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The devil’s in the lack of detail – the new SRA rulebook

10 April 2019

Jonathon Bray provides a personal perspective on the SRA’s new rulebook, and the complexity it could create in the profession.

 

We now know that the new Solicitors Regulation Authority (SRA) rulebook has been approved by the Legal Services Board (LSB) and will therefore be implemented in November 2019. It even has a shiny new name: 'SRA Standards and Regulations' – not sure what was wrong with 'Handbook'.

We also know what the new rules will look like. Of particular note are:

  • the massive 'slimming-down' and simplification of the rulebook – the accounts rules are now just seven pages
  • the furtherance of the principles-based regulatory model
  • the change to two codes of conduct – one for individuals, the other for firms
  • the controversial relaxation of practising structures, allowing solicitors to practise 'freelance' and in unregulated businesses.

The continued move towards principles-based regulation is the Marmite of the regulatory world. You either love it for the flexibility of interpretation, or hate it because of the inherent lack of certainty.

The new rules are drafted so as to be broad-brush and without any guidance. The drafters were given an ambitious brief to radically reduce the length of the current 400-odd-page tome.

On that measure, the new rulebook is a success, and an impressive feat of editing and redrafting, without losing focus of the core rules.

But the obsession with reducing pages necessarily meant jettisoning all incorporated guidance. At least the current Code of Conduct contains the much-maligned but often helpful 'indicative behaviours' – guidance notes that look suspiciously like rules.

The SRA has been clear throughout the 'Looking to the future' consultation that it intends to publish a whole suite of new guidance to accompany the rules. That may take the form of ethics guidance, checklists, case studies, toolkits and videos.

But there are two fundamental issues with this approach.

Where is the correct answer?

In the new system, our search for 'the truth' becomes more of a challenge. It will be unstructured (we have to look in multiple locations) and less certain (how do we know we have discovered all of the relevant guidance?).

Take the treatment of client money. In the current rules, once a bill is issued, money in client account becomes earmarked for costs and magically becomes office money, and we must transfer it to the office account within 14 days. Failure to do so is a minor breach, and accounts systems are set up accordingly.

In the new rules, the 14-day requirement is gone. Great news on the face of it.

But what if the SRA issues guidance that we should transfer the money within 14 days. You could take the view that it's just guidance, not a rule, and so not mandatory. But would you really want to argue that position if necessary at an SRA visit, or worse still, a tribunal? If the guidance sets the SRA's expectations, firms will be reluctant to depart from that. In effect, this creates a de facto rule.

Where does that leave the practitioner – in a better or worse position than having a black-and-white rule?

Most risk-averse solicitors will, I predict, be constantly checking whether there is a corresponding piece of guidance to a rule which they are applying. Does that mean trawling through entire toolkits? How do I know that a really useful tidbit is not hiding somewhere in a one-hour webinar? Have I missed an important tweet on the topic?

And the guidance may change over time. The SRA may decide to add, remove or amend guidance at a moment's notice. So we'll always have to keep up to date with the SRA's guidance changes. And perhaps print or save anything of particular use, lest it disappears.

Wouldn't it be simpler for the profession if the guidance was simply part of the rules?

Flexibility for whom?

But perhaps that's the point. What if this radical change to the rulebook is more about making the profession easier to regulate? We have already seen this to some extent with the change in principles. The SRA has split the current duty of 'honesty and integrity' into two distinct principles in the new rules. Why? Because, then you can prosecute on either, rather than have to argue both. It is likely to make prosecutions easier, in the same way that lowering the burden of proof in the Solicitors Disciplinary Tribunal will – and that's next on the SRA's hitlist.

'Guidance' is also not subject to oversight in the same way that rules are. If the regulator wants to tinker with a rule, it has to go through a whole process of consultation and then seek approval from the LSB. That process can take months – in the case of 'Looking to the future', well over two years.

But if important detail is moved over to non-mandatory guidance – whatever form that takes –the regulator can sidestep that process altogether.

Ultimately, while we can all appreciate why that would be attractive for the SRA, perhaps it shouldn't be dressed up as something that is meant to benefit the regulated, or indeed the public.

 

This blog was first published in Managing for Success, a quarterly magazine that is a membership benefit of our Law Management Section. Managing for Success covers all practice management and leadership disciplines, focusing on the issues that matter in practice, through features, comment, and practical guides from leading practitioners

 

Views expressed in our blogs are those of the authors and do not necessarily reflect those of the Law Society.

Read Tracey Calvert's blog on All change – the new SRA Standards and Regulations

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About the author

Jonathon Bray is a director at Jonathon Bray Legal Services, which provides outsourced alternative business structure and compliance solutions for law firms. Jonathon formerly practised employment and litigation law. He is a recognised ABS expert and COLP/COFA adviser. He works with law firms on a variety of risk management projects and ABS applications.

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