Firm Ownership structure “irrelevant” when assessing financial failure risk
When it comes to assessing a law firm’s risk of financial failure, the ownership structure is “completely irrelevant”.
This is according to the director of the Solicitors Regulation Authority, Crispin Passmore, who spoke at yesterday’s Westminster Legal Policy Forum. The regulator’s executive director for policy stated that regardless of the business framework, whether it’s listed on the stock exchange or is an alternative business structure (ABS), one is no more likely to be seeking profit than another.
He stated: “It doesn’t really matter whether the profit-seeking is done by a partner, LLP owners or someone on the stock market – we have to accept businesses will fail and that is the nature of innovation.”
When asked what amendment he would make to the current framework, Passmore stated that he would introduce changes to eradicate the ‘unevenness’ of the current framework, which requires the regulator to treat ABS’ differently.
Passmore also commented on the existing professional indemnity rules imposed by the SRA, describing the ‘one-size fits all approach’ as ‘not making any sense’.
He stated that ‘regulators should not be imposing unnecessary costs’, taking the view that if premiums were lowered, firms would be able to channel more investment into improving services.