Getting to know you

The SRA’s outcomes-focused regulations will take a bit of getting used to

D Thomas O'Riordan
D Thomas O’Riordan

In A Tale of Two Cities, Charles Dickens wrote: “It was the best of times, it was the worst of times.” It is safe to say that most solicitors, and all those within the ambit of the SRA rules, may feel that Dickens could have had the new SRA regime in mind.

The seeds of regulation were sown in 1823 when several prominent ­solicitors called for the formation of the London Law Institution to raise the “reputation of the profession by setting standards and ensuring good practice”.

The standard of good practice was set out by a code of conduct and ­prescribed rules. The Law Society has maintained the same regulatory process since.
Until now the regulation of solicitors has been prescriptive – the new guidelines disregard prescriptive rules and seek to introduce flexibility on the basis of what is known as ’outcomes-focused regulation’ (OFR).

An OFR regulatory system is ­intended to focus on high-level ­principles (that is, the 10 principles upon which the rules are based – or what I call the ’10 Commandments’) with the requirement of achieving the best possible outcome for clients and the users of legal services.

The ’worst of times’ aspect may be based on the question: how does OFR work? It should allow a firm to use ­appropriate methods of achieving outcomes that suit its business, its type of client and market position and context without having the ­constriction of prescriptive rules, as has been the case until now.

The new rules are not without their challenges. Take, for example, the ­introduction of alternative business structures (ABSs). Non-legally qualified persons can, in principle, own law firms and provide certain legal services to members of the public – in some circumstances with little or no involvement from solicitors or other lawyers.

This new structure is likely to ­increase competition in the marketplace and could cause undue pressure in a less than helpful fashion.

In addition, the new arrangements will involve firms appointing a ­compliance officer of legal practice, a compliance officer for finance and administration, a whistleblowing policy, enhanced governance ­structures and a risk management assessment process, together with numerous related policies designed to help firms comply with SRA rules and requirements.

The UK legal community has a significant presence of London-based offices of foreign-headquartered firms – in no small part those from the US.

The governance, administration, conflict, data protection and risk management requirements will, for sure, pose less than straightforward challenges to the London offices of our foreign colleagues whose firms are headquartered outside the UK.

It will take time for firms to understand the changes that lie ahead and develop and strengthen the governance, administration, risk management and consequent training strategies that will arise out of the new rules during the transition to OFR.

Hopefully the flexible legal regulatory system envisaged by the SRA and embodied in its OFR model will ultimately benefit firms’ clients, the best of times and the worst of times notwithstanding.