SRA policy

Multi-disciplinary practices

Policy statement, April 2014

The SRA has announced today that it is reviewing the approach it takes to authorising multi-disciplinary practices (MDPs) as alternative business structures (ABSs). By an MDP we mean a business that delivers reserved legal services with other professional services, such as accountancy, land and housing management, corporate services or financial services.

Why is a review needed now?

MDPs which allow clients to access multiple professional services in a "one stop shop" were intended to be one of the key benefits of the reforms introduced by the Legal Services Act. ABSs have shown steady progress in the two years since the SRA began authorising them—with over 250 licences granted so far; and ABSs now account, for example, for over a third of all turnover in the personal injury market. However the number of applications from MDPs has been small (in the tens rather than the hundreds) and feedback from potential applicants and others has indicated that part of the problem relates to the SRA rules.

What is the issue?

SRA rules for ABSs have maintained the principle (which applies to all entities that we authorise) that all legal activity carried out within the ABS must be regulated by the SRA. This applies not only to reserved legal activities (such as litigation and conveyancing)—but also to non-reserved legal activities such as advice on the application of any particular piece of legislation.

We believe that this remains an important principle for consumer protection, and that it is not appropriate or consistent with our overall range of obligations to restrict our entity regulation to reserved legal activities. However, if applied over rigidly, the principle can stifle the development of MDP ABSs. In particular, where that non-reserved legal activity (such as tax advice by a chartered accountant or planning advice by a chartered surveyor) is provided as part of the exercise of a non-legal profession that is already regulated elsewhere, then imposing the principle leads to duplication and conflict of regulation. As part of our commitment to proportionate regulation, the SRA has therefore decided to look at ways of avoiding this duplication. We are considering removing the requirement that all legal work should be SRA regulated when this activity is engaged in by a non-legal professional, subject to appropriate conditions to ensure client protection. These conditions could be, for example:

  • (a) the activity not being led or supervised by someone who is an authorised person under the Legal Services Act (such as a solicitor); and
  • (b) the activity being subject to suitable alternative regulation; and
  • (c) the client being aware that the activity is not SRA regulated and instructing the ABS on that basis.

All reserved legal activity would of course remain subject to SRA regulation.

What would these changes mean?

We wish to consider all of these issues further before consulting, and are inviting engagement as part of issuing this statement. We are clear that MDP ABSs would continue to be authorised and regulated as a whole entity by the SRA and key duties, would continue to apply across the whole entity. However, removing duplicate regulation for some of their activities would make it easier for MDPs to become authorised, thus helping increase access to affordable multi professional services.

This could benefit, for example, small business clients who have been shown to be poorly served by the current legal market.

While this proposal is focused on MDPs, it has some implications for how we regulate more widely. The SRA is committed to a level playing field—there should no favours or benefits for particular business models. But where the issues that we are tackling are different in different market segments, we must respond in a manner that is consistent with the better regulation principles. We therefore think that there is scope to consider different provisions for different types of firms recognising the variety of firms, services and consumers. We need, for example, to consider how often we waive certain rules, such as the separate business rule; or how we impose conditions in certain circumstances in order to make sure that our regulatory handbook and approach is keeping pace with the dynamism of solicitors and their firms, and we will be considering some of these issues as part of the development of these policy changes.

What will happen next?

The SRA intends to consult on policy and rule changes in early summer of this year, with a view to proposals coming into effect later in the year.

In advance of consultation, we will be inviting certain key stakeholders and other regulators to take part in an MDP reference group to inform the development of the policy.

We also invite MDP organisations that might be considering the possibility of applying to the SRA for authorisation and that wish to engage with us an early stage to contact us for an informal discussion via our Firm-Based Authorisation team.