England: SRA backs changes to separate business rule in face of Law Society opposition

The Solicitors Regulation Authority (SRA) has given the go-ahead for plans to radically change the separate business rule – against strong opposition from the Law Society.

The new rule will permit solicitors to establish separate businesses delivering unregulated services as long as consumers are fully informed.

Prohibitions in the Code of Conduct will be deleted and new measures will be introduced to safeguard consumers, with the SRA saying the new system could be in place as early as November this year.

Crispin Passmore, SRA executive director for regulation and education, said: “There will still be a separate business rule.

“Solicitors will have to make sure they don’t mislead clients and clients understand what they’re doing.

“Consumers can already choose unregulated legal services. This is simply about whether solicitors can own and manage them.

“It’s about how we loosen our grip. The board can’t know what will happen in the future – all you can do is step wisely.”

Chief executive of the SRA, Paul Philip, said the amendments were a “significant dilution” of the current rule.

He said: “All we are doing is allowing a level playing field” and noted that changes to the rule stemmed from the SRA’s decision to permit “real” multi-disciplinary practices.

Enid Rowlands, SRA chair, added: “All these changes to legal services are happening, so let’s not pretend they’re not and let’s have a regulatory structure which is fit for purpose. There will never be absolute consumer protection”.

But the Law Society has said relaxing the rule could result in a “destabilised” legal services market.

The City of London Law Society warned the move may result in “irreparable damage” to the solicitor brand with large numbers of solicitors being pushed into the unregulated sector.

However, City lawyers sitting on the SRA board supported the plans.

Martin Coleman, a partner at Norton Rose Fulbright, said: “This is a recognition that the divisions between regulated and unregulated services have broken down at the consumer end and at the multi-national end.

“Either we recognise this, or we try and put a finger in the dyke and that is not going to work.”

The SRA board also agreed solicitors should be permitted to provide other services – including accountancy – without requiring to establish another business.