Monthly Archives: June 2013

SRA Chief Executive reiterates referral fee approach

Solicitors Regulation Authority (SRA) Chief Executive Antony Townsend has reiterated that the Authority has taken an understanding approach to enforcing the ban on the payment of referral fees in personal injury cases.

Mr Townsend was speaking at the Legal Futures conference, The LEX Factor, at Bishopsgate in London on 6 June. And he told delegates that the SRA was continuing to take a measured approach as firms get to grips with the ban.

The ban, which came into force on 1 April as part of the Legal Aid Sentencing and Punishment of Offenders Act 2012) (LASPO), prohibits the payment of referral fees in personal injury cases. It has been introduced by the Government amid concerns of the high cost of civil litigation, rising insurance premiums, increasing numbers of claims and the perception of a “compensation culture”, where people are encouraged to claim for minor or even fictitious injuries.

Antony Townsend said: “It is clearly very early days in terms of enforcement; we’re only nine weeks into the ban. And while there are those that may like to have seen hundreds of firms thrown instantly before the SDT on 1 April, we are taking a more proportionate and constructive approach to enforcing the ban wherever possible.

“Our enforcement strategy is focused on active supervision. Where we have concerns, we are engaging with firms to ensure compliance is achieved.

“Where we have significant concerns, we are talking to firms to help them put things right. We are also working very closely with our partners such as the Ministry of Justice and the Financial Conduct Authority, providing information to each other and raising issues as they emerge.

“Of course we will take formal enforcement action against any firm flagrantly breaching the rules. Those unwilling to change their practices and who fail to co-operate will face action.”

The SRA has made a raft of resources on referral fees available to firms. These pages will continue to be updated as new material becomes available. The SRA has also published an enforcement strategy for the referral fee ban.

To deal with the new legislation, the SRA has added two new mandatory Outcomes to the Code of Conduct, which will be found in Chapter 6 and Chapter 9 respectively, and which state that “you are not paid a prohibited referral fee” and that “you do not pay a prohibited referral fee”. On top of the two new outcomes, the Code of Conduct will seek to define referral fees, while Indicative Behaviours illustrate how the outcomes can be achieved, avoiding the need to include detailed prescriptive rules.

Antony Townsend’s speech to the The LEX Factor – Legal Futures conference on 6 June 2013


When can a firm act for both buyer and seller in a conveyancing transaction

The SRA have issued new guidance on when a firm can act for both buyer and seller in a conveyancing transaction.

To achieve Outcome 3.5 of the Code, you must not act for two or more clients in a related matter if there is a conflict, or a significant risk of a conflict, between the interests of those clients. This does not necessarily prevent you from acting for both parties in a conveyancing transaction. However, conveyancing is an area in which there is a high risk of a conflict arising during the course of the transaction. For this reason, Indicative Behaviour 3.14 states that this is the sort of behaviour which tends to show that you have failed to achieve the outcome.

As a general rule, you are likely to fail to achieve the outcome if you routinely act for both parties in conveyancing transactions, but there may be cases where it is appropriate to do so. In reaching your decision, you will not only need to assess the risk of a conflict arising during the course of the transaction, but also have regard to other factors which could compromise your ability to act in the best interests of each client (Principle 4) or your independence (Principle 3). For example:

  • the complexity of the matter
  • the likelihood of negotiations having to take place
  • the bargaining power of the respective parties
  • any particular vulnerability of either party
  • the disruption and additional costs to the parties should you have to cease acting, and
  • the length of the conveyancing chain involved

It is important to bear in mind that if you do act, this should be because of a benefit to the clients, rather than the benefit to you.

To achieve Outcome 3.1, you should have in place an effective system to identify and assess potential conflicts of interest. This could include, for example, listing the factors which should be considered and possible safeguards. For example:

  • that the clients are represented by two different fee earners within the firm;
  • that the parties are informed in writing of the risks and potential consequences (in terms of inconvenience, delay and possible additional costs) should the firm have to cease acting
  • that the factors you considered in reaching your decision to act for both parties are recorded
  • that you obtain the informed consent of both clients in writing before proceeding.
  • The last two will assist you in demonstrating compliance with the outcomes.

Bear in mind that if you will also be acting for the buyer’s lender, you will need to consider any specific requirements of the lender (for example, in the CML handbook). See also Indicative Behaviour 3.7.

SRA warns of non-compliance trap in tough financial times

The Solicitors Regulation Authority (SRA) has warned law firms of the temptation of straying from the compliance path as the tough economic climate continues.

SRA Chief Executive Antony Townsend has told delegates at the “Compliance and the role of the COLP and COFA ? six months on” (CLT Conference) of the link between difficult financial conditions and higher rates of regulatory breaches. The conference, held at the Holborn Bars De Vere Hotel in London, heard that there is a clear link between the good times for legal services and levels of compliance, but when market conditions are more testing, the statistics change.

Antony Townsend said: “When market conditions are tough and financial problems begin to bite, individuals who are usually principled and ethical can succumb to pressures and temptations, getting drawn into schemes and poor practices that put their clients, their businesses and their future at risk. The large majority of legal professionals act scrupulously even when the going is tough. In the last week I have seen an example of an individual who, despite having to close a firm in distressing circumstances, has acted with the highest standards in her clients’ interests, and co-operated fully with the SRA.

“But some will succumb, and this is a real concern for us. If the firms who give in to these pressures act in a way that is not in the interests of their clients, then these clients are put at risk, confidence in the sector is undermined and the cost of protecting clients and the public goes up.”

A combination of, among other things, a poor economic climate, budget cuts in the public sector and legislative changes have led to significant financial problems for numerous firms.

Antony Townsend said: “These pressures create not only economic challenges for firms, but also particular pressures upon those working in compliance – COLPs and COFAs – and upon the SRA, as a regulator. The challenge for us is how to use our limited resources to have the most impact in mitigating these problems.

“Targeting bad practices that put clients at risk and undermine public confidence is therefore an immediate priority for us.”

The SRA has brought together all its advice to firms on managing finances – including responsibilities outlined in the Handbook and a series of good and poor behaviours against which to measure practice – on its website. This resource can be accessed here:

More on financial stability

A copy of the speech is available here:

Read the speech