Exclusive: SRA rejects LSB call for review of separate business rule

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Townsend: rule has not been a significant stumbling block to innovation

The Solicitors Regulation Authority (SRA) has rejected a demand by the Legal Services Board (LSB) that it start a review of the separate business rule, saying it can see “very little public interest justification” for doing so.

The rule prevents both traditional law firms and alternative business structures from separating out non-reserved legal work into unregulated businesses, and, according to the SRA, its purpose is to prevent law firms and solicitors from seeking to avoid regulation, and to provide clarity and simplicity to consumers of legal services.

However, the LSB has continually questioned its existence and as we reported on Monday, has written to the SRA to ask it to make good on a previous pledge to review the rule.

But SRA chief executive Antony Townsend told Legal Futures that the review is not in the SRA’s work programme for 2013 and no resources are available to undertake it.

He continued: “Indeed, were we to devote limited resources to a review at this stage we would, in our assessment, be failing to discharge our duty to set priorities on a risk basis in accordance with the public interest.

“We have made it clear that one of the main drivers for the need to maintain the rule is the narrow foundation of the reserved legal activities maintained by the Legal Services Act. This, combined with our overall regulatory remit for solicitors and the need to ensure as far and as simply as possible that consumers can be clear about the regulatory protections, makes it important that we continue to protect consumers from attempts to evade regulatory protections.

“The existence of the rule has not, in our experience, been a significant stumbling block to innovation, and we have the power to waive aspects of the rule where that is justified in the public interest. As circumstances change we will keep the matter under review, but it is not currently a priority.”

An LSB spokesman said: “Our position remains as set out in our decision notice and the letter referenced in your article. In the meantime we will continue to discuss evidence on the issue with the SRA.”