The Legal Profession: Is Client Protection About to be Put at Risk?

New Rules for Legal Services.

Historically, solicitors have been restricted to providing legal services through regulated businesses. This has proven to be a valuable safeguard for both clients and solicitors.

Under this system, a solicitor’s conduct is governed by extensive SRA (Solicitors Regulation Authority) rules, thus providing increased client protection and imposing a high standard of services. Henceforth, following the Legal Services Board’s approval, the SRA is proceeding with its proposal to allow freelance solicitors to carry out their services outside of the protections of a regulated firm.

What do the SRA Changes Mean for Freelance Solicitors and Fully Regulated Legal Firms?

In essence, solicitors will be able to charge for legal services through any business outside the scope of SRA regulation. This means any solicitor can now work for an unregulated firm, delivering both reserved and non-reserved services.

Understandably, this has been a somewhat controversial decision! In defence of their decision to implement this change, the SRA have stated the basis of their reasoning.

Firstly, the potential cost-saving benefits for clients. And secondly, increased flexibility for not only the freelance solicitors but also for their clients. From the SRA’s perspective, there is a real need for such a drastic change in practising rights.

The SRA has deemed it disproportionate for sole solicitors to be governed by the same regulatory model as a firm employing tens, or even hundreds. The existing regulatory framework is likely to increase the solicitor’s costs, which in turn will generate an increase in a client’s costs.

Overview and General Concern

Although the general consensus is to welcome improvements in accessibility and modernisation of the regulations governed by the SRA, the move to allow solicitors to work on a freelance basis raises significant concerns.

First and foremost, will it result in inadequate protection for clients? The lack of protection for clients begs the question; how many clients will be willing to take up the services of freelance solicitors?

Insured Legal Services

Despite the inclusion of safeguards;

• solicitors must have been practising for at least three years
• solicitors will also need to obtain ‘adequate and appropriate’ professional indemnity insurance

Key concerns remain.

Amongst legal professionals there is general disquiet surrounding the various risks associated with freelance solicitors working outside a regulated firm. Of particular concern, the new proposal does not require freelance solicitors to meet the minimum levels of insurance cover required by regulated firms.

Nor does it require freelance solicitors to comply with the minimum terms and conditions imposed by the SRA. By comparison, regulated firms must stringently abide by these. This has profound implications for the legal industry and client confidence.

Freelance solicitors will henceforth not be covered by the minimum terms and conditions of professional indemnity insurance. This is something they are duty bound to explain to potential clients. The worry here is the extent to which clients are made fully aware of the limited protection they will receive, compared to solicitors at regulated firms. And whether clients will see past the appealing fees and fully appreciate the potential risks involved.

What Legal Professionals Think

Aside from legal professionals, various legal bodies have also expressed their apprehension towards the new proposal.

The Legal Ombudsman has raised concerns that clients will be left without redress from solicitors working outside of regulated firms. The Law Society has stated that clients should not be forced to verify the regulatory arrangements of their solicitor before deciding to instruct them.

Furthermore, the Society has expressed its sincere concerns as to the impact that this proposal will have on not only clients but also the profession in general.

In this regard, the Legal Services Consumer Panel (LSCP) have issued a warning that if the proposal to permit solicitors to practice on a freelance basis proceeds, there will be increased confusion among consumers. This is primarily in respect to the varying levels of protection offered by regulated and non-regulated solicitors.

The LSCP have subsequently called for freelance solicitors to operate under the same transparency requirements under CMA recommendation as sole solicitors regulated by the SRA. Similar levels of protection are required for self-employed solicitors delivering unregulated services, as are for solicitors working in unregulated firms.

Our Advice on the New SRA Proposals

Whilst the changes have greatly opened up the market for solicitors, there is undoubtedly a great deal of apprehension. There is a general worry that the quality of service imposed by SRA regulations may diminish for freelance solicitors working outside the remit of SRA regulations. Sadly it is becoming ever more apparent that the terminology of solicitor is becoming diluted.

It is clear that the high standards imposed within regulated firms has been lowered for freelance solicitors, with the risk that client care and protection will diminish and be gravely overlooked.

By comparison, it is generally acknowledged that most people are more likely to use ABTA protected travel agents because they want to reduce any monetary risks. The same principle can be applied here. Why would you instruct a freelance solicitor with minimal insurance protection, compared to a solicitor at a regulated firm offering greater client protection? As it is too early to determine the range of benefits and risks, the profession remains increasingly uncertain as to the impact of such a drastic change.

RLK Birmingham Solicitors: Insured, Regulated, Qualified and Professional Solicitors

It however remains clear that the best protection for clients will undoubtedly remain with regulated law firms. At Rubric Lois King ‘Insured’ and ‘Regulated’ are fundamental core principles. We would like to reassure clients that full compliance with SRA regulations, including full indemnity insurance protection, is standard. We guarantee consistent, qualified and professional legal services at all times.