Plant: unstable or risky firms should not be propped up
The Solicitors Regulation Authority (SRA) today announced a major crackdown on law firms in the assigned risks pool (ARP), with firms unable to exit the pool at the end of their term or to pay their premiums likely to be closed down.
SRA board chairman Charles Plant said that while it is right that firms experiencing difficulty in obtaining insurance should be given some assistance to do so, “it is wrong that firms which are financially unstable or pose a significant risk should be propped up”.
There are 259 firms currently in the ARP, and we reported in April that they had between them paid just £1.7 million of the £7.5 million in premiums that were due from them. Premiums in the pool are set at punitive levels.
In a move that insurers have been seeking for some time, Mr Plant unveiled a five-point enforcement plan at today’s SRA board meeting:
- Before the end of July, all firms in the ARP which are reaching the end of their two-year term will be contacted to ensure that there are robust plans in place for them to leave the ARP by October – either through obtaining insurance “or through orderly wind-down”;
- Before the end of July, other firms in the ARP which have not paid their ARP premiums will be contacted and told they must pay promptly. “Firms which fail to do so will face regulatory sanctions, and/or will face court action, and/or will be declared ineligible for any further term in the ARP and closed down”;
- In August and September, regulatory action will be pursued in relation to these matters, so that by October as many firms as possible – “particularly high-risk firms and those failing to pay their premiums” – will have been managed out of the ARP;
- By October, any firms whose position has not been resolved by these processes will face the “immediate likelihood of intervention to close them down”; and
- Firms newly entering the ARP in October will be treated in the same way.
Mr Plant indicated that the Law Society has provided extra money so that the SRA can increase its capacity for forensic inspection by employing outsourced expertise. Earlier this month, Law Society chief executive Des Hudson told Legal Futures that a year ago he offered the SRA extra resources to deal with firms in the ARP.
WHY HAS IT TAKEN THE SRA SO LONG TO ADDRESS THIS ISSUE ?
& WHY IS THE PROFESSION BEING ASKED TO UNDERWRITE THE CONSUMER INTEREST?
THAT IS THE TAXPAPER’S RESPONSIBILITY IS IT NOT?
WHAT IS THE PROBLEM WITH ALLOWING FAILING FIRMS TO GO OUT OF BUSINESS ? THEIR CLIENTS WOULD BE MUCH BETTER OFF WITH A RESPONSIBLE FIRM.