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SRA issues warning notice to PI firms
18 October 2013

The Solicitors Regulation Authority (SRA) has issued a warning note for firms involved in personal injury work based on its experiences of how firms have reacted to the first six months of the ban on the payment of referral fees.

And the Authority is urging firms who have re-arranged their business models to adhere to the rules not to forget about all other sections of the Handbook. The SRA has seen numerous examples of firms making changes that, while compliant with the two new Outcomes that deal with the ban, potentially breach other parts of the Code of Conduct.

A warning note has therefore been prepared and published on the SRA’s website. Firms are encouraged to read the warning note.

Richard Collins, SRA Executive Director, said: “Firms have done a lot to ensure they comply with the ban, but this does not in any way reduce the need for firms to continue to ensure compliance with the other Principles and Outcomes in the Code of Conduct. Worryingly, we are beginning to see some examples of firms that – in their desire to maintain a volume of new clients in a manner compliant with the referral fee ban – have not paid sufficient attention to compliance with the broader, and longstanding, regulatory requirements regarding referrals.”

Examples of the type of issues this has raised include:
agreeing with an introducer to deduct money from clients’ damages
inappropriate outsourcing of work to introducers
referrals to other service providers which are not in the best interests of clients
failure to advise clients properly about the costs and how their claim should be funded
lack of transparency about the arrangement

The SRA continues to take a measured approach to enforcing the ban. Its enforcement strategy focuses on active supervision, so where there are concerns, it engages with firms to ensure compliance is achieved.

Where there are significant concerns, the SRA is talking to firms to help them put things right. It is also working very closely with partners such as the Ministry of Justice and the Financial Conduct Authority, sharing information and raising issues as they emerge.

Richard Collins said: “We decided that a measured approach as firms got to grips with the ban was the best way forward. We are taking a more proportionate and constructive approach to enforcing the ban wherever possible.

“Of course we will take formal enforcement action against any firm flagrantly breaching the rules. Those unwilling to change their practices and who fail to co-operate will face action.”

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