Fresh calls on regulator to give clearer steer over OFR

Law firms have responded coolly to the SRA's attempt to reassure the profession over the impact of outcomes-focused regulation, calling on the regulator to give a clearer steer on how it intends to apply the new code of conduct.

Thomas Vesey, non-lawyer partner at Winckworth Sherwood, is one of many law professionals who welcome the principle of OFR but says there are serious concerns about implementation.

'It will require the SRA having reasonably intelligent people who can apply the new code intelligently,' he said. 'If they can do that it will be great, but if they start building empires internally because that's what they think they need to do then it will be a nightmare.'

Vesey's comments came after a series of presentations by senior executives during the SRA's first OFR roadshow last week, which saw lawyers voice fresh concerns over the SRA's new ten commandments approach.

In a separate session on supervision and enforcement, which discussed the SRA's new risk centre, a sole practitioner asked how firms could find out about their risk ranking. She was told that because risk was a 'dynamic' concept there was no set ranking until a risk materialised. In the ordinary course of business, firms could find out about their likely risk profile by checking the risk criteria due to be published on the SRA's website, an SRA manager said.

'There is real concern that small firms will not cope and the SRA apparently sidestepping requests for clarification will not help,' said Brian Rogers, a non-lawyer partner with Lewis Hymanson Small. 'The more I am hearing the more I am getting concerned for the firms that are unsure about how to prepare for the new world.'

There were also fears that reporting requirements would have to increase for the system to work in a meaningful way, fuelled by Antony Townsend's warning that the SRA would indeed consider asking for additional information in relation to the soundness of law firms '“ though 'not huge reams'. Subsequent comments by SRA enforcement managers in a separate session addressing the development of the risk centre added to these concerns.

'There's a great risk that risk management will be reduced to the lowest common denominator applicable to traditional law firms and ABSs,' Tom Vesey continued.

'When a big organisation like the SRA starts putting together its tentacles the tendency will be for reporting requirements on firms to grow and grow. In the context of putting a risk centre together they're going to start looking at every level of risk possible and in three to five years' time every firm will have to produce accounts, ratio analysis and a whole raft of other information concerning, for instance, diversity, and any other risk assessment they have to carry out in the course of their work, together with a host of declarations.

'Much as the idea is great, its implementation is like the law of equity: it is dependent on the examiner as to whether something is reasonable and all depends on how the SRA evolves as an organisation.'

'The new code requires an intellectual approach throughout the organisation,' Vesey continued, 'which is not something that bureaucratic organisations are famous for.'

Rogers echoed these concerns. 'The music from the top is new but will there be any difference on the ground?' he asked. The FSA had similar problems when it introduced OFR in the financial services sector, with too many firms interpreting OFR rules differently, according to Rogers. 'The same is likely to happen with law firms, with many falling foul due to the wrong interpretation of new rules,' he said.