SRA to reform rule on owning separate entities

By John Hyde- Solicitors are to be allowed to own or manage separate businesses providing non-reserved legal services that are not subject to legal sector regulation.

The Solicitors Regulation Authority last week approved reform of the separate business rule, ‘levelling the playing field’ between traditional solicitors, alternative business structures and unregulated providers.

The move was opposed by the Law Society and the Junior Lawyers Division, which argued that encouraging the growth of an unregulated market would harm standards of practice and service.

But members of the SRA board heard that the ‘dam has already burst’ on lawyers and non-lawyers working as one entity as they voted in support of changes to regulation.

An SRA paper said that the market has already developed to combine alternative and solicitor services, under arrangements which operate outside the separate business rule.

‘This [change] increases opportunity for solicitors to innovate and take part in growing the legal market, which is good for quality and good for consumers’, said Crispin Passmore, executive director for regulation and education.

Board member David Willis, a former partner at international firm Herbert Smith Freehills, said: ‘The current position is unsustainable and I was surprised it didn’t get more support. There is no point in us as a regulator harking back to a world that existed 20 years ago’.

SRA chief executive Paul Philip said the reforms were about ‘loosening the grip’ on law firms, but he stressed that safeguards will be retained for practices wanting to own a separate business.

Under new rules, which still have to be rubber-stamped by the Legal Services Board,

it must be made clear to clients which services are offered by the firm and which by the separate business.

The separate business must not carry out reserved legal activities or immigration work, and clients may be shared with the separate business only if they have given consent. Separate business must not be represented as regulated by the SRA.

The SRA began consulting on the reforms last November. [Courtesy: The Law Society Gazette]