Guidance on the meaning of "independent intermediaries"
This guidance was issued in July 2009 by the SRA. The guidance does not form part of the rules and is not mandatory, but the SRA may have regard to it when exercising its regulatory functions. Solicitors, and others subject to the rules, who do not follow the guidance may be required to demonstrate how they have nevertheless complied with the rules.
The SRA is aware that some law firms have been approached by multi-tied and tied advisers seeking to enter into restrictive arrangements to provide financial services to the law firms' clients. Firms must always act in the best interests of their clients. This means that they must refer clients to independent financial advisers for investment advice.
Where clients require advice etc. on investing in an asset that can rise or fall in value—for example, an endowment policy, life insurance with an investment element, or a pension policy—rule 9.03(6) of the Solicitors' Code of Conduct 2007 (the Code) states that they must only be referred to independent intermediaries authorised to give investment advice.
"Independent intermediary" has never been a defined term. However, for the purposes of the Code the view of the SRA is that "independent intermediary" has the same meaning as the Financial Services Authority gives to "independent financial advisers". An independent financial adviser is an adviser who is able to advise on products from across the whole of the market and offers the consumer the option of paying fees. Advisers who advise from across the whole of the market but do not offer the option of paying fees will not be able to call themselves "independent".
Independent intermediaries are different from multi–tied advisers (who are able to recommend the products of a limited selection of providers) and tied advisers (who can only advise on the products of one provider). Clients needing investment advice must not be referred to either of these categories of advisers. Clients who ask to be referred to multi-tied advisers or tied advisers for investment advice should be informed that solicitors must refer them to independent intermediaries authorised to give investment advice.
It is not a breach of the Code to refer clients to multi-tied or tied advisers in respect of non-investment products such as
- general insurance contracts,
- pure protection contracts, and
- regulated mortgage contracts.
However, when considering their clients' needs, firms must ensure that they comply with the other provisions of rule 9.03, rule 1 and rule 19 of the Code.
Further guidance is available from the Ethics Guidance team.