The Solicitors Regulation Authority (SRA) issued a number of consultations into the future regulation of solicitors.
The consultations propose a series of changes to the requirements for professional indemnity insurance, the compensation arrangements, the external accountant's report and regulation of multi-disciplinary practices. We are broadly against the proposed changes, which would weaken the protection offered to clients of solicitors, including lenders.
Professional indemnity insurance
We strongly disagree with the proposed changes to minimum compulsory professional indemnity insurance (PII) cover as each of the changes would significantly weaken the regulatory protection offered to users of legal services regulated by the SRA. Ensuring that financial compensation is available to clients is a key pillar of regulation, and this should be in place irrespective of the type of client. Lenders, as repeat users of legal services have significant exposure to malpractice.
The ‘claims made’ nature of PII means that it is the policy in place when the claim comes in which would pay out. This means that although time-consuming, lenders could check what PII cover is in place at a point in time, but could not be assured that the same level of cover would be in place if a claim was to be made. Ensuring an appropriate minimum level of insurance has always been, and we believe, should continue to be, a function for the regulator.
BSA response to professional indemnity insurance consultation
We strongly disagree with the proposal to introduce an eligibility criteria for the SRA Compensation Fund. The compensation fund is a fund of last resort, and if a client is making a claim that would indicate that something has gone seriously wrong with the firm and its regulation. Clients of solicitors, including mortgage lenders, trust in the regulatory and oversight structure provided by the SRA and if there has been serious wrongdoing it is appropriate that they can go to the Compensation Fund to reinstate their losses.
BSA response to compensation fund changes
The current high levels of qualified accountants’ reports received by the SRA, as well as the upcoming review into client accounts rules make this a particularly inappropriate time to remove the requirement for the accountant’s report. We believe that the external oversight of client accounts provided by the accountant is vital in deterring and detecting fraud.
BSA response to changes to reporting accountant requirements
We are broadly supportive of the proposals in this consultation, however we do believe that there should be a nominated lead regulator who would be responsible for the prevention of fraud and money laundering.
BSA response to multi-disciplinary practices