In this edition of Risk Focus brought to you by JLT’s Legal Practices Group, Richard Lane of Legal Finance Professionals Ltd explains the requirements of the Solicitors Regulatory Authority’s (SRA) Transparency Rules which will be introduced in December and will impact law firms irrespective of size.
The Transparency Rules will require law firms to publish detailed pricing structure on charges relating to the most common type of work as well as a background profile of managers and fee earners involved.
It will be important that firms not only comply with the Transparency Rules to avoid the risk of regulatory action by the SRA but also carefully consider the potential loss of business which may arise. If firms are not careful to link their pricing structure to the quality of the service provided, there is a risk that potential clients will simply use the published information of several firms to choose the cheapest option without giving a firm the chance to explain what sets them apart from their competition.
We believe that in addition to merely complying with this new regulation, firms that do not have the marketing skills in-house should consider seeking professional assistance as how to effectively present the information on their website in order to attract and retain clients.
We extend our sincere thanks to Richard Lane of Legal Finance Professionals Ltd for contributing the following analysis.
December will see a number of new regulatory changes being introduced by the Solicitors Regulation Authority (SRA) which will impact on all organisations and individual solicitors subject to regulation by the SRA.
Perhaps the most significant of these changes will be the obligation to publish detailed information about a firm’s charges for some of the more common work types they undertake for clients, as well as the qualifications and experience of the managers and fee earners carrying out the work. The provisions governing what must be disclosed are contained within the SRA Transparency Rules which were approved by the Board of the SRA in May 2018 and following approval by the Legal Services Board, will be effective from 6th December 2018.
In December 2016, the Competition and Markets Authority's (CMA) legal services market study, concluded that the absence of sufficient information on price, quality and service hindered consumers' and small businesses' ability to choose the best option for legal support. It recommended that regulators set a new minimum standard for the information published by regulated firms.
In response to the CMA’s findings, the SRA commissioned three external research projects looking at different areas of information transparency in the legal services market. The results of the SRA’s research studies, looking at the needs of both private clients and small businesses, helped the SRA to develop a clearer picture of the benefits of information transparency across the legal services market for all concerned - individual consumers, small businesses, solicitors and law firms themselves.
The SRA’s research revealed how people and small businesses search for and choose their legal services provider, what barriers they face and what information they need to make informed choices. The purpose of the new SRA Transparency Rules is to break down those barriers, thereby ensuring that consumers have the information they need to make an informed choice of legal services provider, including understanding what the costs may be.
Not all work types are covered by the SRA Transparency Rules but, as would be expected, many of the most common legal services provided by regulated law firms and in due course, freelance solicitors, are caught by the new rules. From 6th December 2018, when acting for private individuals, SRA regulated firms undertaking residential conveyancing services, probate work, summary motoring offences defence work, representation at employment tribunals and immigration services will need to publish extensive information about the services they provide. As well as information about the prices they charge, they will also need to publish details of the services they will be providing as well as any services not included in the price that might reasonably be expected to be included. SRA regulated firms will also need to disclose publicly the experience and qualifications of those carrying out the work, as well as giving typical timescales and key stages of each matter.
This information will also be required to be disclosed by SRA regulated firms providing certain services to businesses. The legal services provided to businesses which trigger disclosure include acting for corporate clients on debt recovery matters up to £100,000, defence work before employment tribunals and licensing applications for business premises.
The information required to be disclosed must be published on the firm’s website, in a prominent position and clearly signposted. For those firms without a website, the rules require that the information is provided to members of the public and small businesses upon request.
The SRA Transparency Rules require that the following information about costs must be provided to members of the public:
- the total cost of the service or, where not practicable, the average cost or range of costs;
- the basis of a firm’s charges, including any hourly rates or fixed fees;
- the experience and qualifications of anyone carrying out the work, and of their supervisors;
- a description of, and the cost of, any likely disbursements, and where the actual cost of a disbursement is not known, the average cost or range of costs;
- whether any fees or disbursements attract VAT and if so the amount of VAT they attract;
- details of what services are included in the price displayed, including the key stages of the matter and likely timescales for each stage and details of any services that might reasonably be expected to be included in the price displayed but are not; and
- for firms using conditional fee or damages-based agreements, the circumstances in which clients may have to make any payments themselves for the services of the firm including money deducted from any damages.
- The SRA have published a detailed guidance note on their website with example templates giving helpful suggestions as to the nature of the information which firms will be required to disclose to be compliant with the new SRA Transparency Rules prior to their introduction on 6th December 2018.
Those subject to regulation by the SRA will be required to publish on their website details of its complaints handling procedure, including details about how and when a complaint can be made to the Legal Ombudsman and to the SRA when the SRA Transparency Rules take effect.
The SRA Transparency Rules also require all regulated firms to display the SRA digital badge on their website. This will show that the law firm is regulated by the SRA and will link to information about the protections that SRA regulation brings for clients of SRA regulated firms.
However, it should be noted that it will not be compulsory to display the digital badge until a date to be announced, which is expected to be in Spring 2019. To give firms time to prepare for this, the badge will be available to download from the SRA website from 6th December 2018. The SRA have asked firms to check and amend details of their websites within mySRA, as they will only be able to use the badge if the SRA’s records for their firm are accurate.
About Richard Lane, Director at Legal Finance Professionals Limited
In 2007, Richard Lane established Legal Finance Professionals Limited (www.lfpro.co.uk), a regulatory and compliance training and consultancy company. Richard is a qualified chartered accountant who spent six years in practice with Baker Tilly followed by eleven years working within Forensic Investigations for the SRA. Richard is recognised as an expert on the SRA Accounts Rules, the role of the COLP & COFA and legal regulatory compliance issues in general.
For further information please contact, James Frost, Associate on +44 (0)121 626 7841 or email firstname.lastname@example.org.