‘Disruptive’ SRA doesn’t understand profession, say Joint V law societies

The Solicitors Regulation Authority has been told it will add a whole new level of risk if it engages a third-party provider to hold client money.

In a highly critical collective response to the SRA’s consultation on consumer protection, the Joint V law societies – Birmingham, Bristol, Leeds, Liverpool and Manchester – said the plan to stop solicitors holding client money was ‘disproportionate and poorly justified’.

The group, which represents the interests of 15,000 legal professionals, said the SRA risks undermining trust in the legal profession by making changes based on isolated high-profile cases such as Axiom Ince,

While the vast majority of the legal profession acts ethically and complies with existing regulation, the societies said the addition of a single third-party managed account (TPMA) creates new risks over cybersecurity while limiting competition and choice.

‘The SRA has not adequately explained why it considers client money held to a solicitor’s instruction in a TPMA would be safer than client money held in a separate client account,’ said the response. ‘Removal of client funds to TPMA merely pushes responsibility of failure of a TPMA to the FCA rather than the SRA. It gives no greater protection to consumers which is the SRAs entire purpose.’

The societies added that the reforms would also lead to job losses in law firms’ finance teams and increase costs to clients.

The SRA had suggested in its proposals that firm were incentivised to retain funds in the client account to generate interest. The societies said this idea was ‘misconceived and demonstrates a lack of understanding of the profession. It was also pointed out that firms also incur costs and administrative burdens from maintaining client accounts.

The response added: ‘The Joint V Law Societies urge the SRA to refocus its approach to the consumer protection review. Instead of implementing disruptive, knee-jerk reforms, the SRA should focus on targeted improvements to its own processes and enforcement of existing rules. By working collaboratively with the profession, the SRA can achieve its objectives while maintaining public confidence in the legal sector and ensuring access to justice.’

The consultation closes next Friday.