SRA Update Issue 25 – June 2012
We are currently consulting on the future of Authorised Professional Firms (APFs) and the implications for those that wish to be licensed as alternative business structures.
The consultation is part of a move to ensure that the correct regulators—either ourselves or the Financial Services Authority (FSA)—oversee the relevant areas of work.
No one can carry out financial services activities unless they are authorised by the FSA, or are exempt. The majority of law firms rely on an exemption and are described as exempt professional firms, carrying out activities under our supervision. They do not have to be regulated by the FSA, but instead comply with the SRA Financial Services (Scope) Rules 2001 in the Specialist Services section of the SRA Handbook.
A small number of law firms are not exempt because they provide mainstream financial services to their clients. These are authorised by us and the FSA as APFs. We have made it clear since 2009 that we will only regulate legal services, as measures put in place to protect the public against errant solicitors—such as the Compensation Fund—could otherwise be liable for losses caused by non-legal activities.
That means that the non-legal activities of ABSs will not be regulated by us. Therefore, those APFs that become ABSs will no longer receive the amnesty they enjoy from FSA regulations. We are concerned this could lead to a gap in regulatory protection for customers of such businesses.
There is also regulatory inconsistency between ABS APFs and other law firms that are SRA-authorised APFs. We have discussed this with the FSA and have formulated three options to address the situation. We are consulting on these three. They are as follows:
- Bring ABS APFs into the regulation model which currently applies to other APFs
- Extend the current ABS approach to all APFs
- Apply SRA regulatory requirements only to the conduct of non-mainstream regulated activities of all APFs and no longer regulate the mainstream regulated activities of any APFs, therefore excluding such work from the Compensation Fund
The consultation runs until Friday, 17 August. Find out more and take part