Supervision: risk assessment will lead to monitoring ranging from desk-based to continuous contact
The Solicitors Regulation Authority (SRA) will start pilots for desk-based supervision and risk-based visits to law firms next month as the run-up to the launch of outcomes-focused regulation (OFR) steps up.
Unveiled in a lengthy policy statement on OFR, the pilots will build on the relationship management pilot that is already underway with six law firms.
The policy statement explains that under OFR – which will go live on 6 October 2011 – the SRA is likely to supervise all firms that it regulates on a low, medium or high intensity basis according to a risk assessment. This will range from desk-based supervision to visits to “close and continuous involvement”. The SRA emphasises that the fact it considers that a firm requires higher intensity supervision is not an indication that it has concerns about the firm’s viability or motives.
It explains: “We might take a closer supervisory interest in a large firm that has many vulnerable clients and holds a substantial amount of client money, even if the controls in place in the firm mean that it is well managed.”
Addressing concerns that by moving away detailed rules OFR will remove a “‘protective barrier’ against the actions of a regulator whose approach and response to particular circumstances has not in the past been trusted”, the SRA stresses: “Our future approach will be one where we constructively engage with firms who seek to achieve the necessary outcomes for clients and take responsibility for addressing any weaknesses or failures in approach, or underlying systems or processes.
“We do not aim to ‘catch firms out’ but to ensure that compliance is achieved, risks managed and any weaknesses addressed. The corollary of this is that where firms knowingly or recklessly fail in their responsibilities or show no commitment to achieving compliance, we will take swift and appropriate action to protect individual consumers and the public.”
The policy statement also reveals that the SRA has established a specialist ABS team within the authorisation function to work with those who are interested in applying to become an alternative business structure. Earlier this week it set out what steps firms can take now. The team is also researching possible ABS business and financing models, and their possible risk profiles, “in order to understand the likely impacts of ABS ahead of their formal launch”. The SRA is also developing a consumer affairs function to co-ordinate the authority’s approach to protecting the public.
The statement says that in 2012 the SRA is planning to consolidate its Midlands offices in Redditch and Leamington Spa into a single site to improve efficiency and integration. Legal Futures understands that Baskerville House in central Birmingham, which is also home to the Legal Ombudsman, is on the list of possible sites.
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