SRA Update
Legal Services Act update
SRA Update Issue 9 – August 2009
LSA – how to comply with the new requirements for sole practitioners
The SRA Practising Regulations 2009 came into effect on 1 July and, with them, the beginning of a new approach to the regulation of sole practitioners. From that date, any solicitor or registered European lawyer wanting to practise on their own account needs to be a "recognised sole practitioner"—this reflects our approach to regulating firms, which now need to be "recognised bodies".
Existing sole practitioners were "passported" into the new system on 1 July without having to make an application or pay a fee. All sole practitioners passported in July will have received a letter from the SRA confirming this.
The new approach for sole practitioners enables us to develop our work on "firm-based regulation" brought in under the Legal Services Act 2007 (LSA). This means that our rules and our regulatory powers are now more focused on firms, including everyone—not only the solicitors—who work in them. Firm-based regulation is an important tool in improving our risk-based approach to regulating firms and to making best use of our resources.
A change to rule 7 of the Solicitors' Code of Conduct brought in new requirements for all firms in respect of their letterheads, websites and emails. Recognised bodies will need to be in compliance with these by 1 October 2009 and recognised sole practitioners by 1 January 2010. For details, see SRA Update Issue 8.
LSA – what do I need to know?
The work to bring about the changes under the Legal Services Act continues—some parts of this will affect you now, while other parts you need to be aware of to avoid pitfalls that may affect you later. Here are selected key points.
New rules and regulations
Along with the SRA Practising Regulations, a number of other sets of rules and regulations came into force or were amended on 1 July. For a list of these, together with summaries of the main changes made, and links to versions of the rules or regulations themselves with 1 July 2009 changes highlighted, click here.
Renewal for the firm
In October this year, all firms in private practice will need to apply for renewal. Recognised bodies, including partnerships passported in March and existing recognised bodies which previously renewed on a three-year basis, will need to apply for annual renewal of their recognition. Recognised sole practitioners, including those passported in July, will need to apply for annual renewal of their authorisation to practise as a sole principal.
Forms to apply for renewal will be sent out to firms at the same time as the practising certificate application forms. We hope that being able to deal with the forms together will help you and us in completing the application process as efficiently as possible. We will shortly write to all firms with further details of what to expect.
The cost of renewal this year is £180 for recognised bodies and £90 for sole practitioners. Our approach to developing a new structure for raising the money required annually to fund the cost of regulation is discussed in our consultation Moving toward a fairer fee policy, which is open until 28 September 2009; we are keen to receive comments from a wide variety of practitioners.
What if something changes in your firm?
If there are changes in your firm, you may well need to notify us—what you need to do will depend on whether the change is within the firm or to its structure.
If you want to change your firm's structure—for example, from a partnership to an LLP—you will need to make a fresh application for recognition before you can start to practise through the new structure. If you are a recognised sole practitioner and you want to take on a partner, or hold someone out as a salaried partner, you would need to apply for recognition of a new partnership.
To download the forms to apply for approval for any new firm, including a new sole practice, click here. If there is a sudden and unexpected change in your structure you may be in a "TER" situation.
If changes happen within your firm, do you need to let us know? There are a number of notification requirements covering a range of types of information that you may need to give us and some of these are new. The following will help you with what and when you must tell us:
- Section 84 of the Solicitors Act requires individual solicitors and registered European lawyers to let us know within 14 days of any change to their place(s) of business.
- Rule 14.07 of the Solicitors' Code of Conduct requires recognised bodies, and in some instances the managers of the firm, to tell us within seven days of a number of changes, such as any change to the name (including any trading name) or any of the practising addresses of the firm, its managers, or to its members and/or shareowners if it is a company.
- Regulation 14 of the SRA Practising Regulations requires solicitors, registered European lawyers and registered foreign lawyers to tell us within 14 days of a number of matters—for example, being admitted as a member of an overseas legal profession, being charged with or convicted of an indictable offence, or becoming a manager of or acquiring an ownership interest in an authorised non-SRA firm.
Am I in a "TER" situation?
An application for "TER" (temporary emergency recognition) might be needed if your firm is a partnership and there is an unexpected change to its composition. A need for TER might arise, for example, if the partnership splits, resulting in a new partnership, or a new sole practice, alongside the old firm. Another possibility is the death of one of two partners, leaving the remaining partner as a sole practitioner. Because solicitors must practise through a recognised body or as a recognised sole practitioner, this may leave you in difficulty in continuing to provide services to your clients until you are granted recognition.
Help is at hand—in such circumstances, the SRA can grant temporary emergency recognition to a new partnership under the SRA Recognised Bodies Regulations (regulation 5), or to a new sole practitioner under the SRA Practising Regulations (regulation 4.5 and 4.6). The application is subject to certain client protections, such as indemnity cover being in place—but, if granted, the recognition can be backdated, so there is not a gap in recognition between your old and new firms, so that services to clients are provided through a properly regulated firm. If you find yourself in this type of situation, you should call our contact centre so that we can send an application form.
It is worth noting that temporary emergency recognition cannot be granted if the circumstances could have been planned for—for example, a planned withdrawal from the partnership of one or more of the partners on an agreed date. In that case, you will need to go through the normal application process for recognition of the new firm or sole practice.
Alternative business structures – where are we up to?
Alternative business structures (ABSs) will enable lawyers and non-lawyers to share the management and control of a business which provides reserved legal services to the public. It is hoped that this will be possible by mid-2011, and the work towards developing a regulatory regime for ABSs is being led by the Legal Services Board (LSB), which has recently published a discussion paper entitled Wider Access, Better Value, Strong Protection.
Once a regulatory regime is established, the SRA hopes to be appointed by the LSB as a licensing authority so that we can regulate ABSs when they are permitted. In our consultation paper Regulating alternative business structures, we have set out our initial thoughts on what our approach might be. We are very interested in your views on our proposed approach, whether you think you might want to be involved in an ABS or are likely to want to continue practising through a more traditional firm. We have asked for responses by 31 August 2009.