SRA's new 'ten commandments' handbook sets tougher entry rules

The new solicitors' handbook published by the Solicitors Regulation Authority today promises a set of modern principles applicable to all entities operating in the legal services sector come ABS day on 6 October, including tougher requirements for new entrants.

'One of the criticisms in relations to traditional firms was that they could set themselves up, however ropey, then head straight for the ARP,' said SRA chief executive Antony Townsend.

'Much was required in any event in relation to traditional partnerships to improve business robustness but we've also made some ABS-specific changes,' Townsend continued. 'We've tightened up authorisation rules, in particular in relation to ABSs, such as the rules on ownership and fitness to own, which will include much more stringent international identity checks.'

Townsend also pointed out the handbook gave the SRA new powers to call for business plans to test the viability of a new entrant.

The new entry rules will cover not only brand new organisations but also the 337 LDP firms currently with non-lawyer partners that will have to convert to ABS within 12 months of 6 October.

A separate set of rules contained in a series of memorandums of understanding with seven other professional regulators such as the Financial Services Authority and the Institute of Chartered Accountants for England and Wales, will coordinate the activities of organisations setting up as multidisciplinary partnerships.

While some of the MoUs were still awaiting signature, Townsend said all had been agreed in principle with interested regulators.

These provide that all regulated legal activities will be covered by the SRA.

Asked how the SRA would expect MDPs to communicate with clients about the distinction between legal activities and others, Townsend said clarity was key and that the onus would be on firms to show they had explained to clients which activity was covered by which regulator.

Townsend said about 80 firms were already jointly regulated by the SRA and the FSA. He added the regulator would be issuing a policy statement reinforcing the message.

The main change from the current 2007 handbook is a shift in approach, dubbed outcomes focused regulation. OFR will mark a move away from remedies-based policing to a preventive 'ten commandments' approach.

Designed to apply to traditional partnerships, alternative business structures and multidisciplinary partnerships, as well as to high street brands such as Tesco or the Co-op, the ten mandatory principles set a common benchmark for all legal services providers.

However they operate firms and other legal organisations will be free to put in place the systems they regard appropriate to comply with these principles, and will be required only to demonstrate these systems are suitable in each case to deliver the service and outcome to individual clients.

The SRA expects most professionally run organisations to have effective systems in place already. New entrants, however, will be required to meet specific requirements under the new 'fitness to own' test, aimed at preventing rogue traders and criminals '“ foreign nationals in particular '“ from entering the market under the guise of a legitimate organisation.