Ethics guidance

Suitability, LDPs, waivers, fees

Updated 12 July 2013

Suitability Test

The SRA has a responsibility under the Legal Services Act 2007 to ensure that persons who hold certain roles (i.e. managers, owners, COLPs and COFAs, known as authorised role holders) within ABSs are fit and proper. In order to assess whether persons are fit and proper we take into account the criteria set out in the Suitability Test. The test is the same for all legally and non-legally qualified applicants for roles in authorised bodies.

The Suitability Test sets out a series of behaviours, both personal and professional, which we consider would call into question whether someone was fit and proper to become an authorised role holder. Examples of some of issues which would cause concern include

  • criminal offences, especially those which involve dishonesty, discrimination, terrorism and those which have resulted in a custodial sentence, or offences under the Companies Act 2006;
  • plagiarism or cheating in an education establishment;
  • failure to manage personal finances properly, including County Court Judgments and IVAs;
  • regulatory or disciplinary findings (whether by the SRA or another regulator);
  • removal from the office of trustee for a charity or company director;
  • having been a manager or owner of a body corporate that has been subject to a winding up order, receivership, liquidation or administration.

This list is not exhaustive and we recommend that all prospective applicants read the Suitability Test in full in preparation for making an application. Applicants are also advised to consider the published decision-making criteria in respect of the Suitability Test which explains how we reach decisions about whether individuals are fit and proper. Our decisions are taken on a proportionate basis and focused on risk.

Applicants are required to disclose whether there is anything in their background which could call into question their fitness and propriety. We will seek to validate this information and applicants will only be approved if they meet the requirements set out in the Suitability Test.

If an applicant declares something to us in their responses to the Suitability Test, or if our verification checks identify information which may call into question the applicant's fitness and propriety to hold the position, we will investigate with a view to understanding all relevant details in order to assess whether the event calls into question the candidate's suitability to own and / or manage a legal services firm. Where relevant, this may include applicants being required to provide evidence of suitable rehabilitation.

Legal disciplinary practices with non-lawyer managers (LDPs)

Under the SRA Practice Framework Rules 2011, LDPs with non-lawyer managers can elect to become an ABS at any time until the end of the grace period set out in the Legal Services Act 2007. When the transition period ends, all remaining LDPs with non-lawyer managers will need to have transitioned to ABS status.

LDP firms must complete an application. This is to ensure we hold equivalent data about all ABSs. The LDP must also nominate a COLP and a COFA (where they have not already done so) and finally they must tell us if they propose to make significant changes to the structure of the currently recognised firm. By significant changes, we mean the following:

  • Change or increase in non-lawyer management (i.e., above 25 per cent)
  • New external owners introduced to the LDP
  • Change to business model
  • Significant expansion of staff
  • Change of legal entity conducting regulated activities
  • Firms that are dual-authorised with other regulators

Where significant changes are proposed, the application process will be treated in the same way as other ABS applications. Those electing to ABS status that are not making significant changes will not be charged an application fee.

Waivers

Where empowered to do so by our regulatory arrangements we will consider applications for waivers of specific SRA Handbook rules. We will discuss with applicants their wish for any such waiver as part of the process of discussing their overall licence application and make any formal waiver decision as a part of the overall licence application decision. The single criterion on which a waiver application may be granted is "exceptional circumstances" but there are a range of factors that will be considered in reaching the decision as to whether this criterion is met depending on the rule under consideration and the circumstances put forward by the applicant. We have published a policy statement on our approach to waivers which sets out further information. This can be found at www.sra.org.uk/waivers. Waivers may only be granted against certain of our regulatory requirements as provided for in the SRA Handbook. We are, of course, unable to waive statutory requirements. We have committed to publishing waiver decisions and have recently begun to do this in respect of newly authorised ABS firms.

The publication of details of waivers that have been granted should be helpful to new applicants in considering how to proceed with their applications. However, waiver decisions are, necessarily, fact specific and, therefore, the fact that a waiver of a particular requirement has been granted to one applicant does not mean that such a waiver would meet the necessary criteria to be granted to another applicant with a different set of circumstances. If an applicant considers that they will wish to seek a waiver as a part of their licence application they should raise the issue at the earliest possible point in the process.

Fees

Licensed body applicants will pay two types of fee:

  • An application fee – to cover the cost of us making a decision about whether to grant a licence to your body. This will be calculated based on the complexity of the applicant body. Please note this fee is non-refundable.
  • A periodic fee – to cover the cost of us regulating you once your body is authorised.

The application fee will be calculated as follows:

  • An initial payment of £2,000 (This is based on a day rate of £600 and includes a contribution towards the initial costs of the appellate body, the Solicitors Disciplinary Tribunal.)
  • A payment of £150 in relation to each candidate who needs to be approved as a manager, owner and/or compliance officer (an authorised role holder)
  • If the SRA's costs in considering the application exceed the amounts specified above, any additional costs will be charged at a day rate of £600.
  • If it is necessary for the SRA to seek external assistance, the full cost of that assistance will be charged to the applicant body.

If you are an existing legal disciplinary practice with at least one non-lawyer manager and are eligible to elect to become a Licensed Body, then you will not be required to pay an application fee. We will confirm this to you after we have carried out our initial assessment of your application.

The periodic fee will be based on estimated turnover for the first 12 months of trading and will be calculated with reference to the banded turnover table. See further information about the licensed body periodical fee.

A firm contribution to the compensation fund will be calculated in the same way as for recognised bodies. This will only apply if the firm intends to hold or receive client money at any time during the period 1 November 2011 to 31 October 2012.

Further information about the licensed body contribution to the compensation fund.

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