SRA Handbook

Application to be a recognised sole practitioner

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Version 12 of the Handbook was published on 31/10/2014. For more information, please click 'History' Above

Regulation 4: Requirements for sole practitioners

4.1

An application may be made under regulation 4 by a solicitor or European lawyer:

(a)

for initial authorisation as a recognised sole practitioner:

(i)

when making an initial application for a practising certificate or for registration in the register of European lawyers;

(ii)

when applying for replacement of a practising certificate or for renewal of registration in the register of European lawyers; or

(iii)

at any time during the currency of a solicitor's practising certificate or an REL's registration; or

(b)

for renewal of an existing authorisation as a recognised sole practitioner when applying for replacement of a practising certificate or for renewal of registration in the register of European lawyers.

4.2

When the SRA may grant an application

(a)

The SRA may grant an application under regulation 4 if the applicant:

(i)

will be practising as a sole practitioner from an office in England and Wales;

(ii)

is not, and is not about to be made, subject to a condition on his or her practising certificate or registration which would prohibit practice as a sole practitioner;

(iii)

has adopted a name under which his or her firm is to be recognised, and which will comply with Chapter 8 of the SRA Code of Conduct (Publicity);

(iv)

will comply with (or has a waiver of) Rule 12 of the SRA Practice Framework Rules (Persons who must be qualified to supervise);

(v)

will comply with the SRA Indemnity Insurance Rules in respect of his or her firm; and

(vi)

will comply with regulation 4.8 (Compliance officers).

(b)

The SRA may refuse an application under regulation 4 if it is not satisfied that the applicant is suitable to run and manage a business providing regulated legal services or if for any other reason the SRA reasonably considers that it would be against the public interest to grant recognition.

(c)

In reaching a decision on an application under regulation 4 the SRA may take into account:

(i)

any event listed in regulation 3.1 applying to the applicant;

(ii)

any other conduct on the part of the applicant which calls into question his or her honesty, integrity or respect for law;

(iii)

failure or refusal to disclose, or an attempt to conceal, any matter within (i) or (ii) above in relation to the application; or

(iv)

that the SRA is not satisfied that the applicant has sufficient skills or knowledge in relation to the running and management of a business which provides regulated legal services.

(d)

When granting an application under regulation 4 the SRA may impose a condition on the applicant's practising certificate or registration in accordance with regulation 7.

4.3

If a change to the composition of a recognised body or a licensed body which was a partnership results in a solicitor or REL becoming its sole principal:

(a)

the SRA must be notified within seven days; and

(b)

temporary emergency recognition may be granted, subject to 4.4 below, so as to enable that sole principal to continue in practice without breach of Rule 1 or Rule 2, as appropriate, of the SRA Practice Framework Rules.

4.4

Application for temporary emergency recognition

(a)

An application for temporary emergency recognition must be made on the prescribed form within seven days of the change and accompanied by all information and documentation the SRA reasonably requires.

(b)

The SRA may grant an application for temporary emergency recognition if the following conditions are met:

(i)

the SRA must be satisfied that the applicant could not reasonably have commenced an application for recognition as a sole practitioner in advance of the change; and

(ii)

the sole practitioner:

(A)

must be practising from an office in England and Wales;

(B)

is not, and is not about to be made, subject to a condition on his or her practising certificate or registration which would prohibit practice as a sole practitioner;

(C)

must have adopted a name under which the firm is to be recognised, and which complies with Chapter 8 of the SRA Code of Conduct (Publicity);

(D)

must comply with or have a waiver of Rule 12 of the SRA Practice Framework Rules (Persons who must be qualified to supervise);

(E)

must comply with the SRA Indemnity Insurance Rules in respect of his or her firm; and

(F)

will comply with regulation 4.8 (Compliance officers).

(c)

Temporary emergency recognition:

(i)

may be granted initially for 28 days;

(ii)

may be granted to have effect from the date of the partnership split or any other appropriate subsequent date;

(iii)

may be extended for a further specified period or periods in response to a reasonable request by the applicant;

(iv)

must be extended (subject to (viii) below) pending determination of a substantive application for initial recognition commenced during the currency of a temporary emergency recognition;

(v)

may be granted or extended subject to such conditions as the SRA thinks fit, in circumstances falling within regulation 7;

(vi)

is to be treated as initial recognition for the purpose of these regulations;

(vii)

if granted, cannot prejudice the discretion of the SRA to refuse a substantive application for recognition under this regulation (which is also, for the purpose of these regulations, to be treated as initial recognition); and

(viii)

in exceptional circumstances, and for reasonable cause, may be revoked at any time.

4.5

If a recognised sole practitioner dies:

(a)

the SRA must be notified within seven days;

(b)

within 28 days of the death an emergency application may be made, on the prescribed form, for recognition in the capacity of personal representative, practice manager or employee by a solicitor or an REL who is:

(i)

the sole practitioner's executor;

(ii)

a practice manager appointed by the sole practitioner's personal representatives;

(iii)

an employee of the firm.

4.6

If the application for recognition in the capacity of personal representative, practice manager or employee is granted:

(a)

recognition will be deemed to run from the date of death;

(b)

recognition will not be renewed for any period after the winding up of the estate or 12 months from the date of death, whichever is the earlier.

4.7

Regulatory compliance and suitable arrangements for compliance

(a)

A recognised sole practitioner must ensure that:

(i)

any obligations imposed from time to time on the firm or its employees by or under the SRA's regulatory arrangements are complied with; and

(ii)

any other statutory obligations imposed on the firm or its employees, in relation to the firm's carrying on of authorised activities, are complied with.

(b)

A recognised sole practitioner must at all times have suitable arrangements in place to ensure that:

(i)

the firm and its employees comply with the SRA's regulatory arrangements as they apply to them, as required under section 176 of the LSA and regulation 4.7(a); and

(ii)

the firm and its employees who are authorised persons maintain the professional principles.

4.8

Compliance officers

(a)

A recognised sole practitioner must have suitable arrangements in place to ensure that the firm's compliance officers are able to discharge their duties in accordance with these regulations.

(b)

Subject to regulation 4.8(h) a recognised sole practitioner's firm must at all times have an individual:

(i)

who is:

(A)

the sole practitioner; or

(B)

an employee of the firm of sufficient seniority and in a position of sufficient responsibility to fulfil the role;

(ii)

who is designated as its COLP; and

(iii)

whose designation is approved by the SRA.

(c)

The COLP must:

(i)

take all reasonable steps to:

(A)

ensure compliance with the SRA's regulatory arrangements except any obligation imposed under the SRA Accounts Rules;

(B)

ensure compliance with any statutory obligations of the recognised sole practitioner and any employees of the firm; and

(C)

record any failure so to comply and make such records available to the SRA on request; and

(ii)

as soon as reasonably practicable, report to the SRA any material failure so to comply (a failure may be material either taken on its own or as part of a pattern of failure so to comply).

(d)

Subject to regulation 4.8(i) a recognised sole practitioner's firm must at all times have an individual:

(i)

who is:

(A)

the sole practitioner; or

(B)

an employee of the firm of sufficient seniority and in a position of sufficient responsibility to fulfil the role;

(ii)

who is designated as its COFA; and

(iii)

whose designation is approved by the SRA.

(e)

The COFA must:

(i)

take all reasonable steps to:

(A)

ensure compliance with any obligations imposed upon the recognised sole practitioner or any employees of the firm under the SRA Accounts Rules; and

(B)

record any failure so to comply and make such records available to the SRA on request; and

(ii)

as soon as reasonably practicable, report to the SRA any material failure so to comply (a failure may be material either taken on its own or as part of a pattern of failure so to comply).

(f)

The SRA may approve an individual's designation as a COLP or COFA if it is satisfied that the individual is a suitable person to carry out his or her duties. When considering whether a candidate should be approved under regulation 4.9, the SRA will take into account the criteria set out in the SRA Suitability Test and any other relevant information.

(g)

A designation of an individual as COLP or COFA has effect only while the individual:

(i)

is authorised as a recognised sole practitioner, where the compliance officer is the recognised sole practitioner;

(ii)

consents to the designation and continues to be an employee of the firm, where the compliance officer is an employee;

(iii)

in the case of a COLP:

(A)

is not disqualified from acting as a HOLP;

(B)

is:

(I)

a lawyer of England and Wales;

(II)

an REL; or

(III)

registered with the BSB under Regulation 17 of the European Communities (Lawyer's Practice) Regulations 2000 (SI 2000/1119);

and is an authorised person in relation to one or more of the reserved legal activities which the body is authorised to carry on; and

(iv)

in the case of a COFA, is not disqualified from acting as a HOFA.

(h)

A recognised sole practitioner's firm is not required to comply with regulation 4.8(b)(i) where the individual designated as its COLP:

(i)

has been approved by the SRA as a COLP for a related authorised body; and

(ii)

is a manager or employee of that related authorised body.

(i)

A recognised sole practitioner's firm is not required to comply with regulation 4.8(d)(i) where the individual designated as its COFA:

(i)

has been approved by the SRA as a COFA for a related authorised body; and

(ii)

is a manager or employee of that related authorised body.

4.9

Approval of compliance officers

(a)

An application for approval of a compliance officer may be made by a recognised sole practitioner or a solicitor or REL applying under regulation 4.1 to be a recognised sole practitioner (in regulation 4.9, the person applying for approval of a compliance officer is referred to as "the applicant").

(b)

The application must include evidence to satisfy the SRA that the person to be approved (in regulations 4.8 to 4.10 referred to as "the candidate") is suitable to be a compliance officer of the firm.

(c)

The applicant must:

(i)

secure the co-operation of a candidate who is an employee, to assist the SRA to obtain all information and documentation the SRA requires in order to determine the application for approval;

(ii)

obtain all other information and documentation in relation to the candidate which the prescribed form requires the applicant to obtain and keep; and

(iii)

keep all information and documentation under (ii) above for a period of not less than 6 years after the individual concerned has ceased to be a compliance officer of the firm.

(d)

Where the candidate is an employee, he or she must declare in writing on the face of the application that the information supplied about them is correct and complete.

(e)

The SRA's decision to approve or refuse approval must be notified in writing to the applicant and, where the candidate is an employee, separately to the candidate.

(f)

In accordance with regulation 7, the SRA may at the time of granting its approval or at any time subsequently, make its approval of a person to be a compliance officer subject to such conditions as it considers appropriate on the practising certificate or registration of:

(i)

the recognised sole practitioner; and

(ii)

if applicable, the compliance officer.

4.10

Effect of approval of compliance officers

(a)

Approval takes effect from the date of the decision unless otherwise stated, and remains effective only if the candidate takes up the position for which he or she has been approved within the period specified in the notice of approval.

(b)

Subject to regulation 4.10(a), approval continues until:

(i)

it is withdrawn by the SRA; or

(ii)

the approved person ceases to be a compliance officer of the firm.

4.11

Withdrawal of approval of compliance officers

(a)

Where the SRA has granted an approval under regulation 4.9, it may subsequently withdraw its approval of a person to be a compliance officer if:

(i)

it is not satisfied that the person met or meets the criteria for approval;

(ii)

it is satisfied that a condition imposed on the practising certificate or registration of the recognised sole practitioner or the compliance officer has not been, or is not being, complied with;

(iii)

it is satisfied that the person has breached a duty or obligation imposed upon them in or under the SRA's regulatory arrangements or any enactments; or

(iv)

information or documentation is not promptly supplied in response to a request made under regulation 4.13(d).

4.12

Temporary emergency approvals for compliance officers

(a)

If the firm ceases to have a COLP or COFA whose designation has been approved by the SRA, the recognised sole practitioner must immediately and in any event within seven days:

(i)

notify the SRA;

(ii)

designate another individual to replace the firm's previous COLP or COFA, as appropriate; and

(iii)

make an application to the SRA for temporary approval of the new COLP or COFA, as appropriate.

(b)

The SRA may grant a temporary approval under this regulation if:

(i)

it is satisfied that the recognised sole practitioner could not reasonably have commenced an application for approval of designation in advance of the non-compliance; and

(ii)

on the face of the application and any other information immediately before the SRA, there is no evidence suggesting that the new compliance officer is not suitable to carry out the duties imposed on them under these regulations.

(c)

Temporary approval under this regulation:

(i)

may be granted initially for 28 days;

(ii)

may be granted to have effect from the date the firm ceases to have a COLP or COFA whose designation has been approved;

(iii)

may be extended in response to a reasonable request by the recognised sole practitioner;

(iv)

must be extended pending determination of a substantive application for approval commenced in accordance with regulation 4.9;

(v)

may be granted or extended subject to such conditions as it considers appropriate on the practising certificate or registration of:

(A)

the recognised sole practitioner; and

(B)

if applicable, the compliance officer;

(vi)

has effect only while the criteria in regulation 4.8(g) are met;

(vii)

if granted, cannot prejudice the discretion of the SRA to refuse a substantive application for approval of designation or to impose any conditions on that approval; and

(viii)

in exceptional circumstances, and for reasonable cause, may be withdrawn at any time.

(d)

If granted temporary approval under regulation 4.12(c) above for the designation of a new COLP or COFA, the recognised sole practitioner must:

(i)

designate a permanent COLP or COFA, as appropriate; and

(ii)

submit a substantive application for approval of that designation under regulation 4.9;

before the expiry of the temporary approval or any extension of that approval by the SRA.

4.13

Information requirements

(a)

A recognised sole practitioner must properly complete and provide to the SRA an information report on an annual basis or such other period as specified by the SRA in the prescribed form and by the prescribed date.

(b)

A recognised sole practitioner must provide any necessary permissions for information to be given to the SRA so as to enable it to:

(i)

use and prepare a report on the documents produced under (a) above; and

(ii)

seek verification from clients, employees or any other body including banks, building societies or other financial institutions.

(c)

A recognised sole practitioner must notify the SRA as soon as he or she:

(i)

becomes aware of any changes to relevant information about himself or herself, the firm or any employees of the firm including any non-compliance with these regulations and any conditions on the recognised sole practitioner's practising certificate or registration; or

(ii)

becomes aware of or has information that reasonably suggests that he or she has or may have provided the SRA with information which was or may have been false, misleading, incomplete or inaccurate, or has or may have changed in a materially significant way.

(d)

The SRA may at any time require the production of information or documentation from a recognised sole practitioner or a person approved as a compliance officer of the firm in order to satisfy the SRA that that person met, meets, or continues to meet the criteria for approval as suitable to be a compliance officer.

4.14

Waivers

(a)

Subject to provisions in any statutory obligations or the SRA's regulatory arrangements affecting its ability to waive any requirements, the SRA shall have power to waive in writing the provisions of regulations 4.8, 4.9, 4.12 and 4.13 for a particular purpose or purposes expressed in such waiver, and to attach conditions to or revoke such waiver, at its own discretion.

4.15

Condition relating to the cessation period for indemnity purposes

(a)

When a recognised sole practitioner's firm becomes subject to cover under the cessation period, it must immediately, and for the duration of the cessation period, desist from carrying out any legal activities, save that it may undertake work required to discharge its obligations within the scope of existing instructions, or which is necessary in connection with the discharge of such obligations.

Guidance notes

(i)

The approval process for authorisation under regulation 4 will cease when recognised sole practitioners are passported to become recognised bodies and are transitioned to be regulated under the SRA Authorisation Rules. The SRA will establish a process for those practising as recognised sole practitioners at that time to be deemed approved as managers and owners for the purpose of Rule 8.6 of the SRA Authorisation Rules.

(ii)

The SRA's outcomes focused approach to regulation means that the SRA will take into account all of the circumstances relevant to any issue of compliance, whether in relation to the regulatory arrangements or in respect of statutory obligations on firms and those in them. This will include taking into account the evidence that firms and individuals can produce to demonstrate their efforts to ensure compliance (by themselves or others).

(iii)

Regulation 4.7(b) deals with the need for recognised sole practitioners to have suitable arrangements for compliance (see also Chapter 7 of the SRA Code of Conduct (Management of your business)). What needs to be covered by a firm's compliance plan will depend on factors such as the size and nature of the firm, its work and its areas of risk. Solicitors and RELs will need to analyse the effectiveness of their proposed compliance arrangements before applying for authorisation as a sole practitioner and monitor effectiveness on an on-going basis once authorised. Common areas for consideration will include:

(a)

clearly defined governance arrangements providing a transparent framework for responsibilities within the firm;

(b)

appropriate accounting procedures;

(c)

a system for ensuring that only the appropriate people authorise payments from client account;

(d)

a system for ensuring that undertakings are given only when intended, and compliance with them is monitored and enforced;

(e)

appropriate checks on new staff or contractors;

(f)

a system for ensuring that basic regulatory deadlines are not missed e.g. obtaining or delivery of the firm's accountant's report (in accordance with rule 32 of the SRA Accounts Rules 2011), arranging indemnity cover, renewal of practising certificates and registrations, renewal of all lawyers' licences to practise and provision of regulatory information;

(g)

a system for monitoring, reviewing and managing risks;

(h)

ensuring that issues of conduct are given appropriate weight in decisions the firm takes, whether on client matters or firm-based issues such as funding;

(i)

file reviews;

(j)

appropriate systems for supporting the development and training of staff;

(k)

obtaining the necessary approvals of COLP/COFA;

(l)

arrangements to ensure that any duties to clients and others are fully met even when staff are absent.

(iv)

The roles of COLP and COFA are a fundamental part of a firm's compliance and governance arrangements. COLPs' and COFAs' ability to take the steps they need to ensure compliance is dependent on the firm having suitable arrangements in place under regulation 4.7. So, for example, the recognised sole practitioner must therefore ensure that any employee designated as the firm's COLP or COFA is of sufficient seniority, in a position of sufficient power and responsibility and has clear reporting lines to enable them to have access to all management systems and arrangements and all other relevant information including client files and business information. The existence of compliance officers in a firm who are employees and the requirements on them to ensure that the firm, as well as its employees, are complying with the regulatory arrangements (COLP) and the SRA Accounts Rules (COFA) is not a substitute for the recognised sole practitioner's responsibilities and their obligations to comply with regulation 4.7 (Regulatory compliance and suitable arrangements for compliance). Recognised sole practitioners need to take care not to obstruct, whether intentionally or unwittingly, a COLP or COFA employee in fulfilling their role.

(v)

COLPs and COFAs are responsible for ensuring that the firm has systems and controls in place to enable the firm, as well as its employees, to comply with the requirements on them. Recognised sole practitioners are not absolved from any of their own obligations and remain fully responsible for compliance (see regulation 4.7).

(vi)

Those designated as COLP will need to be in a position to be able to discharge the role. They will need to consider whether they are in a position to, for example:

(a)

take all reasonable steps to ensure compliance with the SRA's regulatory arrangements by the firm and its employees; and with relevant statutory obligations e.g.

(A)

that authorised persons and other employees comply with the duty imposed by section 176 of the LSA (duty to comply with the SRA's regulatory arrangements);

(B)

under the LSA and the SA in respect of practice matters;

(b)

as soon as reasonably practicable, report to the SRA any material failure to comply, whether such failure is material either on its own or because it forms part of a pattern of non-compliance. The immediacy of the report will depend on the circumstances and seriousness of the breach.

(vii)

Those designated as COFA will need to be in a position to be able to discharge the role. They will need to consider whether they are in a position to, for example:

(a)

ensure that they have access to all accounting records;

(b)

carry out regular checks on the accounting systems;

(c)

carry out file and ledger reviews;

(d)

ensure that the reporting accountant has prompt access to all the information needed to complete the accountant's report;

(e)

take steps to ensure that breaches of the SRA Accounts Rules are remedied promptly;

(f)

monitor, review and manage risks to compliance with the SRA Accounts Rules;

(g)

as soon as reasonably practicable, report to the SRA any material failure to comply with the SRA Accounts Rules, whether such failure is material either on its own or because it forms part of a pattern of non-compliance. The immediacy of the report will depend on the circumstances and seriousness of the breach.

(viii)

In considering whether a failure is "material", the COLP or COFA, as appropriate, will need to take account of various factors, such as:

(a)

the detriment, or risk of detriment, to clients;

(b)

the extent of any risk of loss of confidence in the firm or in the provision of legal services;

(c)

the scale of the issue;

(d)

the overall impact on the firm, its clients and third parties.

In addition, the COLP/COFA will need to keep appropriate records of failures in compliance to:

(e)

monitor overall compliance with obligations;

(f)

assess the effectiveness of the firm's systems;

(g)

be able to decide when the need has arisen to report breaches which are material because they form a pattern.

(ix)

In developing their governance and administrative arrangements recognised sole practitioners will need to consider how they approach unexpected risks such as the absence of key staff, including COLP and COFA, and whether the nature of the absence will trigger the need to notify the SRA (see regulation 4.12) and to obtain approval for a replacement.

(x)

Approval of compliance officers under regulation 4.9 relates only to the role for which it is granted. Any change from one role that requires approval to another, will require a further approval and firms need to ensure that they notify the SRA of any changes and apply for fresh approvals, as necessary.

(xi)

The period specified in the notice of approval in regulation 4.10(a) will normally be 90 days although may be varied in individual cases.

(xii)

Regulation 4.13 imposes information requirements on recognised sole practitioners. As well as the annual information report, firms must update the SRA by giving details of general changes that occur in respect of the firm. Other reporting and information requirements that apply to individuals or firms include:

(a)

SRA requirements

(A)

Regulations 1.2, 4.3, 4.5, 4.8, 4.12 and 15 of these regulations;

(B)

Rule 18 of the SRA Practice Framework Rules;

(C)

Rule 32 of the SRA Accounts Rules;

(D)

Chapter 10 of the Code of Conduct;

(E)

Rule 17.3 of the SRA Indemnity Insurance Rules 2013 or any subsequent rules thereto;

(F)

Rule 3 of the SRA Overseas Rules.

(b)

Statutory requirements

(A)

Section 84 of the SA (notification of a solicitor's place of business).