SRA launches review of Solicitors’ Compensation Fund
The SRA has launched a comprehensive two-year review of solicitors’ compensation arrangements.
The review will inform future policy decisions. Currently all firms who hold client money contribute to the Compensation Fund.
The purpose of the Fund is to replace money that a client has entrusted to a solicitor in his professional capacity, where the solicitor has either misappropriated or has otherwise failed to account for such money.
The review is intended to ensure customers are offered the best possible protection.
It is worth nothing that the SRA’s powers to make compensation arrangements derive from Acts of Parliament, which may need to be amended before any changes can be implemented.
The SRA will consider whether compensation is an essential part of protecting clients as well as considering what limits should be around that compensation.
Also to be considered will be whether different arrangements are needed for different types of legal services providers as well as whether the calculation of contributions to the current Compensation Fund is appropriate.
This work includes reviewing the impact of the introduction of alternative business structures.
The first stage of this review is already underway and will include:
i) analysis of the current compensation arrangements
ii) analysis of the compensation arrangements made by other professions and by legal services regulators in other parts of the world
iii) review of the current thinking about compensation arrangements
iv) search for innovative ideas about how compensation arrangements could look like in the future
In spring 2013 the research phase will commence and run for about a year.
During this period data will be collect to provide evidence for subsequent policy recommendations.
The data will include numerical data (for example, statistics, risk assessment, financial modelling and market analysis) and information about stakeholders’ experiences of the current compensation arrangements obtained using questionnaires and interviews.
The data will be used to identify what is good and bad about the current compensation arrangements, to identify potential alternative approaches and assess their feasibility.
Policy recommendations will be made based on these two stages. Depending upon the outcome of the review, there may be a subsequent project to implement any changes to compensation arrangements.
The work of the review will be overseen by an internal Project Board.
The Project Board will report on progress and policy recommendations to the SRA Standards Committee and the SRA Board, as well as to the Legal Services Board.
A formal consultation will take place in the latter part of 2014. Before that point, however, other views can also be put forward by e-mailing the Policy Team at [email protected]