SRA discussion paper: next steps on SIF and consumer protection for negligence claims – Law Society response
The Solicitors Regulation Authority (SRA) produced a discussion paper about the future of the Solicitors Indemnity Fund (SIF) and post six-year run-off cover (PSYROC).
The paper was intended to:
- update stakeholders on developments since the conclusion of a formal consultation earlier this year
- seek opinions on the policy options that will be considered when the SRA board meets in September
These options include:
- retaining SIF, but making changes to reduce its operating costs, or
- replacing SIF with a new consumer protection fund which would be run by the SRA
We believe that PSYROC provides necessary protections for consumers of legal services and solicitors alike.
SIF has the confidence of the profession and could, with appropriate changes, offer a good vehicle for the ongoing delivery of PSYROC.
However, if SIF were to be replaced, our key concerns are that any new scheme must:
- provide indemnity as permitted by section 37 of the Solicitors Act 1974 and be an indemnification arrangement as defined in section 21(2) of the Legal Services Act 2007
- be ringfenced for the specific purpose of giving indemnity protection and dealing effectively with PSYROC claims against former principals or employees of ceased SRA-regulated entities, and
- provide the same access to, and scope of, indemnity as SIF
What this means for clients
Following its previous full consultation on the future of SIF and PSYROC, the SRA has now recognised that the removal of long-term protections could have significant negative consequences for the individual consumers affected.
The SRA is now looking to implement a new policy that will ensure consumer interests are protected.
However, the discussion paper considers the exclusion of large corporate clients or claimant costs.
We have voiced our opposition to any reduction in the scope of cover for consumers, from what is currently provided by the SIF.
What this means for solicitors
Some of the options under consideration in the discussion paper could also result in the removal of protections that solicitors enjoy under the current scheme.
However, we argue that this would have negative consequences for competition in the market for legal services, and for access to justice.
The full range of protections that solicitors are provided under SIF should be preserved in any new scheme.
The final day for responses to the paper was 31 August.
The SRA will consider responses and feed these into the policy discussion that will take place at its board meeting in September.
We expect a formal consultation on a new PSYROC policy to follow shortly after.
We will remain active in the pursuit of a solution that will protect the interests of the profession, consumers, and the public at large.