'Scope for argument' over referral fee rules, SRA warns

The SRA has warned that there is ‘scope for argument’ over which activities will be caught by the ban on referral fees set out in Sections 56-60 of LASPO.

The warning came as the regulator today approved the rules it will rely on to police the ban, which comes into force on 1 April 2013.

In its board paper on referral fees, the SRA said it had received a number of requests from firms to “pre-approve” arrangements.

The regulator said it was clear from responses to a consultation on the issue, which closed just before Christmas, that there was “scope for interpreting the provisions in LASPO in different ways and for argument about the activities that are prohibited.

“We are continuing to develop the guidance to deal with the issues raised by the consultation, particularly on issues where respondents have disagreed on our interpretation of the provisions of LASPO.

“We will develop further examples and case studies and ask the standards committee to approve the guidance at its February or March meeting.”

The regulator said it would continue to develop its guidance as its knowledge of different schemes increased.

“There continues to be concerns about alternative business structures, both in terms of the effect these may have on the market and access to justice and the perception that they will have unfair commercial and regulatory advantages over traditional law firms and will be used as a way of ‘getting round’ the ban.

“There were also comments on the draft supervision and enforcement strategy, including concerns about the SRA’s ability effectively to enforce the ban. We are continuing to refine the strategy and to liaise with other regulators and we believe that the SRA will be ready to enforce the ban once it comes into force.”

In line with outcomes-focused regulation, the new rules will not be prescriptive, but take the form of new outcomes, banning the payment or receipt of a ‘prohibited referral fee’.