The profession will escape a full ban on referral fees but tighter measures will be introduced to cut down abuse of the system.
It follows a year-long review of the system after the Law Society found there to be “significant breaches of the referral arrangement rules, including the core principles”.
The SRA board said its 12-month review revealed widespread infringements of the rules, but reintroducing a ban was not the right answer.
Instead the SRA will introduce rules which will allow solicitors to pay people who introduce them to clients after finding that a complete ban “was not feasible”.
The regulator said it would focus on enforcement of the rules and monitoring of compliance.
The watchdog is considering a number of options which would aim to increase compliance. Options include tightening its control of solicitors operating referral fee arrangements; forcing firms to introduce an annual report on their activities to the SRA; and the introduction of “model agreements” to aid firms with compliance.
“We need a regime that is clear and easy to enforce but with tough penalties for those who break the rules” said chair of the Solicitors Regulation Authority Peter Williamson.