Solicitors Regulation Authority Roadshow

I attended a Law Society roadshow on 16 April, which was an eye opener about the SRA's approach to regulation. There are a number of consultation documents in the pipeline, and the SRA was using the roadshows to update the profession on the latest issues. The meeting was attended predominantly by small law firms.

Among other things, we heard about the Practise Standards Unit (PSU) and how it has visited half the profession, and intends to visit the remaining 5,000 law firms in the next couple of years. We were informed about some typical breaches that the PSU uncovers, such as charging clients general disbursement of, say £25, which is a breach of the accounts rules (one is hence guilty of making a secret profit) if in fact only £9 were incurred on the file in bank charges, and no specific records were kept of any other disbursements on that client's file. It was not acceptable in such situations to charge £25 for general disbursements. Instead our hourly rates should take care of such overheads. Disbursements are to be reserved for actual expenses that are incurred and recorded on a client's matter. Well now we know. However, judging by the restrained questions (after all we had just been told this was a breach), many solicitors in the room did not already know this.

At the end of the presentations, there were a few murmurs from the floor to the effect that the SRA would regulate many of us out of business altogether with its PSU visits, and overly prescriptive approach. To me this example about general disbursements says it all about the SRA. If the SRA can be so petty as to concern itself with trifling sums, at a time when it is supposedly adopting a light touch, risk based approach, then what hope does it offer as an effective regulator? I am not surprised so many practitioners are planning to cease practising as solicitors in future. Surely, there should be some sort of de minimis figure, to justify the time and expense involved for the SRA to police such rules, not to speak of the time and expense of solicitors who are trying to make a livelihood having to get to grips with all these trivialities. Someone pointed out that banks do not face the burdensome and overly regulated approach that solicitors operate under even though they make far more money than solicitors do, and hold much larger amounts of client funds.
I was amused by the way in which the SRA announced its plans to endorse the practising certificates of sole practitioners to record that they are entitled to practise as sole practitioners. This was announced in a most apologetic manner, suggestive of many a discussion held behind closed doors when disgruntled sole practitioners on the SRA had no doubt objected to these plans. Yet all the time I was wondering why this archaic approach towards how many solicitors are involved in the running of a practise? Does it really matter whether a practise is run by a sole practitioner or by two or three solicitors? A bad egg in even the largest of law firms can do a lot of damage. If statistically most serious breaches of the accounts rules involving the compensation fund are caused by sole practitioners, then surely the approach should be to look at the types of sole practice that such breaches emanate from, rather than to conclude that sole practitioners as a whole present a disporportionate risk to the profession. Size is surely just one issue among many. I would guess that any inefficiently run business will pose more of a risk than whether the practise is owned by a sole practitioner or by several practitioners. So, I wonder what sort of people are running the SRA, and whether the legal profession can do anything to have a more business minded regulator in charge at a critical time like this?