When will the firing pistol finally go off for the new breed of legal practice? As businesses and lawyers await the granting of the first licences, the profession’s regulators have fired several false starts.
Initially the Solicitors Regulation Authority (SRA) suggested that the names of those to be in the vanguard of the revolution would be unveiled in February. Then it was the beginning of March. Now the official word is “some time within the next few weeks”.
The delays have triggered a flood of criticism. The main charge is that the SRA did not anticipate the rush for licences (there have been about 150 first-round applications). Alternative business structure (ABS) applicants are so dismayed about the delay, and with what some see as a lack transparency in the approval process, that they are openly calling for the Legal Services Board (LSB) to intervene, either by approving competitor regulators or possibly by taking over frontline regulation of this aspect of the profession.
“It has been massively frustrating,” says Tim Oliver, chief executive of the Parabis Group, which includes the firms Plexus Law and Cogent Law. “The SRA has been utterly unprepared. It has had five years to sort itself out for this day — it should have been licensing from last October, which is what it originally said it would do — and we are now in March and there is no news of the first applications being approved.”
Parabis applied for ABS status on January 3 — a day after the SRA was officially accepting bids — to become a practice offering multidisciplinary services as well as having external investment. The process is not cheap. The flat application fee is £2,000, plus £150 each for all people the SRA stipulates has to be put through a suitability test.
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Parabis is far from the only critic among the waiting applicants. David Simon, the managing partner of Robin Simon, the niche insurance law firm, says the SRA’s direct communication has “been good”, but the stage two application process “has been fairly impenetrable and overly extensive”.
It “doesn’t appear to be designed with existing legal practices in mind”, he says. “A number of us in the solicitors’ profession have looked to ABS as a way of enhancing relevant services by looking to offer multidisciplinary opportunities. This approach is more evolutionary than revolutionary but the [application] process appears to be geared to new entrants and organisations looking to bring in external capital.”
Perhaps most controversial are calls for the creation of competing regulators. Some applicants point out that for those groups aiming for full-service ABS status, there is only one game in town — SRA approval.
“The LSB needs to authorise a competitor regulator,” Oliver says. “The SRA is going to come into line only if there is some competitive tension around whom prospective ABSs chose to be their regulator.” The Bar Standards Board is not licensed to regulate litigation ABSs and the Council of Licensed Conveyancers has a very narrow remit. Indeed, Oliver goes further: “What should have happened, and what should happen now, is that the LSB itself should be an approved regulator and authoriser of ABSs.”
While sources suggest that the board — the semi-detached, umbrella legal profession regulator — is concerned about the delay to ABS approvals, it remains officially noncommittal.
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A spokesman says that the LSB has been in close contact with the SRA “to understand their experience of the first applications. The only situation in which the LSB could be approached as a direct licensor is when the all licensing authorities — including the SRA — do not make provision for the type of firm applying. We will continue to monitor closely how the licensing process, and the operation of the wider ABS regime, is working in practice”.
The Law Society is also understood to have reservations about the efficiency with which the SRA is processing applications. But officially, it too, is being guarded. Russell Wallman, the society’s director of government relations, says: “It’s important there is no unnecessary delay in dealing with applications. But it’s also essential that the SRA is thorough and robust in licensing ABSs rather than make the process a rubber-stamp process. This should not be about speed, it must be about ensuring ABSs operate in a way that is compatible with the regulator’s objectives.”
The SRA is robust in its own defence. Leading the 13-strong, full-time team conducting approvals is Ann Morgan, who says the authority is dealing with applications quickly and appropriately. She places the blame for any delay on the shoulders of some applicants. “Firms are often not completing the application forms properly and in full,” she says. “Some basic information regarding financial information and the suitability test is not being completed properly. And that causes delays.”
It seems unlikely that the announcement of the first licences will be made much before the first of April.The profession will be hoping that the process won’t have made fools of all involved.