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Supervision Pilot shows positive results for the SRA

Results of the SRA's supervision pilot focusing on over 100 firms of varying size across the country showed overwhelmingly positive feedback from the profession, according to a report just published.

The pilot was carried out from January to September last year with what the SRA classifies as 'medium to low' impact firms under the organisation's new outcomes-focused approach to regulation involving a more active engagement with firms.

The aim was to test, define and develop the new approach to particular themes and events using two different methods - desk-based, and visit-based supervision - or a combination of the two. The approach selected depended on the SRA's assessment of risk the firm posed, its management of risk, its size, and its approach to, and history of compliance.

Supervisors were encouraged to contact firms firstly by telephone followed by email, fax and letter, in descending order, to discuss how they assessed and dealt with risks they faced. Previously the SRA adopted a written approach which was more impersonal and time-consuming.

Within the pilot sample, supervisors within the SRA's taskforce identified and categorised six key risk areas affecting the firms:

  • Operational risks - 46%
  • Instability/financial failure - 25.2%
  • Competency, fitness and propriety - 12.4%
  • Fraud/dishonesty affecting - 8.9%
  • External perception - 4.5%
  • Market risks - 3% In the majority of firms, risk levels were shown to decrease during the period of the supervision pilot.

Research into thematic areas also covered six issues comprising first-tier complaints handling; orderly wind-down; treatment of third parties; payment protection insurance; mental health work contracts; and reaction to the Legal Services Board proposed Equality and Diversity questionnaire launched in July 2012.

Marc Baker, Director of Supervision, said: "The pilot we carried out was to test our new outcomes-focused approach so that we could concentrate resources where we believed there to be a serious or potentially high risk, rather than minor or low risk matters.

"The study certainly came back with a strong message that constructive engagement with firms helped them to identify and tackle risks, leading to a positive impact on their overall risk levels. Certainly the majority appreciated being contacted by telephone and a number commented on how this had helped the process to be efficient. We found it necessary to pursue regulatory and/or disciplinary action in a small percentage of the total number of firms."

Since October the Supervision team have been putting the new approach into action and reaction from the profession has continued to be positive. Philip Horn of Plainlaw said of his experience in dealing with the SRA: "I would describe the SRA in its new role following the recent move to an "Outcomes" based system of regulation of the profession as FFF (Firm, Fair and Friendly)."

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