You are here

SRA unveils entity-neutral new handbook

21 March 2011

Legal services providers, whether traditional partnerships or alternative business structures, will only need to comply with a set of ten core principles according to the first draft of the new code of conduct seen by Solicitors Journal.

The draft handbook, which includes the ten SRA principles and the revised code of conduct, together with updated account rules and minimum practice requirements, is due to be published on 6 April.

The new rules have been devised to apply equally to traditional law firms and the new ABSs and are due to come into effect on 6 October to coincide with ABS D-day.

The new code officially introduces the concept of outcomes-focused regulation, which will see the SRA move away from hands-on policing in favour of non-prescriptive rules encouraging firms to take responsibility for devising mechanisms to meet the objectives of the code.

With only 50 pages, compared with the current 270-page code, the new slim-line code is intended to be more user friendly but lawyers have raised concern that the rules would not be sufficiently clear.

The SRA has accompanied the code with examples of “indicative behaviour” which is intended to give firms general guidance about what the SRA will regard as compliant.

The code will also be supplemented with online guidance which the SRA envisages will be in the form of frequently asked questions.

Acknowledging that the interests of consumers and of the general public should be “the key justifications for any regulatory scheme”, the introduction to the code states that “users of legal services are the focus of the SRA’s regulatory framework”.

The concern is reflected in the key rules such as those in the first section ‘You and your client’, under the heading ‘Client care’, which replaces the current rule 2 ‘Client relations’.

Instead of a set of instructions, the client care chapter lists a number of outcomes the firm must achieve, starting with outcome 1.1: “You treat your clients fairly.”

Decisions as to whether to act or cease to act for a client are no longer couched in terms of a solicitor’s rights and obligations but in terms of client interests. For instance, rule 2.01(b) (“You must refuse to act or cease acting for a client… where you have insufficient resources or lack of competence to deal with the matter”) requires a lawyer to achieve a positive outcome (1.4): “You have the resources, skills and procedures to carry out your clients’ instructions.”

Of particular concern to conveyancers were the proposed rules on conflict of interest where solicitors are acting for both lender and buyer.

Speaking to Solicitors Journal last week SRA chief executive Antony Townsend said lawyers working with commercial property clients were confident they could have mechanisms in place that would address the issue.

Residential conveyancers were doubtful that the proposed new rules would be workable in such cases, saying solicitors would be in breach of the code, particularly if a transaction turned out to be fraudulent and litigation ensued.

Many also said that Chinese walls, the solution in place in larger firms, would no longer be appropriate and that officers in charge of risk management would not be comfortable that the firm was compliant.

The new code will need to be approved by the Law Society and the six-month period between publication and effect will give stakeholders the opportunity to test drive the new rules.

Categorised in:

Legal Aid