice, one or two individuals are responsible for supervising the firm in any event. No specific details have yet been published, but the SRA has confirmed that it is reviewing this issue.

Publicity material

The SRA is keen to promote its reform programme and both the programme and the need for more targeted and less costly regulation has formed a significant part of its publicity material over the last few months. At a conference earlier this month, the SRA was extolling the need for reform and emphasising the work it has done in making itself more approachable; the regulator is keen to reassure firms it is listening to their concerns.

In practice though, the outlook is not quite so rosy. Reports made by the SRA’s legal and enforcement team to the Regulatory Risk Committee (for information only) would seem to indicate that the SRA sees, in particular, complaints about staff members to be tactics used by those under investigation.

The reports suggest firms, particularly large ones, use aggressive defence tactics and strategies such as complaints about SRA staff and requests for information as delaying or diversionary tactics solely designed to tie up SRA resources. There is a worrying lack of critical analysis as to whether complaints made are, in fact, merited and as to what lessons the SRA can learn from the nature of the complaints made.

So, on the one hand, the SRA is actively engaging with the profession to reassure us that it is listening and, on the other, its own reports seem to encourage the perception that firms’ requests for information and complaints are unmeritorious and the result of some ulterior motive.

In general, the SRA’s reform plans are a positive step, though it seems unlikely that the SRA can resolve the concerns of the profession and maintain its confidence unless it is prepared to demonstrate that it takes issues raised by the profession seriously.

Susanna Heley

This article was first published by Solicitors Journal and is reproduced by kind permission. You can read the original article by clicking here.


This briefing is for guidance purposes only. RadcliffesLeBrasseur LLP accepts no responsibility or liability whatsoever for any action taken or not taken in relation to this note and recommends that appropriate legal advice be taken having regard to a client's own particular circumstances.

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