The SRA’s new rules offer in-house legal teams, and anyone wanting to compete with Big Law, a radical opportunity to develop new and disruptive business models.
Despite fierce opposition from the Law Society and others, the SRA’s plans to shake up the legal services sector have at last been approved by the Legal Services Board on 6 November 2018.
One part of these plans involves a new Code of Conduct for solicitors, and a new approach to regulating solicitors’ firms.
The revolutionary part concerns unregulated firms. Until now, a solicitor could only practise in-house, or in private practice from a fully regulated law firm. The SRA is doing away with this restriction. When the new rules come into force next year, a solicitor with a practising certificate will be able to provide legal advice (but not reserved legal activities such as litigation or conveyancing) to members of the public without the need for his or her employer to be regulated, and without the need for expensive SRA-mandated professional indemnity insurance.
It seems likely that the main beneficiaries of this rule change will be in-house lawyers, associations and affiliate groups, and anyone looking to compete with Big Law. High Street practitioners may be less affected.
In-house legal teams are currently highly restricted in their ability to provide legal advice to anyone other than their employer. When the new rules come into force an in-house legal team can offer their specialist knowledge to a wider range of group companies and other non-competing businesses. A cost centre could become a profit centre!
Networks of businesses and members’ associations are also expected to benefit. They can set up unregulated businesses to provide legal advice to their members without worrying about the burdens of full SRA regulation.
We also expect to see a spate of lawyers leaving fully-regulated, mainstream law firms with a view to setting up small, unregulated boutique firms selling legal advice to large corporates. These breakaway businesses will enjoy all the costs advantages of lower regulation and insurance premiums.
Of course, there are a few catches. Unregulated firms won’t be able to offer conveyancing or litigation in the courts (or other reserved legal activities such as probate work). Prospective clients will need to be told that the regulatory protections for unregulated firms are rather less (no SRA Compensation Fund, no SRA Minimum Terms insurance cover…). And it’s still not clear how the operating environment for this new kind of ‘law firm’ will work as regards privilege, conflicts and confidentiality, and regulatory oversight.
Despite these uncertainties, our view is these changes represent an opportunity for radical transformation of the legal services sector in England & Wales.