Annual report 2009-10: The path to outcomes-focused regulation

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Chair's Foreword

Charles PlantWhen I was appointed Chair of the SRA Board in late 2009, I knew that a uniquely challenging period lay ahead. The Legal Services Act (LSA) 2007 had heralded the biggest transformation of legal services in living memory and the SRA was facing a period of unprecedented change. The agenda was lengthy and the timescales exacting.

First, we needed to move away from our traditional, prescriptive regulatory approach towards one that was better suited to deliver effective regulation in the brave new world that was approaching. The decision to introduce the principles-based approach of outcomes-focused regulation meant producing a new Handbook and Code of Conduct - an incredibly complex and time-consuming task. We also wanted to be able to ensure continuation of the highest professional standards by regulating the new generation of legal services providers alongside traditional law firms. This meant preparing an application to become a licensing authority for Alternative Business Structures (ABS). These fundamental changes meant that we also needed to restructure the SRA, to ensure we had the appropriate skills balance; and to introduce a new IT infrastructure that would enable us to conduct our business in an entirely different way.

Throughout all this, we have worked closely with the Law Society, Legal Services Board (LSB), Ministry of Justice, Financial Services Authority and many other bodies to ensure that we remained on track in both our planning and our policy-making.

Was it worth it? My answer is unequivocally 'yes' because consumers' interests will, in the future, be at the heart of all legal activity in England and Wales.

We welcomed the changes that the LSA brought about and we embraced them. I believe we have played a key role in making them happen.

We are a stronger, more robust and confident organisation than we were even two years ago. Our relationship with the regulated community in all its diversity has improved substantially. We have involved all parts of the regulated profession in the development of the new Handbook. We have held regular meetings with sole practitioners and equality groups; we have addressed regional meetings, and held specialist events for them. We have improved our relationship with City law firms by appointing a City firms adviser and by building regulatory relationships with them. In short, we have shown that we can and do listen to what the regulated community has to say.

A recurring message is that its members welcome the SRA's efforts to interact more effectively and more personally. The profession enjoys seeing the human side of the SRA. We, in turn, have welcomed the opportunity of increased face-to-face dialogue.

It has been a demanding but exciting period. I should like to pay tribute to the support I have received from members of the Board. I know that they will wish to join with me in paying tribute to the Chief Executive, Antony Townsend, his senior management team, and SRA staff for their hard work, dedication and professionalism in delivering a taxing set of objectives, on time and to the highest of standards.

And I should like to thank members of the regulated community, for working with us in opening up the legal services market and making sure that consumers of legal services feature prominently in everything that we do.

Charles Plant

A message from the Chief Executive

Antony TownsendIn the last two years the SRA has experienced a period of relentless change and upheaval. Alongside this, many remarkable achievements have charted our route towards becoming a truly effective regulator of legal services for the 21st century.

The launch of the draft Handbook on 6 April and its subsequent approval by the LSB was a major milestone. This was followed swiftly in June by LSB approval to become a licensing authority for ABS. We are on track to have the capacity to license ABS this year but, at the time of writing, the parliamentary timetable means it is more likely that we will not license our first ABS until the start of 2012. I select these two achievements particularly because of the sheer scale of what they represent and the work required to bring them to fruition, both by SRA staff and by our stakeholders.

I am encouraged at the way in which we have, as an organisation, learnt how to build more effective relationships with our stakeholders, especially the regulated community. Communication has been at the heart of our engagement programme: we have travelled England and Wales delivering our roadshows at which we met with thousands of members of the profession; we have established special interest groups, attended conferences, written articles, and delivered a comprehensive programme of webinars and consultations. Our relationships have improved and we will ensure that our level and standards of communication remain high.

OFR should ensure that delivering the right outcome for consumers is the primary concern of all those engaged in the provision of legal services. We carried out research amongst consumers to determine how they viewed the profession. In 2011, we set out our consumer affairs strategy and established a consumer affairs function within the SRA. We are in the process of strengthening our relationships with bodies representing consumer interests.

Whilst we knew that the profession would be facing major changes as it moved towards outcomes-focused regulation, we did not underestimate the changes that the SRA would have to make in order to deliver OFR. Later on you will read about the comprehensive Transformation Programme into which we have put huge effort, ensuring that the SRA is 'fit for purpose'; and the Enabling Programme, which has provided us with a vastly improved IT infrastructure, facilitating more efficient and effective ways of working.

We have re-organised our work with firms into three main functions: Authorisation, Supervision, and Enforcement. The new Authorisation function is introducing far more rigorous processes for individuals and firms wishing to enter legal practice, including ABS. The Risk Centre has developed its approach to risk management and our Relationship Management project has given us a clear insight into how supervision of those we regulate should operate. Enforcement practices have been reviewed and refined to ensure that our work takes place faster and more efficiently. In short, every aspect of our regulatory activity has been challenged, reviewed, refined and tested.

Working alongside other regulators, we have embarked upon the biggest review of education and training within the legal profession for over thirty years.

Plans to relocate to Birmingham, bringing together staff currently located on two Midlands sites are also proceeding apace.

We now have a much greater understanding of our stakeholders, and the image of the SRA as a somewhat remote and formal regulator is being largely dispelled.

I am proud of what the SRA has achieved over the past two years. Our staff have demonstrated outstanding levels of commitment and resourcefulness in delivering significant changes to such tight timescales. We have demonstrated that value for money and transparency underpin all our activities. We have worked to a punishing schedule, and we are a more effective organisation as a result.

But we are not complacent. Whilst we have laid the OFR foundations, our real work now begins.

Rather than produce an annual report for each of the past two years, we decided that we should chart our progress towards OFR within a stand-alone publication. Those reading this publication may well have been part of the detail. If so, I thank you for your contribution.

I hope you enjoy sharing our achievements with us.

Antony Townsend

Introducing the SRA

The Solicitors Regulation Authority (SRA) was launched in January 2007 as the independent regulatory body of the Law Society of England and Wales. We are a public-interest regulator, committed to protecting the interests of consumers of legal services, by regulating the legal community. We ensure that solicitors and law firms meet high standards, and we act when risks are identified.

In addition to setting standards for, and regulating more than 156,000 solicitors on the Roll, we set the standards for the training of those seeking to become solicitors and regulate almost 1,600 Registered Foreign Lawyers (RFLs), and 290 Registered European Lawyers (RELs). We also regulate law firms in which solicitors practise. These firms range from single-solicitor practices to large firms with a global presence and thousands of lawyers. Those we regulate also work in the justice system, in government and within companies. They all follow the same professional principles and code of conduct. We provide advice to help them do so.

The LSA and good regulation principles govern our regulatory objectives. We are in the final stages of adopting an outcomes-focused approach to regulation, which will place the interests of consumers first.

We are an organisation of around 600 employees, split across two sites in the Midlands, in Leamington Spa and Redditch. We also operate from an SRA London office where much of our work with London firms is based. Our work is overseen by the SRA Board, which is currently made up of 17 members, of whom nine are solicitors (including the Chair) and eight are lay members. The Board is assisted in its work by eight committees and groups.

Facts and Figures 2009
(31 Dec. 2009)

2010
(31 Dec. 2010)

Number of Practising Certificate holders 112,589 117,802†
Number of solicitors on the Roll 150,789 156,628†
Number of Registered Foreign Lawyers (RFLs) 1,663 1,619
Number of Registered European Lawyers (RELs) 273 294
Total number of solicitors' firms 10, 958 10,961
Sole practitioner 4,083 3,777
Partnership 3,874 3,517
LLP 1,129 1,345
Incorporated company 1,657 2,081
Multinational/overseas 164 151
Other 51 90
Number of new firms 1,059 1,100
Number of calls received to Ethics Guidance Helpline/number of calls answered 64,029/ 61,631 58,193/ 56,902
Number of visits by Practice Standards Unit 825 923
Number of Forensic Investigation visits 484 466
Number of interventions 97 64
Number of referrals from Legal Complaints Service 1,163 1,026†††
Disciplinary proceedings cases issued 237 252
New claims received on Compensation Fund (volume/value) 2705/ £114m 4590/ £137m
Visits to SRA website 1,521,464 1,901,979
Total net direct expenditure against budget (actual/forecast) £22.501m/£21.881m £12.491m/£15.357m
Number of full-time equivalents (FTE) at year end 638 637
Staff turnover (%age) 6.3% 10.9%

† Figure is at 31 January 2011 as figures from December 2010 do not allow like-for-like comparison with 2009 due to the later completion of the Practising Certificate bulk termination exercise for 2010
†† The number of firms closed can change quite significantly retrospectively as it can take some time for the SRA to be notified of closures. These figures provide a snapshot taken two months after the period in question
††† LCS closed in March 2011; the Legal Ombudsman was established in October 2010.

The path to outcomes-focused regulation (OFR)

The LSA 2007 had far-reaching consequences for the legal services market and for the way in which it was regulated.

At the beginning of 2010, the Solicitors Regulation Authority (SRA) was ready to map out its plans for introducing outcomes-focused regulation (OFR) in October 2011. This represented a major advance towards a risk-based regulatory regime based on the core principles and high-level outcomes firms must achieve. OFR was designed to allow freedom to innovate, while providing a strong focus on the quality of the services provided to clients.

This section outlines the steps taken by the SRA to prepare the profession, key stakeholders - and itself - for the changing legal landscape.

Outcomes-focused regulation

Our starting point was to set out the broad context of OFR and its implications for regulatory practice by launching our 'Freedom in Practice: Better Outcomes for Consumers' campaign.

Antony Townsend—Chief Executive

"Dialogue was key to this campaign. The plans had to be realistic as they involved major changes in approach for both the SRA and the legal services sector. The thrust of the 2010 campaign was on consultation."

Consultation

There followed a two-year period of major, strategic consultations, with feedback received given detailed consideration.

Consultation Dates
Moving towards a fairer fee policy: second consultation 7 December 2009 - 22 January 2010
Advocacy standards 18 December 2009 - 12 February 2010
Conflict and confidentiality: second consultation 18 December 2009 - 12 February 2010
Indemnity Insurance Rules: Successor practice definition 19 November 2009 - 12 February 2010
Assigned Risks Pool review 19 November 2009 - 12 February 2010
Moving towards a fairer fee policy:
transitional arrangements
5 March - 16 April 2010
Achieving the right outcomes 20 January - 6 March 2010
The architecture of change: the SRA's new Handbook 28 May - 20 August 2010
Outcomes-focused regulation - transforming the SRA's
regulation of legal services
30 April - 27 July 2010
Joint Advocacy Group - consultation on proposals for a
quality assurance scheme for criminal advocates
10 August - 12 November 2010
Legal Practice Course: policy on accreditation of
prior learning (APL)
13 July - 21 October 2010
Future client financial protection arrangements 6 December - 28 February 2011
The Architecture of Change Part 2 - the new SRA
Handbook - feedback and further consultation
21 October 2010 - 13 January 2011
Sole practice: modernising authorisation 14 December 2010 - 8 March 2011
ABS fees structure 17 March 2011 - 29 April 2011
SRA Equality Framework and Engagement Strategy
for 2011-2012
8 March 2011 - 8 June 2011

Samantha Barrass—Executive Director, Risk, Supervision and Standards

Samantha Barrass"The Handbook does not represent light-touch regulation. It is a framework that will allow the SRA to regulate firmly and fairly, focusing on the things that matter, while legal services providers are given the chance to serve their clients in the best possible way. Our primary concern will be to work with firms to improve standards and we will only seek to take disciplinary action when failures are serious or a firm does not show the capacity or willingness to improve."  

In the course of 2010, we organised a series of roadshows throughout England and Wales, attended by 1,500 members of the profession; we sought relevant speaking engagements as well as opportunities to interact with sector-specific groups. Reference groups were established to help test proposals and formulate detail. We engaged in research programmes to understand better the relationship between the profession and consumers; established a consumer affairs function within the SRA; drew up a consumer affairs strategy; formulated an SRA charter and developed stronger relationships with consumer advice bodies.

Work began on re-drafting the Code of Conduct with a clear focus on the key principles and outcomes that we expected solicitors and firms to achieve. Our intention was to build a more mature relationship with those we regulated, moving from prescriptive 'tick-box' detail to greater innovation and freedom in practice.

Handbook

Included in the consultative programme were two major consultations on the Handbook, complemented by a comprehensive series of events with key stakeholders. The SRA's traditional approach required the profession to comply with a myriad of detailed rules and regulations. The Handbook brought together all the regulatory requirements applying to individuals and firms regulated by the SRA. Importantly, these arrangements will apply both to traditional law firms and to ABS - a new kind of law firm - thus affording the same level of regulatory protection to consumers, regardless of the type of business providing them with legal services.

The new regulatory Handbook was published on-line and on time, in draft format on 6 April 2011. This marked two years of intensive work by SRA colleagues, working closely with solicitor organisations, consumer groups, and many others.

The 6 April publication date gave individuals and firms six months to familiarise themselves with the Handbook, allowing us to help them with that education process. Its publication signalled the start of an intensive communication campaign for the profession. A further eighteen roadshows were organised across England and in Wales between May and September 2011 as well as 15 webinars (on-line seminars). We sought opportunities to engage with the profession at seminars, conferences, specialist groups and local Law Society meetings, and we worked closely with legal media to maximise coverage of key issues.

On 13 June, 2011, the LSB approved the Handbook.

Supervision and risk

The changing relationship with the profession caused us to consider our approach to supervision of both individuals and firms. Our aim was to establish an open and trusting relationship, as well as providing a robust mechanism for dealing with those who failed to work with the SRA in this way.

In autumn 2010, our Relationship Management (RM) pilot was launched. The pilot followed from a programme of pre-pilot visits made earlier that year to a small number of commercial firms in the City. The programme provided us with a means of trialling various aspects of a new form of supervision and to consider how it would complement other supervisory approaches. This was supported by the development and approval of a new enforcement strategy.

The RM pilot concluded in summer 2011, providing us with confidence that the new and improved risk-based authorisation and supervisory arrangements for all firms were robust and outcomes-focused.

In July 2010, the Risk Centre was formally established, to ensure that monitoring and investigative activity was better targeted through more effective use of intelligence and assessed against robust risk criteria, enabling us to focus resources on serious risk.

Transforming the SRA

We recognised that we needed to change in order to respond to the major developments taking place in the legal services market. Our Transformation Programme has two elements to it - the IT infrastructure required to support our transformation, known as the Enabling Programme, and the SRA as an entity.

The purpose of the Enabling Programme is to provide the infrastructure for providing consistent, timely and reliable management information and business intelligence, helping the organisation to be more practice- and risk-based in investigations. It has also enabled the automation of standard processes and minimised duplication in order to deliver the most effective and efficient service.

A good example was the launch, in February 2011, of the facility for students to apply on-line, for the first time, for Legal Practice Course places. More than 500 students took advantage of the new service during its first week of operation. This new service was the first of our paper-based systems to go online. In the summer of this year, we sent members of the profession details on how to create their own online account within mySRA, a dedicated web portal, where they could update their personal details and obtain information and guidance.

The Transformation Programme

Web/online service Computer systems Business processes

Objective:

  • Improve services for the profession, and the channels through which to access them

Outcomes:

  • Register and authenticate services
  • Payments online service
  • Applications online
 

Objective:

  • Replace out-of-date and inflexible IT solutions for critical business systems

Outcomes:

  • A new system that delivers a single customer view
  • An updated document management system - a single set of documents in one place
  • Renovation of Management Information
  • Move to online forms and processes

Objective:

  • Modify business processes to support OFR and business & technology changes

Outcomes:

  • New business processes for the future state
  • Delivery of identified positive outcomes to the organisation
 

Antony Townsend—Chief Executive

"Many areas of our work will see radical change. 'Traditional' areas of work will be phased out. At the same time new, and very different, types of jobs will be created. For those staff who are open to the idea of doing different things, our new structure presents exciting opportunities for staff to take their careers in a new direction."

In future, all these processes will be carried out online, saving the profession valuable time compared to that previously taken to administer updates and changes.
In the longer-term, the new IT infrastructure and technology will assist us in interpreting and improving the effectiveness of policies and processes, and in providing better feedback and trends analysis data to those we regulate.

By the end of 2011, the Enabling Programme will have provided us with a new technology platform allowing our staff to deliver excellent customer service in a more effective manner.
The organisation will be using new IT systems, which are aligned to the requirements of the regulatory landscape, including online services, unified data, greater knowledge and case management information.

The SRA's ambitious transformation plans have involved retraining and external recruitment to ensure that the long-term aims of meeting the challenges of OFR and being the regulator of choice were achievable.

Mike Jeacock—Chief Operating Officer and Executive Director, Authorisation

Mike Jeacock"In October 2010 we began a systematic assessment of the workforce's competencies, skills and readiness to adapt to the new regulatory framework with compulsory attendance at assessment centres. This was followed by support in embedding behavioural competencies."

Internal review

Steps were taken to review staffing policies and practices to ensure there was flexibility in the workplace. This included implementation of a behavioural competency framework and standardised performance management. We replaced job descriptions with role profiles, which focused on outcomes rather than on a list of tasks, allowing both the organisation and the individual greater flexibility in career development.

We published a new staffing structure in February 2011. The senior team for this structure was in place by June 2011, with the remainder of the structure filled in phases during the spring and summer.

By December 2011, a plan to reduce the workforce from 640 to 561 full-time equivalents will have been achieved. This is the final stage of a programme to equip us to be a modern, risk-based regulator, capable of meeting the needs of consumers of legal services in a vastly changed legal sector. We recognised that key to the success of the new regulatory regime was to have the right people with the right skills in the right jobs. By the end of 2011, knowledge and skills gaps will have been addressed, and the workforce will be enhanced through the recruitment of new staff with the required skills. Existing staff will be more empowered to deliver excellent service. Through performance management we will be seeking continuous improvement within the workforce, rewarding exceptional working and challenging behaviours and performance that fall below standard.

More emphasis has been placed on internal communications to build understanding of and commitment to SRA priorities. We appointed 'Transformation Champions' across the organisation to act as conduits within their own departments to disseminate both information and feedback. A systematic, comprehensive and transparent approach to internal communications was adopted, including regular all staff briefings, and an improved and updated intranet.

Closer dialogue with City firms

Autumn 2010 brought about the appointment of a senior City law firms adviser to help the SRA build a stronger relationship with this key stakeholder group by encouraging mutual understanding and co-operation.

Budgetary responsibility

At the start of 2010, financial pressure was mounting as the economic and financial climate worsened. We had a limited budget within which to deliver our services and discharge our regulatory responsibilities, minimising the cost of regulation. Value for money and transparency had to underpin all our activities, a goal which we have worked tirelessly to achieve throughout 2011.

Heather Lees—Executive Director, Resources

Heather Lees "Working from two Midlands sites has inevitably made promoting a 'one-team' culture challenging. In 2010, work began on a business case to identify and procure a single site within the West Midlands, which would enable SRA staff, and some Law Society Shared Services staff, to co-locate. The benefits of moving to a combined site will include enhanced communication across teams, a greater sense of shared purpose and improved efficiency in working practices."

Midlands single site

At present, SRA staff are based at two sites in the Midlands - Leamington Spa and Redditch - and in London. The London office was opened in January 2010, giving us a strong presence in the capital, and providing easier access to larger law firms, other regulators, government officials and civil servants.

In June 2011, the SRA and the Law Society reached agreement on their preferred location in central Birmingham. Contracts are currently in preparation, and plans to relocate SRA staff and Law Society shared services staff to a new location in the summer of 2012 are well underway.

A respected and recognised regulator

For the past two years, we have placed particular emphasis on providing independent, proportionate, accountable and fair regulation. This meant that regulatory processes had to be constantly reviewed and audited to ensure that they were fit for purpose and delivered in the public's interest.

In order to gain and maintain the trust and confidence of both the public and those we regulate, we focused on delivering core services such as investigations, compliance monitoring, guidance and training in an effective, timely and competent manner. Excellence in customer service and delivery was the SRA's guiding principle in building a reputation as a regulator of choice.

Collective responsibility

In an effort to raise awareness of and respond collectively to different types of fraud and fraudulent activity, we developed relationships with key organisations. These included the Council for Mortgage Lenders (CML), the Association of British Insurers (ABI), the Financial Services Authority (FSA), banks and other financial institutions as well as law enforcement agencies.

Regulatory activity

Significant progress was made in demonstrating that the SRA was a more open and accountable regulator. For example, we now publish more details on how we investigate firms, and the principles underpinning our regulatory decision-making. We have taken further steps to protect consumers and improved the timeliness and transparency of prosecutions brought to the Solicitors Disciplinary Tribunal.

We continue to carry out interventions (the process through which we close down firms) in a timely and proportionate manner, responding swiftly where the public interest was threatened. Targets were set and statistics for the first quarter of 2011 demonstrate that one hundred percent of interventions were within target.

A working party set up to conduct a comprehensive review into the compensation arrangements reported in 2009. This concluded that the underlying principle governing all activities relating to compensation arrangements must be client protection. Changes to the Fund's operation included extending the grant limit to £2million and the time limit for applications to 12 months. Two years on, we are confident that there are effective arrangements in place to provide the right financial protection and compensation for consumers.

The LSA 2007 gave the SRA the power to impose fines and issue rebukes. Powers were also granted to publish decisions that would previously have been kept confidential, creating more transparency in decision-making.

David Middleton—Executive Director, Legal & Enforcement

David Middleton"Those powers came into effect in 2010 and allowed us to secure prompt and proportionate action to minimise risk to consumers and the public. It is important for the public to see that the SRA takes these matters seriously."

Education and Training

Significant work has taken place within Education and Training. Our Work Based Learning (WBL) scheme was initiated in September 2008 to develop a consistent and reliable method of trainee assessment and to test a different route to qualification which did not depend on the candidate securing a training contract. The results were published in summer 2011.

This has provided a firm basis on which to develop the work further, which will be fed into the overall Education and Training review being conducted by the SRA, the Bar Standards Board (BSB), and ILEX Professional Standards (IPS). The review will take account of the future demands on legal services and the changes that will shape the legal services market. The Legal Education and Training Review consultation panel is being chaired by two eminent lawyers, Dame Janet Gaymer and Sir Mark Potter.

Proposals for a radical overhaul of quality standards for criminal advocates were approved by the SRA Board in June 2011. The Quality Assurance Scheme for Advocates (Criminal) was developed by the Joint Advocacy Group (JAG), comprising the SRA, BSB, and IPS. Full submission to the LSB is scheduled for early autumn 2011. If approved, the scheme will be introduced in phases from January 2012.

Equality framework

In July 2011, we launched our new Equality Framework, following a three-month period of consultation with the public and engagement with stakeholders. Within the framework, we outlined our equality objectives for 2011/12, explaining how these would be met through an action plan. Specific actions related to data collection and equality monitoring; communication and engagement with stakeholders; encouraging equality of opportunity and respect for diversity in the profession, and the review of regulatory decision-making.

The Equality Framework replaced the SRA's previous equality and diversity strategy. It will enable the SRA to continue to progress and promote its vision of equality and diversity as it moves to outcomes-focused regulation in October 2011.

Stakeholder engagement

We also took steps to understand external stakeholders better. Much greater emphasis was placed on stakeholder engagement in the course of all our activities in 2010 and 2011. This included a research programme to elicit the profession's views on the SRA and consumers' views on the legal profession.

Fees

A major overhaul of the way in which practising fees were calculated and collected was undertaken to provide a fairer fees regime and one that took greater account of regulatory risk. The introduction of an individual fee and an entity fee, with a firm's regulatory payments based on banded turnover, was well received by the profession when introduced in 2010.

Financial protection

Following burgeoning concern from both the profession and insurers about law firms which had failed to obtain insurance, we approved an Assigned Risk Pool enforcement strategy in July 2010 to help firms manage their insurance payments and shut down the ones that failed to pay.
In April 2011, our Board approved key changes to the arrangements for client financial protection, following receipt of more than 300 responses to our consultation. The main changes were in relation to the operation of the Assigned Risks Pool (ARP). The amount of time a firm can remain in the ARP has been reduced from 12 months to six months for 2010/11. It was determined that the ARP will be funded jointly by qualifying insurers and the profession in 2011/12, with liability for claims arising from firms who have not taken out insurance moving from the ARP to the Compensation Fund.

The ARP will be replaced in October 2013 with a system where insurers offer a three-month extended policy period to firms who cannot obtain professional indemnity insurance for the following year.

Alternative business structures (ABS)

As stated earlier, the LSA permitted the introduction of a new kind of legal practice, Alternative Business Structures (ABS), which allowed participation by a larger proportion of individual non-lawyers in a firm than is currently permitted, as well as allowing external ownership or part-ownership of law firms. The SRA welcomed this diversification of the legal services market.

Antony Townsend

"We are pleased with the way the first year has gone but we will continue our efforts to manage the ARP tightly as we move towards its abolition, and put more firms in a position to be able to find their own PII cover. "

A major focus in 2010 and at the start of 2011, was for us to prepare to become a licensing authority for ABS, as well as being the preferred regulator for the new structures. Extensive preparatory work was required before application could be made to the LSB for approval. Crucial to this preparation was an assurance that the same consumer safeguards could be applied to the new structures as those applied to traditional legal practices. We had to put measures in place to make sure that those who owned and invested in ABS met rigorous standards, in order to protect the public interest.

Antony Townsend

"We were delighted to win the LSB's approval for the licensing authority application, which has gone forward for Parliamentary approval. We believe that it is in the public interest for us to regulate ABS, as this allows us to ensure that these new business are subject to the same rigorous professional standards as those expected of traditional law firms."

A robust schedule of preparation and consultation on all the relevant rules and regulations for the introduction of ABS was established and completed to tight timescales. We revised the Code of Conduct to reflect these changes in the summer of 2010. Work began on reviewing the Solicitors' Accounts Rules, with a particular focus on ensuring compliance with Rule 6.

Approval

In June 2011 the SRA received LSB approval to become a licensed regulator for ABS. At the time of going to print, we are likely to license our first ABS in early 2012, following designation as a licensing authority in December 2011.

Looking forward

We expect that the next few years will be a period of consolidation and development and continuous improvement. The intense work and planning that have been undertaken over the past few years will be paying dividends. It is clear that the aspirations outlined in our strategic plan leading up to 2013, are already translating into reality.

  • By 2012 we expect to be the leading regulator of a diverse, dynamic and vibrant legal services market. We will continue to play our role in promoting access to justice and will be able to take satisfaction from knowing that we have helped to provide consumers with greater choice and value for money.
  • Building on the work we have done over the past two or three years, we expect to emerge - by 2013 - as the regulator of choice for the sector.
  • By 2013 other regulators and the profession will have benchmarked the SRA as a model regulator.
  • We will have facilitated the introduction of ABS into the legal services market, ensuring that they are subject to the same rigorous regulatory framework as traditional law service providers.
  • By the middle of 2012, we will have consolidated our two Midlands sites into one location, based in central Birmingham. Our staff will be benefiting from closer working relationships for a shared purpose, a greater sense of unity, and more efficient ways of working, and our diversity profile will continue to improve.
  • We are already seeing evidence of how transforming the way in which we work has resulted in improvements in efficiency and effectiveness, as well as demonstrating value for money, greater speed in the execution of our work and enhanced customer service.
  • It will be evident that our culture has progressively changed from 2010 to be one which is unequivocally positive, dynamic, co-operative and proactive.
  • Staff will have the confidence to lead their teams through change, break down barriers to work together, and demonstrate an ability to seek out personal development opportunities, as well as responding effectively and enthusiastically to change.
  • We will have in place a renewed and revitalised Consumer Affairs programme, which helps protect the interests of the public and promotes good practice.
  • The new governance arrangements set out in the Internal Governance Rules will have been implemented and reviewed on an ongoing basis.
  • The SRA brand will be known, recognised and respected by the public and those we regulate. The SRA will be synonymous with demonstrating fairness, consistency and prompt action in the public interest.
  • Our Board and staff will have shaped what the SRA stands for and will be proud to represent the organisation.
  • The SRA's image with those we regulate will have been enhanced through transparent, clear and accountable regulation and engagement. There will be noticeable improvements in our satisfaction ratings.
  • The SRA will be recognised as being committed to promoting and progressing equality in all our activities.

Financial Review 2009/2010

Demonstrating value for money in all our work is fundamental to the way in which the SRA carries out its regulatory responsibilities.

Results

In the year ending 31 December 2010, the total cost of regulation was £44.4 million. This is a 10% reduction on 2009, when the cost was £49.3 million.

Expenditure

Direct expenditure totalled £44.7 million, compared to £49.0 million in 2009.
The SRA shares a range of services - IT, finance, HR and facilities - with the Law Society. It pays a charge for these services. In 2010, the SRA's charge rose to £31.9 million, from £26.8 million in 2009. This was largely due to work on the SRA's Enabling Programme, which is delivering a new IT system to support the introduction of outcomes-focused regulation.
Adding direct expenditure to shared services costs, our total expenditure was £76.6 million in 2010.

Money recovered

The Solicitors Act 1974 allows the SRA to recover from the Compensation Fund payment of all costs, charges and expenses for managing and administering the fund. £18.0 million was, therefore, re-charged to the Compensation Fund in 2010.
The SRA has the authority to recover the costs of its legal fees for Solicitors Disciplinary Tribunal (SDT) hearings, interventions and other costs orders. Between 2009 and 2010 money recovered in this way increased from £3million to £5.3million. The bulk of this increase came from recovery of costs from solicitors in relation to miners' compensation cases.
Adding this to recoveries from the Compensation Fund, the total recovered was £23.3 million.

Income

Regulatory income for 2010 was £8.9 million, compared to £5.7 million in 2009 - a 55% increase. The main reason for this was the introduction of Recognised Body and Sole Practitioner Renewals, new types of application introduced in 2010. These now form part of the annual practising fee.

The total cost of regulation explained

The total cost of regulation is arrived at by deducting from our expenditure. The totals of money recovered (£23.3 million) and income generated (£8.9 million) from expenditure. This makes a total of £17.8 million. The cost of our contribution to the Law Society's shared services, at £31.9 million, is added to this. The total cost is, therefore, £44.4 million.

Future expenditure

Increased expenditure has been unavoidable in 2011 as the SRA has implemented an organisational restructure and fundamental changes to working processes, to ensure that we can deliver all the requirements of the new regulatory approach. We have striven throughout to introduce these changes as cost-effectively as possible. This investment will improve our efficiency and lower our cost base as we move into a new era of regulation.

Financial review: comparison of 2009 and 2010 2009

2010

Expenditure £m    
Staff costs 25.3 156,628†
Staff travel and subsistence 1.2 1.0
Board, adjudicator and other expenses 1.4 1.2
Professional and legal fees 19.4 14.8
Other admin costs 1.7 2.2
Total Expenditure 49.0 44.7
Income £m    
Exam and Legal Practice Course Fees 1.9 2.4
Admission and enrolment fees 1.8 2.1
Registration and transfer of articles 0.1 0.2
Panel income 0.3 0.0
Other income 1.7 4.2
Total Income 5.7 8.9
Net Position Excluding Recoveries 43.2 35.8
Legal Fee Recoveries 3.0 5.3
Comp Fund Recoveries 17.8 18.0
Total Recoveries 20.7 23.3
Total SRA Net Position 22.5 12.5
Law Society Shares Services Costs 26.8 31.9
Total SRA 49.3 44.4

 

Expenditure

 

Income

 

Appendix 1

Board members

Board members were appointed for a term of three years, until the end of 2012, with the exception of Stephen Whittle and Yvonne Brown, who were appointed for two years, until the end of 2011.
The Chair was appointed for four years, until the end of 2013. By January 2013, the Board will have a lay member majority.
All Board members undertake training in equality and diversity.

See profiles of the Board www.sra.org.uk/board

Committees

Each of the Board committees is chaired by a different Board member, and includes external members (from outside the SRA) who bring particular expertise.

Compliance Committee

Advises on the application of principles of risk-based and proportionate regulation to all compliance issues

Education and Training Committee

Advises on all matters relating to pre-admission and post-admission training of solicitors

Finance and Resources Committee

Provides advice and assurance to the SRA Board on all matters relating to the efficient and effective management of human and financial resources across the organisation.

Financial Protection Committee

Advises on all policy and technical matters relating to the Compensation Fund and professional indemnity.

Standards Committee

Advises on all matters concerning standards of professional conduct.

Communications and Engagement Group

Advises on and keeps under review all aspects of the SRA's corporate communications and wider stakeholder engagement activity.

Equality and Diversity Group

Responsible for strategic oversight of the implementation of our equality and diversity strategy.

High Profile Litigation Group

Deals with matters relating to litigation arising from individual regulatory decisions.

Board Members (from left to right)

Sara Nathan, OBE
Lay Member

Charles Plant
Chair, Solicitor Member

Cindy Leslie
Solicitor Member

Professor Shamit Saggar
From 1 July 2011
Lay Member

Mark Humphries
Solicitor Member

Dr Susan Bews
Lay Member

Martin Coleman
Solicitor Member

Sir Ron Watson CBE
Lay Member

Tom Keevil
Solicitor Member

Ian Menzies-Conacher
Lay Member

Peter Duffy
Lay Member

Malcolm Nicholson
Solicitor Member

Graham Chisnall
Lay Member

Yvonne Brown
Solicitor Member
Until 31 December 2011

Lucy Winskell
Solicitor Member

Stephen Whittle OBE
Until 31 December 2011
Lay Member

Missing from the photo is

Lorrette Law
Solicitor Member

To join the Board in January 2012

Jane Furniss
Lay Member

Moni Mannings
Solicitor Member