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SRA publishes Handbook for new regulatory regime from October 2011

The Solicitors Regulation Authority has this week published its new Handbook, setting out the watchdog’s approach to regulating law firms and alternative business structures from 6 October 2011.

Ten mandatory principles will replace the current regime of detailed rules and regulations from that date, when ABSs will also be allowed for the first time. The principles are that solicitors and firms regulated by the SRA, and all those who work in them, must:

  1. Uphold the rule of law and the proper administration of justice
  2. Act with integrity
  3. Not allow their independence to be compromised
  4. Act in the best interests of each client
  5. Provide a proper standard of service to their clients
  6. Behave in a way that maintains the trust the public places in them and in the provision of legal services
  7. Comply with their legal and regulatory obligations and deal with their regulators and ombudsmen in an open, timely and co-operative manner
  8. Run their business or carry out their role in the business effectively and in accordance with proper governance and sound financial and risk management principles
  9. Run their business or carry out their role in the business in a way that encourages equality of opportunity and respect for diversity
  10. Protect client money and assets.

The SRA said there were differences between the principles and the core duties in the Solicitors’ Code of Conduct 2007, with the sixth principle talking about “the provision of legal services” rather than “the legal profession”. Principles 7 to 10 are also new.

According to the Handbook, “you should always have regard to the Principles and use them as your starting point when face with an ethical dilemma. Where two or more Principles come into conflict, the Principle which takes precedence is the one which best serves the public interest in the particular circumstances, especially the public interest in the proper administration of justice”.

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The Handbook is designed to support outcomes-focused regulation, with the authority claiming this would free lawyers from “box ticking and form filling”.

The watchdog said it would be looking at “breaches of principles and failure to achieve defined outcomes, rather than assessing whether detailed rules are being followed”.

SRA chief executive Antony Townsend insisted that there would be no lowering of standards. “This is not light-touch regulation, it is a framework that will allow the SRA to regulate firmly and fairly while legal services providers are given the chance to serve their clients in the best possible way,” he said.

"Our primary concern will be to work with firms to improve standards. Only when failures are serious or a firm does not show the will to improve will we consider taking formal action."

The SRA claimed that the ABSs it licenses will have to uphold the same professional standards as traditional firms. Clients and funds will also receive the same level of protection.

“Anyone with a material interest in an ABS will be subject to a Suitability Test while the SRA's existing indemnity insurance and compensation fund provisions will apply to ABS in respect of all 'regulated' activities,” the authority said.

The SRA said it would be holding a number of roadshows on the new Handbook ahead of its introduction.

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