Introduction to SRA Regulation for ABSs

An introduction to SRA regulation of licensed bodies (ABS)
Helen Carr

Today’s session will cover:
• The Solicitors Regulation Authority (SRA) and its style of regulation
• Key aspects of SRA compliance and the role of the COLP and COFA
• An overview of the SRA Handbook
Jonathon Bray Legal Services Limited

Legal Services Act 2007
• Allows non-lawyers to own and invest in law firms (ABS)
• Sets out the legal framework for ABS
• Creates the Legal Services Board (overarching regulator of the other
legal regulators)
• Creates the Legal Ombudsman
• Sets out the reserved legal activities (broadly speaking, conveyancing,
litigation, probate and administration of oaths)

Other relevant legislation
• Solicitors Act 1974
• Administration of Justice Act 1985
• Courts and Legal Services Act 1990
• Financial Services and Markets Act 2000
• Data Protection Act 2000
• Legal Aid, Sentencing and Punishment of Offenders Act 2012
• Compensation Act 2006

The Solicitors Regulation Authority (SRA)
“Our purpose is to protect the public by ensuring that solicitors meet
high standards, and by acting when risks are identified”

Variety of roles:
• Authorises entities as recognised bodies (traditional law firms) and
as licensed bodies (ABS)
• Issues practising certificates
• Sets training, qualification and ongoing education requirements
• Sets standards of behaviour (SRA Code of Conduct)
• Supervises firms and individuals
• Enforcement and disciplinary action
• Outcomes-focused, risk-based, entity-based regulation

Risk based regulation
“A vital activity that the SRA undertakes, as a risk-based regulator, is the
identification of risks to the regulatory objectives set out in the Legal Services
Act 2007.
At the SRA, we allocate our own resources proportionately, in line with
identified risks to the regulatory objectives. We require firms to ensure that
they, too, are managing identified risks to the regulatory objectives.”

Risk Outlook
“The Risk Outlook provides an overview of risks to protect people who
use legal services, the operation of the Rule of Law, and the proper
administration of justice.”

“The purpose of the Risk Outlook is to
• set out our position on risk in the legal services market
• show the priorities to which we will allocate our resources
• explain how we will control these risks and act in the public
interest
• help solicitors and firms manage risk.”

Priority Risks
1. Investment schemes
2. Lack of access to legal services
3. Standards of service and considering vulnerability
4. Information security
5. Independence and integrity (concerns about personal injury work)
6. Protecting client money
7. Money Laundering
8. Diversity

SRA Handbook 2011
“This will bring together all the SRA‘s regulatory requirements into a
single, coherent structure that underpins the regulation of solicitors,
law firms and alternative business structures”

SRA Handbook 2011
• Launched 6 October 2011 – now on version 18
• Applies to:
• The authorised body (i.e. the law firm or ABS)
• All solicitors working in the entity
• All other individuals working in the ABS, including non-lawyers

SRA Principles
“The Principles embody the key ethical requirements on firms and individuals who
are involved in the provision of legal services. You should always have regard to the
Principles and use them as your starting point when faced 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.”

The ten Principles
1. Integrity
2. Independence
3. Act in the best interests of each client
4. Provide a proper standard of service
5. Uphold rule of law and proper administration of justice, and
6. Maintenance of the trust the public places in you and the provision of legal services
7. Comply with your legal and regulatory obligations and deal with your regulators and
ombudsmen in an open, timely and co-operative manner
8. Run your business or carry out your role in the business effectively and in accordance with
proper governance and sound financial and risk management principles
9. Run your business or carry out your role in the business in a way that encourages equality
of opportunity and respect for diversity
10. Protect client money and assets

SRA Code of Conduct 2011
The Code is divided into 5 sections:
1. You and your client
2. You and your business
3. You and your regulator
4. You and others
5. Application, waivers and interpretation
• Each section is divided into chapters dealing with particular regulatory issues, for
example, client care, conflicts of interests, and publicity.
• These chapters show how the Principles apply in certain contexts through
mandatory and non-mandatory provisions (i.e. Outcomes and Indicative
Behaviours)

SRA Code of Conduct
• 1st section: You and your client
• Chapter 1 Client care
• Chapter 2 Equality and diversity
• Chapter 3 Conflicts of interests
• Chapter 4 Confidentiality and disclosure
• Chapter 5 Your client and the court
• Chapter 6 Your client and introductions to third parties

• 2nd section: You and your business
• Chapter 7 Management of your business
• Chapter 8 Publicity
• Chapter 9 Fee sharing and referrals

• 3rd section: You and your regulator
• Chapter 10 You and your regulator

• 4th section: You and others
• Chapter 11 Relations with third parties
• Chapter 12 Separate businesses

• 5th section: Application, waivers and interpretation
• Chapter 13 Application and waivers provisions
• Chapter 13A Practice Overseas
• Chapter 14 Interpretation
• Chapter 15 Transitional provisions

SRA Accounts Rules 2011
• Purpose of the rules is to keep clients’ money safe
• Failure to comply with these Rules is key risk for the SRA
• Consulted last year on changes to the Accounts Rules – watch this
space!

SRA Authorisation Rules 2011
• Key requirements to obtain and retain authorisation
• Regulatory foundation for key roles:
• A Compliance Officer for Legal Practice
• A Compliance Officer for Finance and Administration
• Compliance plan
• Risk register

Compliance Officer for Legal Practice (COLP)
• The COLP of an authorised body must:
• Ensure compliance with terms of authorisation and SRA Handbook (except
SRA Accounts Rules)
• Ensure compliance with legal obligations
• Keep a record of any failures
• Report any material failures to the SRA immediately and all other failures as
required

Compliance Officer for Finance and Administration (COFA)
• The COFA of an authorised body must:
• Ensure compliance with SRA Accounts Rules
• Ensure compliance with legal obligations
• Keep a record of any failures
• Report any material failures to the SRA immediately and all other failures as
required

Register of breaches
• Authorisation Rules require COLP and COFA to keep a register of all
breaches which occur, and to report any material breaches to the SRA
• Purpose of the register
• Allow for inspection by the SRA
• Monitor overall compliance with conditions of authorisation
• Assess the effectiveness of the firm’s systems
• Be able to comply with the duty to report breaches which are material
because they form a pattern

Material breaches
• Not defined in the SRA Handbook
• Handbook guidance suggests consideration of the following:
• The detriment, or risk of detriment, to clients
• The extent of any risk of loss of confidence in the firm or in the provision of
legal services
• The scale of the issue
• The overall impact on the firm, its clients and third parties

Risk Register
• Important document to evidence compliance with the Principles, the
management sections of the SRA Code, and the Authorisation Rules
• Evidence of the firm’s analysis of risk and steps taken or to be taken to
mitigate these risks
• Ties in with the SRA’s approach to regulation (i.e. risk-based)

Questions

Introduction to SRA Regulation for ABSs

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