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Regulator defends ‘realistic’ approach to suitability test

No pattern suggesting smaller firms more likely to be in regulatory breach

4 November 2016

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The Solicitors Regulation Authority is unlikely to change its approach to suitability and move the point at which it is checked, the regulator’s policy director has suggested, rejecting calls for more systematic thorough enquiries into applicants’ backgrounds.

Last month, the Solicitors Disciplinary Tribunal took the opportunity of responding to the SRA’s 'Looking to the future' consultation to issue a few barbed comments about the regulator’s approach to suitability.

‘In some instances, the tribunal’s strong suspicion is that the SRA’s enquiries at that critical point were insufficiently rigorous or that clear warning signs were not heeded by those with decision-making powers,’ the SDT said in its submissions.

Further on, it launched into an impassioned plea in support of smaller firms, which it said played an essential part in ensuring access to justice for vulnerable people but also happened to be the ones more likely to end up before the tribunal.

SRA policy director Crispin Passmore told Solicitors Journal the regulator dealt with a huge number of cases that didn’t end up in court and were resolved through negotiations with the solicitor or firm involved. suitability test

‘You’ve got to be realistic,’ Passmore said. ‘The idea that we have magic powers that allow us to spot potential offenders at the time of admission – it’s just not possible. People are more likely to develop problems later on – marital, professional, financial, or otherwise.’

The possibility of a more rigorous test has also been mooted by some commentators, especially if it involved distinctive ethics elements. This would probably involve additional costs, and unless individuals displayed obvious behaviour making them unsuitable, it probably would not help solve the suitability dilemma. So what else could be done?

‘Of course more could be done,’ Passmore continued. ‘But instead of trying to check everybody at the point of entry, it’s much better to look at the different things we can do. Sometimes it’s being clear about the standards expected of solicitors. We want to encourage individual codes of conduct, and for firms to take responsibility for the conduct of their solicitors, which ties in with the new approach under the proposed solicitors qualifying examination.’

Some respondents to the consultation have voiced concerns that the new competence regime didn’t place sufficient emphasis on ethics, but Passmore explained that rather than forming a specific requirement, ethics were woven into all expected standards.

Asked further whether the regulator would clarify the rules on private conduct and conduct in the course of business, Passmore said they would provide more guidance but probably not rules. ‘Our reforms are about getting proportionality right,’ he added. ‘Sometimes, there is an obsession with rules. Our role is to find the right balance between market forces and consumer interests. We want robust enforcement, but enforcement is a movable feast.’

The policy director also rejected the argument that smaller firms were more likely to fall foul of regulatory requirement. With the incidence of regulatory breaches being quite low relative to the number of firms and solicitors, he said it was difficult to pick up a pattern of this kind.

Talking to Solicitors Journal last week about the new continuing competence regime, education and training director Julie Brannan said the SRA would continue to take a targeted approach to policing based on risk. It’s also the approach the regulator has been taking in terms of enforcement, and Passmore confirmed this was unlikely to change.

‘It’s more complicated than just saying that regulatory breaches happen more in smaller firms,’ he said. ‘We look at patterns, and when we see a pattern, we usually issue a warning notice to remind solicitors of the standards.’

Passmore accepted that such reactive enforcement wouldn’t ‘always stop things going wrong’ but that it might be ‘enough to stop somebody wondering how they are going to pay their staff from thinking about the clients’ accounts.’

The regulator will examine the consultation findings before Christmas with a view to launching a new consultation on a new enforcement policy in spring next year.

Jean-Yves Gilg is editor in chief of Solicitors Journal

jean-yves.gilg@solicitorsjournal.co.uk | @jeanyvesgilg

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