SRA issues policy statement on new outcomes-focused approach to regulation

The Solicitors Regulation Authority has today published a policy statement on how it will deliver outcomes-focused regulation (OFR), insisting that it is still on target to implement the new regime from October 2011.

The policy statement covers a range of issues, including:

• Detail about risk-based regulation. The SRA said it will focus on risks arising from regulated individuals, from individual firms, from the activities of a number of firms together, and from the SRA’s own operational risks.
• What the SRA is doing to ensure it is ready to be a successful outcomes-focused regulator
• The SRA’s future approach to consumer education and support
• Information about each of the authority’s three key regulatory functions going forward – authorisation; supervision; and legal and enforcement – and how these will work together
• Case studies to illustrate how the SRA’s new approach might work in different situations
• Analysis of feedback to its April 2010 consultation
• An indicative framework for cost-benefit analysis.

The watchdog has also updated its guidance for those who are looking to establish alternative business structures, and launched a dedicated team that is developing the processes allowing organisations to apply for an ABS licence.

The SRA said in the statement that OFR “places a primacy, not simply on compliance with the rules, but on achieving the required outcomes for clients underpinned by a strong ethical framework”.

It added: “Primary responsibility for achieving these outcomes, and for operating ethical and effective systems and processes that enable outcomes to be achieved, now more clearly lies with the individuals and the firms we regulate.”

The SRA acknowledged that some solicitors and other legal providers were concerned at the move away from detailed rules to regulation based on principles and outcomes. “However, detailed rules may frequently not be aligned with the way firms want to carry on their business, leading in some cases to firms doing certain things for the purposes of the rules, rather than for any genuine reason for the benefit of consumers or the public interest,” it argued.

The statement also suggested that detailed rules “frequently do not provide the certainty which is claimed for them”.

The watchdog said it would seek to address concerns that detailed rules had provided a “protective barrier” against the actions of a regulator “whose approach and response to particular circumstances has not in the past been trusted”. It promised a greater emphasis on constructive engagement with firms.

SRA chief executive Antony Townsend said:  “We remain firmly on target to become an outcomes-focused regulator by October next year. This paper sets out clearly how the SRA is approaching the task and what this will mean for consumers and law firms.”

Townsend said consumers could expect the watchdog to uphold the standards of the profession and to provide more information to help them access and use legal services. Firms would benefit from greater flexibility, but would need to show they are delivering the required outcomes, he added.

The SRA chief executive said: “A key part of the new approach is about facing forwards, identifying risks before they happen, rather than looking backwards, finding and penalising firms who have breached prescriptive rules. The statement explains how we will assess and manage risk, so that we can target our resource at the areas of greatest need."

A copy of the policy statement can be downloaded here.