SRA Consumer Protection Review – next phase consultation now open

The Solicitors Regulation Authority has opened the next phase of its consultation as part of their Consumer Protection Review, originally launched in early 2024 following the collapse of Axiom Ince.

Some of the more controversial and perhaps most talked about changes, such as the outsourcing of client money handling and treatment of client account interest, are not included in this consultation. The SRA has confirmed that these are longer-term issues that they will return to, but have not provided a timescale for this yet.

The key areas they are currently considering are split into three focus points, with proposals as follows:

Accountants’ reports regime

• All reports for non-exempted firms, regardless of whether they are qualified or unqualified, would be submitted to the SRA and include a declaration from Reporting Accountants, with submissions possibly being made by the Reporting Accountants themselves.
• SRA focus would remain on high-risk areas and qualified reports.
• All firms would have to make an annual declaration regarding the requirements to obtain an AR1, or whether they are exempt.
• Exemptions to remain the same.
• Fixed fines and penalties proposed for late reports and incomplete declarations.
• Increased guidance will be provided for accountants e.g. more routine requirements for obtaining bank confirmations.
• No requirement for rotation of Reporting Accountants.

Checks and balances within law firms

• Increased requirements/ separation of roles are proposed where there are higher risks, e.g. for firms with turnover > £600k and client money > £500k unilateral decision makers would not be able to be the COLP or the COFA
• For sole owner manager firms with turnover < £600k and client money > £500k, it is proposed that unilateral decision makers could not hold the COFA role but would still be able to hold COLP role
• It is noted that this could create increased cost burdens on those firms who need to either bring someone in or contract out roles.
• No detail has yet been provided on how this would be monitored, but for any requirements that are brought in, the SRA will be looking at ways to make sure they are complied with.

Improving oversight of firms changing profile

• The SRA confirm they need to look at the approach for gathering, analysing and acting on information in respect of firms changing their profiles, e.g. through mergers and acquisitions.
• The SRA has generally seen positive responses to the suggestion of a more proactive oversight approach to acquisitions, but there are concerns about the impact of information gathering or approval requirements and how this could affect business activity.
• They are working on proposals for consultation next year, including what risk indicators should be used and what information should be required to improve oversight in this area.

The consultation on the areas outlined above is now open, with the deadline for responses due by Friday 20 February, 12:00pm. The SRA aims to publish their final positions by Summer 2026. Of course, some of these areas could cause significant impact on firms, including structural changes and increased costs. The SRA has confirmed that they will look at transitional arrangements and implementation plans. Given the potential impacts to all solicitor firms, it is crucial that those operating in the sector understand the potential implications of the proposals.

To access the SRA’s webpage for the Consultation, please click here.

If the above has raised any questions or concerns for you or your firm, or you would like to feed into our responses to the SRA then please do contact us.