A letter regarding the four consultation papers issued simultaneously by the solicitors regulation a
We write in order to respond, in so far as is possible, to the four consultation papers which have been issued by the solicitors regulation authority covering 1 The filing of Solicitors Accounts 2 Professional Indemnity Insurance 3 A relaxation on the regulation of Multi-Disciplinary Partnerships 4 The future of the Compensation fund
We are an independant body entitled Asian Lawyers GB campaigning to promote,advance and protect the interests of Asian Lawyers and the Communities that we serve. We are a pressure group and think tank comprising senior Members of both the Solicitors and Barristers professions.
We write this letter shortly after the publication of both Gus John’s report and SRA statistics which demonstrate how severe the problem of disproportionality in the regulation of BAME firms and solicitors is when compared to the regulation of their non BAME counterparts. In its response to Gus John’s report the SRA point to these four papers as being examples of the SRA attempting to ease the regulation of BAME firms. After reading these four papers we do not accept that is the case. We believe that each and every one of these four consultation papers represent a clear and present danger to the continuing existence and viability of BAME firms representing the needs of BAME communities. We also doubt the good faith of the SRA in only consulting for six weeks in circumstances where 12 is the normal accepted time for consultation. Whilst it would have been possible to deal with one of these papers,in a six week timeframe ,the same cannot be said for four consultation papers .
There is only one of two conclusions which can be drawn from this behaviour on the part of the SRA. Either it has made a serious miscalculation or it does not care what the profession has to say on these matters and is determined to carry on regardless. We are volunteers and we freely give of our time.Several of our founders have been involved with the work of the External Implimentation group of the SRA since its inception. The SRA thanked us for our time when it published its response to Gus Johns report.Yet restricting the response time,in this instance,is an odd way of demonstrating gratitude. We are certain that we are not the only body who are troubled by this reduced response time. Under the circumstances we would invite the SRA Board to extend the consultation period to 12 weeks. The other issue which troubles us is the fact that the SRA has not conducted any Equality Impact Assessments in relation to any of these four proposals. These should have been conducted before the issue of any of these papers.
We are also deeply concerned that such radical ,and potentially damaging ,reforms are being carried out in such a short timeframe without any thought being given to their consequences. We do not intend to go through each report question by question but will give our overall responses. If the SRA wishes to hear from us in more detail then we are prepared to submit a more detailed response if the time for submission is extended
SUBMISSION OF SOLICITORS ACCOUNTS We do not believe that this proposal will result in any saving to Law firms.
The fact that the COFA has ,under the proposals,to make a declaration that the client account of the firm is in order,represents a serious additional imposition on the COFA who ,in many cases,will be an employee of the firm.
Many COFAs will be put under pressure,by their employers, to make such a declaration regardless of their views or understanding as to what they are declaring.
In most cases COFA’s will require a set of audited accounts in order to make such a declaration. There is therefore likely to be little or no saving involved. The SRA also appear to have ignored the deterrent effect of the requirement to file accounts in relation to the prevention of fraud. The SRA state that the reports are of little use to them.
However, rather than dispensing with this requirement, the SRA should consult and propose cheaper and more effective ways of attaining the information it requires in this respect.
The requirement to file the accountants report can also be seen as a means of alerting a firm, at an early stage, as to any problems which may exist.
If such reports are not routinely produced then the danger is that a minor infraction might become a major issue threatening the continued existence of the firm.
The reports also have the effect of alerting the SRA to any incidences of fraud since the auditors, preparing the report, are under an obligation to report any such wrongdoing, to the SRA.
The dispensation of this requirement is therefore likely to lead to less incidences of fraud being detected.
That is not good for the profession or the public that we serve.
We are also concerned by the fact that the SRA may require certain firms to still file solicitors accounts. This is likely to be seen, by insurance companies, as being a risk factor which may result in insurance companies asking for higher premiums or refusing to insure firms subject to such a requirement.
We see such a proposal as potentially increasing disproportionality so far as the regulatory activities of the SRA are concerned .
INDEMNITY INSURANCE This proposal causes us a great deal of concern.
The SRA seem to believe that such a proposal will result in lower premiums for firms which will result in greater competition and greater availability of legal representation for those who have been priced out of the market in relation to paying for legal services.
Whilst such an aim is praiseworthy we believe that these proposals are misguided and will have the opposite effect.
Insurance companies have openly stated, in the legal press, that these proposals will not result in lower premiums.
This is because the insurance company say that the vast majority of claims are in the range of £500,000 or less range.
Moreover the fact that all firms need to have indemnity insurance of at least £2 million has led to economies of scale within the insurance market.
If these proposals are carried through then we forsee difficulties which are likely to disproportionately affect BAME firms because they are disproportionately represented amongst small firms.
We refer to the Law Society’s 2013 figures which state that more than 50% of BME solicitors are to be found in firms of five partners or less.
The SRA wishes to introduce a requirement whereby a firm has to declare that it has purchased adequate professional indemnity insurance.
This is to be introduced together with a limitation on aggregation of claims such that the total amount that an insurance company might pay in any one year, with respect to claims of a firm, will be limited to £1.5to £2 million.
We wonder how a firm might be expected to know what claims are likely to arise in any given year.
Furthermore we wonder what success a sole practitioner might have in negotiating additional insurance, above and beyond the minimum, with a large insurance company. There would be no equality of negotiating position involved and it is therefore highly likely that premiums would rise and not reduce as a result of these proposals. We are concerned about the attempt to limit run off cover to three years from six years. This is contrary to the recommendations in Charles Rivers report in 2010. It offers less protection to consumers in circumstances where many claims come to light more than three years after the event.
Consumers may well find that,as a result of these measures, they are not adequately compensated when things go wrong.
This would be to the detriment of the profession and, even more importantly, to the detriment of the general public.
These proposals,if introduced, would also lead to conveyancing panels restricting the solicitors on their panel or requiring them to potentially insure themselves at an unaffordable level in order to remain on the panel.
MDP We feel that these proposals will be almost impossible to police.
We also see no reason why Alternative Business Structures should be at an advantage to traditional firms of solicitors.
Applying different rules to different types of business is likely to result in unfair advantage to existing law firms. We therefore fear that many BAME a firms will be driven out of business if these proposals are introduced.
COMPENSATION FUND The reforms propose that large institutions should not be able to benefit from the compensation fund.
We believe that any attempt to exclude large financial institutions such as building societies and banks is likely to result in a restriction of the their conveyancing panels ,resulting in an exclusion of small firms, from their panels. This will disproportionately affect BAME owned firms.
For all the aforementioned reasons we ask the SRA not to rush these measures and to commission independent research.
We also believe that impact assessments need to be conducted as a matter of some concern.
We are happy to assist in any consultations that the SRA may wish to carry out.
Asian lawyers GB.
Please reply to Asian lawyers GB care of sundeep Bhatia
Beaumonde law practice Evans House Marsh Road Pinner HA5 5 PA 02088681614 07803727534