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The SRA Handbook is no longer in effect. It was replaced by the SRA Standards and Regulations on 25 November 2019.

SRA Handbook

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Version 8 of the Handbook was published on 01/10/2013. For more information, please click 'History' Above

Part 3: The ARP

Rule 9: [Deleted]

Rule 10: [Deleted]

Rule 11: [Deleted]

Rule 12: [Deleted]

Operation of the ARP

The ARP shall be managed by the ARP manager.

Applying to the ARP

Where a firm carrying on a practice has not obtained qualifying insurance outside the ARP in respect of any indemnity period or part thereof to which these Rules apply it must, if an eligible firm, apply in accordance with the procedure set out in this Rule 10 to enter the ARP, subject to Rule 10.2, before the start of the relevant indemnity period.

Commentary: 

A firm which for any reason does not have qualifying insurance in place should apply to the ARP before the start of the relevant indemnity period if it is an eligible firm. However, it is important to note that premiums payable to the ARP are intended to be high, and firms would therefore be prudent to seek quotations from qualifying insurers outside the ARP before the start of an indemnity period.

An ARP policy can be cancelled if it is replaced by a policy with a qualifying insurer. A return premium may be payable to a firm which cancels an ARP policy in these circumstances - refer to Appendix 2 for the basis on which the ARP premium and any return premium is calculated.

Firms should also be aware of the other consequences of being insured through the ARP set out in this part of the Rules, including the need to comply with any special measures under Rule 10, and the limitations on eligibility set out in the definition of "eligible firm".

A firm must not start carrying on a practice without having obtained qualifying insurance outside the ARP.

Commentary:

Any firm wishing to start up a new practice must obtain qualifying insurance with a qualifying insurer other than the ARP, before starting practice. For the avoidance of doubt, a firm which has not previously been regulated by the SRA or a non-SRA firm that elects (and is accepted) for regulation by the SRA must also arrange qualifying insurance outside the ARP in order to commence carrying on a practice. Subject to this requirement, a new firm may start practice at any time during an indemnity period.

By applying to enter the ARP, the firm and any person who is a principal of that firm agrees to, and (if the firm is admitted to the ARP) the firm and any person who is a principal of that firm shall be jointly and severally liable to:

pay the ARP premium in accordance with these Rules, together with any other sums due to the ARP manager under the ARP policy; and

submit to such investigation and monitoring and to pay the Society's costs and expenses as referred to in Rule 11.2; and

pay any costs and expenses incurred by the Society or the ARP manager incurred as a result of any failure or delay by the firm in complying with these Rules;

and shall be required to implement at the expense of the firm any special measures.

Any material misrepresentation made in an application for admission to the ARP shall, subject to any waiver under Rule 19.1, render the firm a firm in default for the purposes of Part 4 of these Rules. The provisions of that Part shall apply to the firm as if that firm had not been admitted to the ARP but neither the firm nor any principal of the firm shall be entitled to the refund of any ARP premium paid to the ARP manager. Any amount so paid shall be credited against any sums payable under Part 4 of these Rules.

Commentary: 

Although an ARP policy, once issued, cannot be cancelled (unless and until a replacement policy with a qualifying insurer is issued to that firm), a firm which makes a material misrepresentation in its application to be admitted to the ARP will be nevertheless treated in the same way as a firm in default.

The application for admission to the ARP must be made to the ARP manager on the proposal form provided by the ARP manager.

The applicant must state on the proposal form the date from which cover is sought. This date must not be earlier than the date on which the application is made for admission to the ARP. The applicant must also provide such other information as the ARP manager requires for the purposes of setting a premium.

If the applicant is a firm in default it must state on the proposal form that it is a firm in default and give the date of the start of the period of default from which retrospective cover is sought.

Commentary:

The ARP premium is calculated in accordance with a formula set out in Appendix 2, and is linked to the gross fees of the firm concerned. It is important to note that, under Rule 15, any material misrepresentation in an application will result in the firm being treated in the same way as a firm in default, including being liable to pay the ARP default premium.

The firm, together with each principal of the firm, must ensure that the firm's application has been made and must provide the ARP manager with all information it reasonably requires to process the application.

Commentary:

It is in the interests of the firm and each of the principals of that firm to verify that the application to enter the ARP has been received and that the firm is insured. An application should be made before the start of an indemnity period. Failure to comply with the requirements of this Rule and Rules 14 and 15 will result in the firm becoming a firm in default.

If a firm has not received a written acknowledgement of its application from the ARP manager 30 days after making the application, or within such other period as is stated on the proposal form, the firm and any person who is a principal of the firm must seek written confirmation that the firm's application has been received by the ARP manager. If that written confirmation is not obtained within seven days after the end of the 30 days, or within seven days after such other period specified on the proposal form, the application shall be deemed not to have been made.

An applicant whose first application is deemed under Rule 10.9 not to have been made must, within seven days of the day when under Rule 10.9 the first application is deemed not to have been made, make a fresh application. The firm and any person who is a principal of the firm must ensure that the firm is in a position to prove to the reasonable satisfaction of the Society that the firm's fresh application was delivered within those seven days to the ARP manager at the address specified on the proposal form. Provided the firm's fresh application was so delivered, the application shall be treated as having been made at the date when the firm's first application was made. A firm that is not in a position to prove to the reasonable satisfaction of the Society that its fresh application was so delivered shall be deemed not to have made any application.

Provided that an application or, if necessary, a fresh application, has been made in accordance with Rules 10.5 to 10.10, a firm which is an eligible firm will be covered in the terms of the ARP policy to be issued to it from the start of the relevant indemnity period or, in the case of a firm to which Rule 10.2 applies, the date specified in the application, being the date specified in accordance with Rule 10.6, until whichever is the earlier of:

the end of the relevant indemnity period; or

the date on which the firm obtains qualifying insurance outside the ARP; or

the date when the firm ceases to be an eligible firm.

Commentary:

An eligible firm which should have applied to the ARP before the start of an indemnity period but fails to do so will have breached these Rules by failing to take out a policy from the start of that indemnity period. It may make a later application, but will be liable to pay the ARP default premium for the indemnity period in question. Each principal in an eligible firm which fails to make an application in time commits a disciplinary offence.

Any firm in the ARP, and any person who is a principal of that firm, is liable to pay to the ARP manager the ARP premium in respect of that firm within thirty days of such premium being notified to it by the ARP manager.

Commentary:

It is a disciplinary offence for a firm and for any principal of that firm to fail to pay the ARP premium (including the ARP run-off premium) to the ARP manager within the required 30 day period. A firm may enter into arrangements with, for example, a premium funding company (whether offered by the ARP manager or arranged independently) to enable it to make payments by instalments, provided that the premium is received in full by the ARP manager from the premium funding company within the required 30 day period.

Special measures

An eligible firm that has applied to enter the ARP in accordance with the procedure set out in Rule 10 will be issued with an ARP policy by the ARP manager.

Commentary:

A copy of the standard-form ARP policy is available on the website of the SRA at www.sra.org.uk and is also available from the SRA. Contact details appear at the end of the introductory commentary.

A firm in the ARP must if and to the extent required by the Council submit to investigation and monitoring by the Society and/or its agents, including investigation and monitoring:

to determine the reasons why qualifying insurance outside the ARP was not obtained;

to ascertain what special measures should be taken by the firm.

The Society's costs and expenses of the investigation and monitoring and the Society's costs and expenses of ascertaining what special measures should be taken and of monitoring them shall be met by the firm and by any person who is a principal of that firm. The amount of such costs and expenses shall be determined by the Society which shall not be required to give any detailed breakdown thereof.

Time in the ARP

Notwithstanding the provisions of any other Rule, no firm may remain in the ARP beyond 30 September 2013, regardless of the date on which the firm entered the ARP, except in respect of an ARP policy under which the period of run-off cover pursuant to clauses 5.1 and 5.2 of the ARP policy commences on or before 1 October 2013 or an ARP run-off policy which incepts on or before 30 September 2013.

A firm may leave the ARP at any time after it has satisfied the ARP manager that the firm has obtained qualifying insurance outside the ARP at least until the expiry of the relevant indemnity period.

Commentary:

Refer to Appendix 2 to determine whether any return premium will be payable on leaving the ARP.

Subject to Rule 12.7, a firm may only remain in the ARP so long as it is an eligible firm, or if it becomes a run-off firm.

Commentary:

A firm cannot remain insured through the ARP for more than 6 months in any four consecutive indemnity periods (unless it satisfies one of the exceptions to this requirement in the definition of "eligible firm"), and should therefore seek insurance in the open market with a qualifying insurer as soon as practicable. A firm which is no longer an eligible firm (because, for example, it has already been insured through the ARP for 24 months in the last four indemnity periods) must either obtain qualifying insurance on the open market or cease carrying on practice.

Subject to Rule 12.7(b), a firm in policy default at the end of an indemnity period shall be deemed to be a firm in default for the purposes of Part 4 of these Rules and shall not be an eligible firm. This Rule shall not apply in any case where the Council is satisfied that there exists a genuine dispute between the firm and a qualifying insurer or the ARP manager which makes it unreasonable for the firm to be deemed to be a firm in default pending the resolution of that dispute.

Commentary:

A firm in policy default must remedy that default before the start of an indemnity period if it wishes to obtain insurance through the ARP at any time during that indemnity period. Alternatively, it must either obtain qualifying insurance in the open market, or cease carrying on practice. If a firm believes that there is a genuine dispute which justifies that firm not being deemed to be a firm in default, it should apply to the SRA as soon as possible before the start of the next indemnity period. Contact details appear at the end of the introductory commentary.

A firm that is no longer an eligible firm must either have qualifying insurance outside the ARP or forthwith cease carrying on practice.

The Council may in its absolute discretion treat a successor firm or successor firms (or any of them) and the firm from which such successor firm or successor firms were derived as being a single firm for the purposes of determining whether the successor firm or successor firms or any of them are or remain an eligible firm.

Commentary:

The purpose of this Rule is to ensure that the time limit on participation in the ARP cannot be avoided by a merger or reconstitution of that firm. A firm which was not previously eligible to join the ARP will not necessarily become an eligible firm by virtue of changes in the composition of a firm. Firms which are unsure about their eligibility following any such change should consult the SRA. Contact details appear at the end of the introductory commentary.

Subject to a firm not being admitted into, remaining in or re-entering the ARP in respect of any indemnity period commencing after 30 September 2013 (except to permit a firm with an ARP policy which, on or before 1 October 2013, enters the period of run-off cover stipulated by clauses 5.1 and 5.2 of the ARP policy or a firm with an ARP run-off policy as at 30 September 2013, in each case, to continue to receive the run-off cover provided by such policy), the Council shall have power in any particular case or cases:

to allow a firm to remain in or to re-enter the ARP after any date when the firm would otherwise cease to be an eligible firm; and

to permit a firm to be admitted into or remain in or to re-enter the ARP notwithstanding that the firm is in policy default on such terms and conditions as the Council may prescribe including the taking of steps by the firm by a specified date or dates to remedy the policy default;

and when such power is exercised the firm shall continue to be an eligible firm for so long as the Council may from time to time permit and provided that it complies with any such terms and conditions.

Commentary:

It is envisaged that these powers would be exercised only in exceptional circumstances. Any application seeking the exercise of this power should be made to the SRA at least three months before the firm in question would otherwise cease to be an eligible firm.

Rule 13: Power to collect contribution from firms

13.1

Every firm and/or principal shall make contributions in such amounts, at such times and in such circumstances, as may be prescribed from time to time by the SRA in respect of the ARP, the cost of funding all or any part of the ARP or funding or providing any contribution, consideration, payment, undertaking, reimbursement, guarantee, surety or security in respect of the ARP, in each case, that the SRA agrees or determines is to be contributed or made available on behalf of firms and/or principals to or in consideration for participatingqualifying insurers agreeing to underwrite the liabilities of the ARP in respect of the indemnity period commencing on 1 October 2012.

13.2

Any unpaid contribution under Rule 13.1 may be recovered as a debt due to the Society. The SRA may recover any unpaid contribution from a licensed body, and may require licensed bodies to make such further contributions as the SRA considers necessary in respect of the ARP, the cost of funding all or any part of the ARP or funding or providing any contribution, consideration, payment, undertaking, reimbursement, guarantee, surety or security in respect of the ARP, in each case, that the SRA agrees or determines is to be contributed or made available to or in consideration for participatingqualifying insurers agreeing to underwrite the liabilities of the ARP in respect of the indemnity period commencing on 1 October 2012.

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