The Legal Services Board has opened a consultation on extending the SRA’s Compensation Fund for ABS firms after 31 December 2012. The intention of the consultation document is to ensure that there are adequate compensation arrangements for ABS firms that are regulated by the SRA after the end of the year.
Also included in the consultation paper is a draft Order published in accordance with section 70 of the Legal Services Act 1997.
The SRA has powers to run a compensation scheme under the Solicitors Act 1974 for sole practitioner solicitors and recognised bodies. The compensation fund was extended to cover ABS firms in an Order under section 69 of the Legal Services Act 2007. However, a ‘sunset’ clause was included in the Order meaning that the relevant clauses would expire on 31 December 2012 and the compensation scheme would no longer be able to be extended to cover ABS firms. The SRA consented to this time limited extension.
The ‘sunset’ clause was included because the SRA was due to undertake a comprehensive review of the compensation fund. However, this has been delayed so that evidence can be gathered on the types and scales of claims that ABS firms would be likely to cause.
Two options have been considered. The first is to extend the time period of the ‘sunset’ clause to allow the SRA to complete its review. The second is to remove the ‘sunset’ clause and make the change permanent. The second option is preferred.
The consultation paper and draft Order can be found here.
The consultation will close at 5pm on 13 July 2012.
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