Legal Services Act – new rules and regulations
Last updated 29 August 2008
Solicitors' Code of Conduct (LDPs and Firm Based Regulation) Amendment Rules [2009]
We plan to amend the Solicitors' Code of Conduct so that it will in future support firm-based regulation and LDPs. These amendment rules have been made and will in due course amend the Code. The amendments to the Code are shown in revision marking.
The most significant changes are made to
- rule 12 (framework of practice);
- rule 14 (incorporated practice—this rule will be re-titled "recognised bodies"); and
- rule 20 (requirements of practice).
Collectively, the rules above establish the regulatory structure for the new regime.
Consequential amendments appear throughout the Code, along with various other changes. These ensure that our rules will apply to all "managers" and employees in firms. Significant changes include
- rule 5 (persons who will be "qualified to supervise");
- rule 7 (publicity);
- rule 9 (referrals of business).
Download the Solicitors' Code of Conduct (LDPs and Firm Based Regulation) Amendment Rules [2009] (PDF 625K).
Solicitors' Accounts (Legal Services Act) Amendment Rules [2009]
The majority of changes to the Solicitors' Accounts Rules 1998 (SAR) reflect the forthcoming introduction of LDPs and firm-based regulation. The amendments are shown in revision marking.
The SAR will cover sole practitioners, partnerships, companies, LLPs, practices with non-solicitor lawyers as managers, and practices with up to 25 per cent of managers who are not legally qualified. The SAR will also apply to the individual managers and employees of those practices, and to in-house lawyers.
The position of managers or employees in firms regulated by other approved regulators, such as the Council for Licensed Conveyancers, is dealt with in rule 5(d) and note (iii) to rule 5. All managers will be permitted to authorise client account withdrawals but need to have an appropriate understanding of the requirements of the rules. Note the relaxation of the criteria relating to when a FILEX or licensed conveyancer may sign on client account.
The Legal Services Act has abolished the concept of a "controlled trust", so all money held by a practice will be either client money or office money. This means that the same interest provisions will apply to all client money, including money previously defined as "controlled trust money".
The statutory basis for interest certificates has been removed, so interest complaints will be dealt with by the Legal Complaints Service.
The Act also enables the introduction of more flexible, risk-based provisions for the delivery of accountants' reports, and requires the introduction of a mandatory whistleblowing duty on reporting accountants.
Finally, the opportunity has been taken to make some clarificatory changes:
- rule 2(1) on the mandatory nature of the notes to the rules;
- rule 15(2)(d) on using a client account for paying a sum in lieu of interest;
- note (viii) to rule 15 on the aggregation of client accounts;
- note (iii) to rule 16 and note (iia) to rule 17 on including money withheld from a client account in the monthly reconciliations;
- paragraph 2.2 of the Guidelines for accounting procedures and systems on access to the online version of the SAR;
- paragraph 5.6 of the Guidelines on including digital images of paid cheques in a firm's retention policies and systems.
Download the Solicitors' Accounts (Legal Services Act) Amendment Rules [2009] (PDF 997K).
SRA Recognised Bodies Regulations [2009]
These new regulations will replace the Recognised Bodies Regulations 2007. They require all new partnerships, as well as companies, LLPs, etc. to apply for recognition before being able to provide legal services, and they deal with
- the application process;
- initial recognition;
- renewal of recognition;
- approval of a non-lawyer individual as suitable to be a "manager";
- conditions on recognition, etc.
Download the SRA Recognised Bodies Regulations [2009] (PDF 281K).
SRA Practising Regulations [2009]
These new regulations will deal with
- applications for practising certificates;
- applications to be a recognised sole practitioner;
- the register of solicitors with practicising certificates;
- the register of European lawyers, and the register of foreign lawyers.
Download the SRA Practising Regulations [2009] (PDF 315K).
Solicitors' Financial Services (Scope) Amendment Rules [2009]
These rules make the necessary consequential but fairly minor amendments to support LDPs and firm-based regulation, and mainly concern redefining certain terms. The amendments are shown in revision marking.
Download the Solicitors' Financial Services (Scope) Amendment Rules [2009] (PDF 235K).
Solicitors' Indemnity Insurance (Amendment) Rules [2009]
These rules include consequential amendments to support LDPs and firm-based regulation. The amendments are shown in revision marking. They provide that
- individual solicitors and individual registered European lawyers (RELs) and registered foreign lawyers (RFLs) who are engaged in private practice should continue to be covered by compulsory professional indemnity insurance through their firms;
- the compulsory professional indemnity insurance requirement should apply to all entities authorised by the SRA;
- any partnership or sole practice that can only be authorised by the SRA should be covered by the compulsory indemnity insurance scheme in order to protect clients, even if it has not obtained recognition by the SRA nor has it been held out as being regulated by the SRA;
- any unauthorised partnership or sole practice that can be authorised by the SRA or another approved regulator should not be covered by the SRA's compulsory indemnity insurance scheme;
- firms authorised by another regulator should be excluded from the SRA's compulsory professional indemnity scheme;
- firms that cannot be authorised by any regulator should be excluded from the SRA's compulsory professional indemnity scheme.
Download the Solicitors' Indemnity Insurance (Amendment) Rules [2009] (PDF 232K).