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SRA tightens level of compliance on referral fees

15 January 2008

NEW MEASURES ARE to be introduced to improve compliance with the rules on referral fees.

The measures are being introduced by the Solicitor Regulation Authority (SRA) following a 12-month monitoring and enforcement programme that revealed widespread infringements of the rules.

However the SRA decided a complete ban on referral fees is unfeasible. SRA chairman Peter Williamson said: ‘The Board concluded that re-introducing a ban would not be justified, although that will be kept under review. We need a regime that is clear and easy to enforce but with tough penalties for those who break the rules.’

Williamson continued that ‘the focus should be on education, enforcement and monitoring,’ and said that the SRA will look at whether there should be a new regime so that it can control which solicitors can operate referrals arrangements.

The SRA is also looking at the possibility of introducing an annual reporting requirement by solicitors; ‘model agreements’ to help solicitors ensure that their arrangements comply with SRA rules; and an information campaign to help the public understand referral arrangements.

The SRA’s approach was supported by one of the solicitors the new regime will affect, Richard Barnett, managing partner of Southport-based conveyancing and personal injury firm Barnetts Solicitors.

Barnett said: ‘There is nothing wrong with referral fees as long as the arrangement is transparent. The proposal reflects the commercial reality that if there is a cost in bringing in the work it is only fair to acknowledge it. Solicitors have always tried to comply with regulation but traditionally the difficulty has been in ensuring that the referrers were complying on their side of the transaction. The proposal tries to bring efficacy into the system: as solicitors we’ve got nothing to hide, and if introducers have got nothing to hide, why not make the process transparent?’

Barnett continued that a ban on referral fees would place solicitors firms at a disadvantage to other legal professional such as licensed conveyancers, who are not regulated by the SRA and thus would not be subject to the same restriction.

It would also give an advantage to the 'Tesco law'-style alternative business structures likely to be created by the Legal Services Act, who would not face restrictions on internal referrals made between different business strands within the umbrella organisation.

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