3 - Regulation of Firms Flashcards
What does the SRA do?
- Authorises organisations to provide legal services: Reserved legal services, immigration, claims management, regulated financial activities.
- Sets standards for solicitors and enforces those standards.
- Main point of call for disciplinary matters relating to solicitors or firms. Issues warnings, sanctions etc.
What are reserved legal activities?
Section 12, Schedule 2 Legal Services Act 2007:
- Rights of audience: The right to appear before and address a court, inc examining a witness.
- Conduct of litigation.
- Reserved instrument activities, e.g., preparing a transfer or charge relating to land.
- Notarial activities.
- Probate activities.
- Administration of oaths.
What approach does the SRA take to regulation?
The SRA takes a ‘risk-based’ approach to regulating firms. Set out the regulatory framework firms and solicitors must comply with. Encourages firms to set and own their own standards to ensure compliance with the regulations.
Where is the SRA’s regulatory framework set out?
SRA Standards and Regulations 2019. Comprises several documents, including:
- SRA Principles - The fundamental tenants of ethical behaviour.
- Code of Conduct for Solicitors (CCS)
- Code of Conduct for Firms (CCF)
- The SRA Accounts Rules.
Who does responsibility fall on for compliance with SRA regulations?
Responsibility falls on:
- Partners or Members of the LLP Ensuring CCF compliance. Responsibility for breach also falls on these.
- Employees of the firm - Obligations towards best interests of clients, public trust and third parties (courts), colleagues, SRA and other regulators rules.
- The COLP - Ensures compliance with regulatory obligations, recording failures and reporting material failures to SRA.
- The COFA - Ensure compliance with SRA’s Accounts Rules and report serious breaches to SRA.
- Money Laundering Reporting officer (MLRO).
Is the SRA responsible for referrals?
It is responsible for enforcing requirements relating to referral fees. This relates to:
- Third party introductions in exchange for a fee.
- Law firm client referrals to third parties for a fee.
What does the SRA prohibit during referrals?
Prohibits solicitors from referring or receiving referrals in claimant’s claim for damages for personal injury or death in consideration for a referral fee.
What is professional indemnity insurance?
To ensure that firms are able to pay out on any claims from clients or third parties, the SRA requires them to take out professional indemnity insurance.
What are a law firms outgoings?
Major outgoings for a law firm include:
Rent: Often high due to central city locations.
Salaries: Costs increase with more staff.
Insurance: Required by SRA with minimum thresholds.
Marketing: Expenses related to promoting the firm.
Utilities: Costs for essential services.
IT/Equipment: Includes computers, printers, scanners, and other technology.
Technology: Law firms need up-to-date technology to stay efficient and in line with client needs, moving away from a paper-based office.
What methods of billing do law firms use?
Hourly Charging
Conditional Fee Agreements
Fixed Fees
Capped Fees
Insurance
Community Legal Services (CLS)
What is Hourly Charging and how does it work?
Fee earners record time (usually in 6-minute blocks.)
Recorded time is Work in Progress (WIP).
Partner reviews WIP to decide billable time and write-offs.
Time is then billed according to the fee earners’ charge out rates.
Invoicing typically monthly or as agreed.
Golden Rule: Record all time accurately; partners decide on write-offs.
What are Conditional Fee Agreements (CFAs)?
Also known as ‘no win, no fee’ or ‘damages based agreements’.
No fees recovered by lawyers if the case is lost.
Fees recoverable from damages if the case is won.
Capped at a percentage, e.g., 25% for personal injury.
Requires careful consideration and partner input, eg what constitutes a “win” in any given case?
They are common in litigation and mediation cases.
What are Fixed Fees?
The law firm will invoice a client for a fixed amount, regardless of the amount of time spent by fee earners on the transaction.
Invoice raised after completion of the transaction.
Common for services like conveyancing or wills, eg drafting a will for a set fee of £95 plus VAT.
What are Capped Fees?
The law firm will record (and bill) their fees in the normal way, but the fees will not exceed a pre-agreed amount for the particular transaction.
If the recorded time on a file reaches the cap, the legal team may be asked to stop work on the file while the partner attempts to renegotiate the cap.
Otherwise, work will continue as normal past the cap, and any fees incurred above the cap will have to be written off.
How does Insurance work for legal fees?
Fees paid by the client under an insurance policy.
Insurance company may have a “panel” of solicitors who must undertake the legal work (i.e. depending upon the policy wording, the client is unlikely to have a free choice).
Common in personal injury and certain litigation claims.
