SRA Handbook Review Juliet Oliver, General Counsel Chris Handford, Director of Regulatory Policy

Objectives Share our early thinking on regulatory reform and the Handbook Get your feedback on our early thinking Why a new approach In 2014 we set out our intention to begin a programme of work in 2015 to review our regulatory arrangements as currently set out in the Handbook This marks a significant next step in our ongoing programme of reform – which is designed to ensure that our regulation: Reflects the realities of a rapidly changing legal market, and Delivers our core regulatory purpose of protecting those consumers that need supporting, and supporting the operation of the rule of law and the proper administration of justice We will be publishing a short paper in early November, setting out (at a high level) Details of the shape and organisation of the review The rationale, and objectives of, the review Some of the issues with the current arrangements (and format of the Handbook) Early thinking about how we may develop our approach to regulation and our regulatory arrangements We want to engage with the widest possible audience in advance of a formal consultation in Spring 2016. This session today forms part of that engagement, and welcome your views. (Ask for feedback at the end of the session here?)

Why change? We need to ensure our regulation remains relevant in the changing legal market We need to address the realities of Changing solicitor and firm behaviour Consumer purchasing choices that are already driving and responding to the changing market We want to make it easier for solicitors and firms to focus on their customers and business by ensuring regulation is proportionate This is the logical next step in our programme of regulatory reform. The legal services market, and consumer purchasing behaviour within it, is evolving at a previously unseen rate.   We need to ensure that our regulation remains relevant in that changing legal market We need to address the realities of changing solicitor and firm behaviour – solicitors are providing services within businesses other than traditional solicitors firms. For example, many solicitors practice in regulated firms that combine different types of regulated lawyers. Others work in businesses regulated by other legal services regulators (eg...) and beyond this (eg FCA and accountancy regulators) We are also seeing changing service delivery models. For example: A growth in the provision of online services And legal process outsourcing (in various forms) The provision of qualified lawyers on a short term basis to assist in house teams or carry out a specific legal task for a commercial consumer Subscription services Unbundled legal services. Consumer behaviour is also changing – across the market we are seeing consumers buying services from a wide range of different providers (eg...) We want to make it easier for solicitors and firms to focus on their customers and business by ensuring regulation is proportionate. Reviewing the Handbook is the logical next step in our programme of regulatory reform.

Our regulatory framework In recent years we have made a number of changes to provide greater flexibility for solicitors and firms We now need to go further There are a number of problems with the current SRA Handbook – Restrictive and focused on legal structure Remains overly detailed and prescriptive Large, complex and wide in scope and applicability Operates on a ‘one size fits all’ basis We need to adopt a new approach. We have made significant changes to our regulatory arrangements to provide greater flexibility for solicitors and firms to deliver the services their consumers (and potential consumers) need (and to maximise competitiveness).   Examples include the recent reforms to SBR (explain), and the removal of obstacles to the formation of MDPs (description). We now need to go further. To give a few examples: Most in house lawyers may not currently deliver any legal services to the public A number of restrictions go further than those required by legislation, with negative consequences for consumers and businesses alike Solicitors are not free to participate in the wider legal services market Consumers' access to solicitors is fettered Not only is our regulation impeding innovation in the legal market, solicitors are not competing on a level playing field. We want to remedy that. In order to reform our regulatory arrangements, we need to look again at the SRA Handbook. There are a number of problems with the current Handbook: the Handbook reflects to an extent the position prior to 2007 (explain) it does not reflect reality - the SRA is regulating more widely than solicitor (explain) it is large, complex and wide in scope and applicability fails to reflect the current variety of legal practice and to permit innovation contains a number of elements that were not reviewed for the 2011 launch operates on a one size fits all basis aims to be a one stop shop for all the rules (expand on all of these!) On top of this, the Handbook may over regulate in some areas and under regulate in others: over regulates in some areas because of the one size fits all model, may also under regulate in other areas of high risk, for example where life or liberty are under risk, distinct preventive requirements may be appropriate. Our review will be a move away from the traditional response to write ever more rules for every situation, for every group of solicitors, and for each form of practice. It is exactly that approach that we want to change. With that model, the regulator is always playing catch up, always behind the market, and always in the way of innovation. We want to get out of the way.

Our early thinking We have been developing our thinking over the past 12 months. We have developed a model for discussion. Under this model: All solicitors are subject to a set of professional principles and a Code of Conduct at all times Solicitors will be freed up to provide non-reserved legal services across the whole of the legal services market They will remain subject to the code wherever they work. There will be clarity between individual regulation and entity regulation, which will be separated and streamlined. Our current thinking takes as its starting point the five professional principles in the Act. We propose that all solicitors are subject to five professional principles and an individual Code of Conduct at all times.   If delivering reserved legal activities and related activities to the public or a section of the public, solicitors must do so through an authorised entity. Individual solicitors may deliver other, non-reserved legal services to the public or a section of the public by practising in an unauthorised entity, but if they do, they: cannot held client money under SRA Authority have no - or restricted access to the SRA Compensation Fund are subject to the complaints handling and Ombudsman obligations in the code of conduct. An entity may be authorised by the SRA to deliver reserved legal activities, but is not required to deliver one or more reserved legal activities. Any entity authorised by the SRA (delivering reserved or non-reserved services) must have appropriate indemnity insurance may hold client money under SRA authorisation and will have obligations under SRA compensation arrangements.

Tackling the problem Delivers greater flexibility for solicitors and firms Increases the availability of solicitors to consumers An individual Code that focuses clearly on ethics and competence Entity regulation that focuses on systems and controls Supported by SRA resources (eg guidance and toolkits) Our approach will retain the framework of, and build on, the existing legislative foundations including solicitor title and reserved activities.   It will be important to get the balance right between entity and individual regulation, and to focus on the appropriate requirements for different types of bodies depending on the level of risk they pose. There will be some degree of segmentation to reflect the different obligations on individuals and entities. individual base regulation is based on competence, ethics, values and behaviours, and is delivered through a code of conduct together with competence requirements (training and qualifications) there will be a short set of rules that apply to the entity, focused around appropriate business level protections, systems and controls. regulatory arrangements will be targeted, proportionate, accessible and flexible. Taking primary legislation as a starting point, entity regulation will apply to two groups those who deliver reserved legal activities to the public and must be regulated those who may not deliver reserved legal activities to the public but wish to be regulated by the SRA because of the benefits that this brings. We are aiming for simplification not complication, and will ensure that any guidance is clear, targeted and acts to reduce, not increase the regulatory burden.

Get involved...... We want to hear your views: What would you like to see changed? What would you like to keep? You can get involved through dedicated area of SRA website engagement events webinars Formal consultation in Spring 2016 Reform will not be implemented before April 2017