As a practice regulated by the SRA, you may have shopped around from time to time to see how your compliance obligations compare with those of other regulators, such as the Council for Licensed Conveyancers (CLC). However, a quick check of the minimum terms and conditions (MTCs) is probably enough to stop you going any further, once you realise that any practice wishing to switch is treated as though it were ceasing to practise. Six years of run-off cover is automatically triggered, typically costing three times the annual professional indemnity insurance (PII) premium. Suddenly, any benefits of switching seem rather less attractive.
The SRA have asked whether this is really in the interest of the consumer. Can it be in the public interest if practices are locked into a relationship with their regulator because the cost of changing is too prohibitive?
Following recent consultation, in which the SRA proposed changes to their PII requirements for firms wishing to leave SRA regulation, the SRA has published its response document 'Removing barriers to switching regulators'.
Opinions were sought from other regulatory bodies, law practices and consumer groups. All parties highlighted the need for:
- A clean break between regulators;
- Clarity of where responsibility lies; and
- The promotion of competition between providers of regulatory services.
As a result, the SRA is changing its MTCs from 1 October 2017, so that run-off cover will no longer be automatically triggered at the point of changing approved regulator. Instead, the new regulator will become responsible for ensuring that adequate indemnity insurance is in place for future claims.
This is good news for both legal practices and regulators alike. There will be no more duplication of cover and the regulatory burden will be much reduced. No longer will regulators be required to monitor practices who are covered by another’s regime.
So now what? Who are the alternatives to the SRA?
Over the next few weeks we will compare and contrast the different legal regulators, so keep an eye on our website for further comment.
We have started by comparing the SRA’s Accounts Rules to the CLC’s Accounts Code.