Solicitor's Regulatory Authority
SRA OUTCOMES FOCUSED REGULATION - TRANSFORMING THE SRA’S REGULATION OF LEGAL SERVICES1. In a recent announcement (30th April 2010) the SRA notified an intention of consulting on the transformation of its approach to the regulations for the benefit of consumers. These proposals will involve significant reform of the SRA’s traditional approach of regulating the solicitors profession in order for it to be “fit for purpose” for the new legal landscape brought in by the Legal Services Act 2007.
2. Amongst those matters given recognition by the SRA are:
(1) That its current rule book is too detailed
and prescriptive and that detailed rules are
becoming increasingly difficult to keep pace with
change and will be even more so with the
liberalised legal landscape coming into effect in
October 2011.
(2) That its regulatory approach needs to be more
effective, proportionate and targeted so it can
consistently regulate a greater range of legal
service providers with a targeted risk based
approach.
3. The SRA proposes to move to a system of “outcomes focused regulation” (OFR) which will offer a “better focus on making sure firms offer good standards of service to consumers and good firms more flexibility in how they operate their businesses”. This transformation will involve:
(1) Changing the way the SRA delivers its regulatory objectives.
(2) Changing the relationship legal service providers have with the SRA.
(3) Further development of SRA’s internal staff skills and competences.
4. The SRA’s intention to deliver OFR in practice will involve:
(1) “Working with firms to focus on acting in a principled manner to deliver good standards of service to clients rather than compliance with mere detailed rules.
(2) A sophisticated desk based research and analysis capacity to assess potential risks to the regulatory outcomes and support for delivery of targeted proactive regulatory action.
(3) An approach to authorisation that is risk and evidence based, making sure that legal services are delivered by principled and competent firms and individuals.
(4) An approach to supervision which encourages firms and individuals to tackle all the risks themselves, allowing the SRA to concentrate on those who can’t or won’t put things right.
(5) An approach to enforcement which creates a credible deterrent and is effective fair and proportionate; and
(6) Concentrating the SRA’s resources on dealing with those firms who pose a serious risk to the SRA’s regulatory objectives such as protecting and promoting the interests of consumers. The SRA’s approach would be to foster a flexible and innovative market for legal services combining importantly improved access to justice with assured standards. It is for this reason that the SRA’s plans for OFR will be introduced at the same time as the framework permitting alternative business structures (ABSs) in October 2011.”
5. The SRA have emphasised that flexibility and
not lower standards will be the key note of the
new regime and firms will be allowed to show
compliance in ways best suited to consumers in
their own businesses and the SRA will act
flexibly in its regulatory dealings with the
market as a whole. The risk based approach will
focus on things which really matter to consumers
and legal service providers rather than a range
of detailed and complex rules. It is stressed
that OFRs will not be a light touch regulatory
regime but an effective one.
6. The structure of the new regulatory regime
will at its pinnacle have a set of principles
(e.g. you must act in the best interests of each
client and/or you must provide a proper standard
of service to your clients). An issue of concern
will be identified in relation to a regulated
entity (e.g. client care) and an outcome or
disposal will arise (e.g. the client receives a
service in a manner which protects their
interests subject to the administration of
justice). The standard of service the firm
provides to clients should be competent and
prompt. Furthermore certain supervisory matters
may flow from such action including what the SRA
term as “indicative behaviour”, for example
agreeing on an appropriate level of service
between the firm and the client and explaining to
the client the firm’s responsibilities and also
those responsibilities of the client. Further
guidance may also be developed and involved in
that process.
7. Principles are mandatory and will govern all
the activities of firms and individuals and will
apply universally across the entire handbook. The
SRA will perform the outcomes they expect firms
to achieve. These will also take the form of
binding regulatory commitments. “Principles and
outcomes” will be supported by two types of
non-mandatory material entitled “indicative
behaviour” and “guidance”. These latter matters
will be regarded as persuasive behaviour which if
complied with are likely tol give the SRA comfort
that the firm is in compliance. However firms
will not be obliged to follow these provisions.
The SRA supervisors will however start from the
presumption that there is a risk to the firm’s
delivery of the outcomes if they do not adhere to
the indicative behaviour and guidance although
the firms will still be free to demonstrate that
it is using effective alternative methods of
compliance.
8. The new handbook will focus around the management of risk in complex matrixes which do not form the basis of this note but a risk based approach in relation to authorisation and enforcement and supervision form the bedrock of the new regime.
Formal Investigations and Enforcement
9. The new SRA will continue to have a legal and
enforcement function to provide legal advice to
the SRA and advise on proposed enforcement action
in relation to matters in particular before the
Solicitor’s Disciplinary Tribunal and other
financial penalties. In particular the legal and
enforcement function will function separately
from the informal investigations, i.e.
investigations to establish whether principles
and/or outcomes have been breached, providing
objective evaluation of enforcement proposals,
take forward actions that is proportionate, set
overall enforcement policy and strategy and
publicise enforcement action on priority issues
to improve standards.
Other areas covered by the SRA’s proposals
10. Other areas covered by the SRA’s proposals
include:
(1) Consumer education;
(2) Education and training;
(3) Evidence based decision-making and research;
(4) Government’s co-ordination and decision-making within the SRA and the people culture and assistance of the SRA;
(5) The people culture and assistance of the SRA;
(6) Transitional arrangements, equality and diversity and the approach of working with their stakeholders.
11. The SRA’s enforcement strategy with the objective of constructive engagement and credible deterrents was published and last updated on 2nd June 2010 and forms Annex A of the current consultation process. At its heart lies the adherence and compliance with the 10 Core Principles and the enforcement objectives that flow from them.SRA OUTCOMES FOCUSED REGULATION - TRANSFORMING THE SRA’S REGULATION OF LEGAL SERVICES
1. In a recent announcement (30th April 2010) the SRA notified an intention of consulting on the transformation of its approach to the regulations for the benefit of consumers. These proposals will involve significant reform of the SRA’s traditional approach of regulating the solicitors profession in order for it to be “fit for purpose” for the new legal landscape brought in by the Legal Services Act 2007.
2. Amongst those matters given recognition by the SRA are:
(1) That its current rule book is too detailed
and prescriptive and that detailed rules are
becoming increasingly difficult to keep pace with
change and will be even more so with the
liberalised legal landscape coming into effect in
October 2011.
(2) That its regulatory approach needs to be more
effective, proportionate and targeted so it can
consistently regulate a greater range of legal
service providers with a targeted risk based
approach.
3. The SRA proposes to move to a system of “outcomes focused regulation” (OFR) which will offer a “better focus on making sure firms offer good standards of service to consumers and good firms more flexibility in how they operate their businesses”. This transformation will involve:
(1) Changing the way the SRA delivers its regulatory objectives.
(2) Changing the relationship legal service providers have with the SRA.
(3) Further development of SRA’s internal staff skills and competences.
4. The SRA’s intention to deliver OFR in practice will involve:
(1) “Working with firms to focus on acting in a principled manner to deliver good standards of service to clients rather than compliance with mere detailed rules.
(2) A sophisticated desk based research and analysis capacity to assess potential risks to the regulatory outcomes and support for delivery of targeted proactive regulatory action.
(3) An approach to authorisation that is risk and evidence based, making sure that legal services are delivered by principled and competent firms and individuals.
(4) An approach to supervision which encourages firms and individuals to tackle all the risks themselves, allowing the SRA to concentrate on those who can’t or won’t put things right.
(5) An approach to enforcement which creates a credible deterrent and is effective fair and proportionate; and
(6) Concentrating the SRA’s resources on dealing with those firms who pose a serious risk to the SRA’s regulatory objectives such as protecting and promoting the interests of consumers. The SRA’s approach would be to foster a flexible and innovative market for legal services combining importantly improved access to justice with assured standards. It is for this reason that the SRA’s plans for OFR will be introduced at the same time as the framework permitting alternative business structures (ABSs) in October 2011.”
5. The SRA have emphasised that flexibility and
not lower standards will be the key note of the
new regime and firms will be allowed to show
compliance in ways best suited to consumers in
their own businesses and the SRA will act
flexibly in its regulatory dealings with the
market as a whole. The risk based approach will
focus on things which really matter to consumers
and legal service providers rather than a range
of detailed and complex rules. It is stressed
that OFRs will not be a light touch regulatory
regime but an effective one.
6. The structure of the new regulatory regime
will at its pinnacle have a set of principles
(e.g. you must act in the best interests of each
client and/or you must provide a proper standard
of service to your clients). An issue of concern
will be identified in relation to a regulated
entity (e.g. client care) and an outcome or
disposal will arise (e.g. the client receives a
service in a manner which protects their
interests subject to the administration of
justice). The standard of service the firm
provides to clients should be competent and
prompt. Furthermore certain supervisory matters
may flow from such action including what the SRA
term as “indicative behaviour”, for example
agreeing on an appropriate level of service
between the firm and the client and explaining to
the client the firm’s responsibilities and also
those responsibilities of the client. Further
guidance may also be developed and involved in
that process.
7. Principles are mandatory and will govern all
the activities of firms and individuals and will
apply universally across the entire handbook. The
SRA will perform the outcomes they expect firms
to achieve. These will also take the form of
binding regulatory commitments. “Principles and
outcomes” will be supported by two types of
non-mandatory material entitled “indicative
behaviour” and “guidance”. These latter matters
will be regarded as persuasive behaviour which if
complied with are likely tol give the SRA comfort
that the firm is in compliance. However firms
will not be obliged to follow these provisions.
The SRA supervisors will however start from the
presumption that there is a risk to the firm’s
delivery of the outcomes if they do not adhere to
the indicative behaviour and guidance although
the firms will still be free to demonstrate that
it is using effective alternative methods of
compliance.
8. The new handbook will focus around the management of risk in complex matrixes which do not form the basis of this note but a risk based approach in relation to authorisation and enforcement and supervision form the bedrock of the new regime.
Formal Investigations and Enforcement
9. The new SRA will continue to have a legal and
enforcement function to provide legal advice to
the SRA and advise on proposed enforcement action
in relation to matters in particular before the
Solicitor’s Disciplinary Tribunal and other
financial penalties. In particular the legal and
enforcement function will function separately
from the informal investigations, i.e.
investigations to establish whether principles
and/or outcomes have been breached, providing
objective evaluation of enforcement proposals,
take forward actions that is proportionate, set
overall enforcement policy and strategy and
publicise enforcement action on priority issues
to improve standards.
Other areas covered by the SRA’s proposals
10. Other areas covered by the SRA’s proposals
include:
(1) Consumer education;
(2) Education and training;
(3) Evidence based decision-making and research;
(4) Government’s co-ordination and decision-making within the SRA and the people culture and assistance of the SRA;
(5) The people culture and assistance of the SRA;
(6) Transitional arrangements, equality and diversity and the approach of working with their stakeholders.
11. The SRA’s enforcement strategy with the
objective of constructive engagement and credible
deterrents was published and last updated on 2nd
June 2010 and forms Annex A of the current
consultation process. At its heart lies the
adherence and compliance with the 10 Core
Principles and the enforcement objectives that
flow from them.
[AJC- 6/7/10]
Categories: 5th edition, Current topics, updates