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SRA examines firms’ financial data
20 September 2013

The Solicitors Regulation Authority (SRA) has started to evaluate the data on firms’ finances following a substantial fact-finding exercise.

As part of its programme of work designed to help firms struggling in tough economic times, the SRA contacted around 2,000 practices asking for key financial information. The Authority hopes to add to its picture of issues affecting firms so it can target resources through its financial stability programme.

Data requested focused on such things as net profit (at the last financial year end), total borrowings, and highest and lowest bank balances for each of the last three months. Firms included in the survey included those working in areas that are experiencing particular economic pressures, such as personal injury or legal aid, and around 500 ‘high impact’ firms, those which would have a significant impact on the regulatory objectives if they were to fail.

A number of these firms (around 700) were already being actively supervised by the SRA. For the remaining 1,300, emails were sent to the firms’ COLP (Compliance Officer for Legal Practice) at the beginning of August.

Mike Haley, SRA Director of Supervision, said: “We contacted these firms not because we know they are experiencing financial difficulties, but to build our understanding of the current position so that we can target our resources at those who most need our help. Engaging with firms at the earliest opportunity is the best thing to do, and this will allow us to know where we need to do this.

“We’ve already had numerous examples of better outcomes for firms and clients when firms in financial difficulty have come to us. By surveying firms in this way, we are able to make our approach even more risk-based, and hopefully avoid the disruption caused by intervention.”

Of the 1,300 emailed, around 1,000 firms (77 per cent) supplied the requested information or applied for an extension by the 3 September deadline. Of the firms that responded, around 50 per cent did not score at all on any of the financial indicators, suggesting there is no evidence of financial difficulty requiring engagement at this stage.

Those firms that are demonstrating indicators of financial difficulty will be contacted as part of supervisory engagement and according to the level of risk they pose. Those firms that have failed to provide the requested information will be encouraged to provide it before potential enforcement action is initiated.

Mike Haley added: “We rely on firms to look for help as soon as possible, such as talking to us through our Supervision function or seeking other forms of assistance, such as professional advice or contacting their Law Society Regional Manager. Sadly, some firms refuse to acknowledge that they are in financial trouble until it is too late, which causes problems for clients, and can also lead to investigations into conduct.”

The SRA has created dedicated web pages for firms as part of Chapter 7 of the Handbook to help keep a tab on finances, including a list of good and bad behaviours. The pages can be found here:

Go to the Financial Advice pages

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