Firms should continue to be able to operate client accounts, as they are vital for the effective delivery of many legal services, the Law Society of England and Wales said in response to the Solicitors Regulation Authority’s (SRA) consumer protection review discussion paper.
Law Society president Nick Emmerson said that the SRA is considering whether or not firms should hold client money or whether some form of restrictions ought to be introduced. He continued:
“The ability to handle client money is an important difference between solicitors as regulated professionals and unregulated services providers. Client accounts are a fundamental tool for the efficient and effective delivery of many types of legal services.
Most firms comply with all the rules. Unfortunately, there are an exceptional few who abuse their position and careful consideration should be given to applying appropriate and proportionate safeguards that might reduce risks to consumers.
Despite this recent uptick in the number of SRA interventions, the yearly mean for the three-year period for 2020-2023 was 39 interventions, lower than the historical average of 42.5 over the period 2010-2023.
We asked for more information from the SRA about recent interventions, including reasons, types of entities and size of entity involved and whether the SRA can identify common themes. To date, this information has not been provided but if and when, we receive it, we will provide a constructive response on how any potential risks may be ‘minimised to consumers.’”
On firms’ structures and ownership modes, Nick Emmerson said:
“We have concerns about the legal consultancy and accumulator firm models**, due to the high-profile collapses of Metamorph, Kingly and Axiom Ince. We are disappointed that the deadline for responding to the SRA’s discussion paper is before the findings and any recommendations of the Legal Services Board’s (LSB) independent review into the SRA’s regulatory actions leading up to the collapse of Axiom Ince and the SSB Group.
This limits the Law Society’s ability to provide focused and useful feedback. It would make sense to factor in ‘lessons learned’ to ensure future policy changes focus on the most significant areas of risk.”
On the Compensation Fund, Nick Emmerson added:
“The SRA’s discussion paper also raises a number of questions around the future of the SRA Compensation Fund.
The Fund provides an essential last line of defence for clients and it has been the subject of two major SRA consultations since 2018. We reaffirm our commitment to the Compensation Fund and reiterate our responses to previous consultations, while stating a willingness to give fair consideration to any evidence-based proposals the SRA might put forward to ensure the Fund’s long-term sustainability.
Despite this lack of supporting data, we welcome the SRA’s new approach to policy-making, where it is seeking input from stakeholders prior to the launch of formal consultations.
We look forward to engaging with a fully evidenced formal consultation on consumer protection issues later this year.”
