SRA repeat advice to firms in difficulty

SRA repeat advice to firms in difficulty

The SRA have repeated their advice urging firms facing financial difficulties to seek outside help and advice at the earliest opportunity.

The call comes after the intervention by the SRA into eight firms so far this year.

Based on trends from previous years, the SRA had estimated the total number of interventions for 2013 would be around 30, with an associated estimated budget of around £1.3 million.

Due to the demands so far this year the cost of dealing with increasing financial instability by firms is putting a strain on the SRA‘s budget.

SRA Executive Director Samantha Barrass said: ”Intervention is always a last resort where financial instability issues arise.

"We will try to work with a firm where we can to look at ways in which a business can get back on track. If this is not possible we will try to achieve an orderly wind-down.

"In many instances, an orderly wind-down can be achieved without the need for us to intervene, for example where there is a willing buyer for the business, either wholly or in its constituent parts.

“However, our first priority is to protect the public interest, so we have no choice but to intervene into a business when we believe these interests are threatened; for example, when there is otherwise no prospect of orderly continuance of client business.”

Ms Barrass stressed the importance of firms seeking help as soon as possible. She said that firms should already be talking to the SRA via Supervision and, if not, should contact them immediately.

A financial stability presentation was made to the SRA Board earlier this month to highlight the emerging issues.

It reported that eight firms were in intensive supervision where intervention was highly probable, and that intervention was possible for a further 48.

It also outlined a range of behaviours which were typical of a firm in trouble.

These include payments made to partners irrespective of "cash at the bank”, all net profits drawn and no "reserve capital pot” retained, drawings exceeding net profits, high borrowing/net asset ratios, firms controlled by an "inner circle” of senior management and key financial information not shared with "rank and file” partners/members.

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