SRA Update
LDPs and firm-based regulation are here
SRA Update Issue 8 – May 2009
New rules and regulations which fundamentally change the way firms are regulated came into force on 31 March 2009.
For the latest news on implementation, and for more information, please visit www.sra.org.uk/lsa.
Firms are now able to form legal disciplinary practices (LDPs). LDPs are firms in which the "managers" (i.e. the partners in a partnership, the members of an LLP, or the directors of a company) can be other lawyers (e.g. legal executives or licensed conveyancers), and there can be up to 25 per cent non-lawyer "managers". The non-lawyers must be approved by the SRA.
Click here for the forms to apply for approval of a non-lawyer or for recognition of a new firm. Anyone wanting to set up a recognised body (whether or not it's an LDP ) needs to apply for authorisation before starting business. This includes where a partnership splits, or where a sole practitioner takes on a partner.
"Firm-based regulation" means that our rules are more focused on firms—including all the people, not only the solicitors, who work in them. All existing partnerships automatically became "recognised bodies" on 31 March. We expect the provisions that affect sole practitioners to come into force on 1 July 2009.
Sole practitioners will need to become "recognised sole practitioners". If you are already practising as a sole practitioner in July, you will be "passported" automatically into the new regime without having to make an application or pay a fee.
The rules and the SRA's powers now apply to all "managers" and employees, as well as to the firm itself. "Managers" need to ensure that all staff are properly trained for the work they undertake, and that they are aware of the possible consequences of misconduct. We have issued guidance to assist you—visit www.sra.org.uk/employee.
Review all of the 31 March changes to the Solicitors' Code of Conduct 2007 and the Solicitors' Accounts Rules 1998 at www.sra.org.uk/tracker.
We have begun working with the Legal Services Board on designing a regulatory framework for alternative business structures (ABSs). We plan to issue a consultation on the high-level principles in May—register here to be notified of SRA consultations as they happen.
What's the bottom line?
If you don't want to take advantage of LDPs at present, you can continue with business as usual for the most part. However, there are some changes that all firms need to know about.
Renewals for all
In October 2009, all firms (recognised bodies and recognised sole practitioners—and whether or not you've been passported) will need to apply for annual renewal of their recognition or authorisation. We will send you a renewal form nearer the time. The renewal fee for recognised bodies will be £180. The fee for recognised sole practitioners hasn't yet been approved, but we expect it to be in the region of £90.
Firms that were already recognised bodies before 31 March will need to apply for annual renewal in October, along with the rest of the profession. We will give credit for fees and contributions paid for periods of cancelled recognition to firms whose three-year period of recognition is cut short by the change in renewal date—you should receive this before your renewal payment is due.
New information
We need to collect more information than we do at present to help us develop our work, although we will keep our requests to the minimum necessary to be a regulator that is both effective and risk-aware. For instance, on renewal, we plan to ask for turnover figures (such as firms provide to their insurers) which will help us to
- assess risk,
- target our resources, and
- develop a more appropriate system for allocating and collecting fees.
Letterhead, websites, emails…
There are new requirements in rule 7.07, but under rule 25 firms will have six months to make any necessary modifications and to use up existing stocks of notepaper. Briefly, firms must show on their letterhead, fax heading, website and emails
- the words "regulated by the Solicitors Regulation Authority"
- the name under which the firm is recognised by the SRA and its SRA ID number if it is a partnership or sole practice, or the registered name and number of the firm if it is a company or LLP. (Existing firms will receive details of their SRA ID number in the reference of their passporting letter—or you can find it by visiting Find a solicitor, where it will be shown as your head office ID number.)
Firms can still use different trading styles, but the letterhead etc. of branch offices or departments which do so must also include the firm's SRA recognised name and SRA ID number or the registered name and number.
Recognised bodies need to make any necessary changes by 1 October 2009 and sole practitioners by 1 January 2010.
Practising certificates—what you need to tell us
Although it's early days to be thinking of practising certificate renewal (which will still be at the end of October each year), there's a change that some practitioners will need to note. This applies after 1 July whether you're renewing your PC or applying when you don't currently hold one.
Section 12 of the Solicitors Act will be replaced in July by regulation 3 of the new SRA Practising Regulations—this lists the events you need to tell us about when applying for a PC. There are some differences between section 12 and regulation 3, so some people who were subject to section 12 won't be subject to regulation 3, for some there'll be no change, whilst some who weren't subject to section 12 will find they have to declare matters under regulation 3.
Tell us your changes
To keep our records up to date, rule 14.07 requires that recognised bodies notify us within seven days of any changes in the name, address, managers or members/shareowners of the firm. We now have forms for firms to give us the details of a new manager, and for individuals to tell us any changes in their practising details.
There are also some new information-giving requirements (see regulation 14 of the SRA Practising Regulations 2009) for individuals whose circumstances change—for example, in relation to qualifying and practising as a member of another legal profession, financial arrangements and criminal issues.
What about sole practitioners?
Sole practitioners will need to become "recognised sole practitioners". They will be "passported" automatically into the new regime.