Axiom Ince Review
The recent enforcement action initiated against the Solicitors Regulation Authority (SRA) following the Axiom Ince review has sparked significant discussions within the legal community.
The review found that:
- The SRA did not act adequately, effectively and efficiently,
- The SRA did not take all the steps it could or should have taken, and
- The SRA’s actions and omissions in this matter necessitate change in its procedures to mitigate the possibility of a similar situation arising again.
It shows that we should review AML procedures and risk management systems within our day to day roles, and ensure our Clients and WIP are managed effectively along with how the law is being applied.
Discussions on LLPs and ABS
There has been some noise from the SRA surrounding Limited Liability Partnerships (LLPs) and Alternative Business Structures (ABS), with some viewing these structures as problematic. Certain insurers have also had extra question sets around these in the past. However, it is essential to note that these structures are highly successful in general, and the SRA and regulators need to ensure they are approving firms with due diligence and consideration.
Implications of Changing to a Limited Company
You may be thinking about the implications of transitioning from an LLP to a Limited Company (Ltd). It is crucial to address several key points in such scenarios if a partner is leaving during this process:
- Replacement of Non-Solicitor Partner (if applicable): Identify who will replace the non-solicitor partner if you are continuing to trade as an ABS
- Financial Implications: Assess any financial implications resulting from the structure change, are you changing partners (retiring, leaving or joining).
- Potential Issues: Evaluate any potential issues that may arise with the exiting partner – have you discussed and reviewed your Management Liability insurance covers
- Future Plans: Understand the future plans following the change in structure. While most firms may not undergo significant structural changes beyond the departure of an individual partner, it is essential to address all aspects comprehensively.
Additionally, communication is key. It is important to maintain the insurance limit at £3 million and inform insurers about the changes via your broker, who should work with you in advance to support any applications to the SRA. Likewise, following any business changes, you must ensure to review and update engagement letters accordingly.
October Renewal Season Premium and Cover comments
Following another successful Solicitors PI season we have found the market on the whole a lot more flexible than in previous years. Capacity has returned to the market, and with it a willingness to offer long-term policies and negotiate on premiums and deductibles.
On average, primary layer premiums fell markedly and excess layer premiums followed a similar trend. On our book of lawyers overall clients enjoyed on average a 12% saving year-on-year.
In the main law firms have enjoyed fee income growth, meaning the rates (premium paid relative to most recent years fees) has reduced significantly as well.
It’s pleasing to operate in a marketplace that is, at last, starting to feel more in the clients favour. While long-term partnerships and the stability of incumbent insurers are still important, the pendulum has definitely shifted and we find ourselves in a buyer’s market once again.
Conclusion
The enforcement action against the SRA, and the subsequent discussions, highlight the importance of thorough regulatory oversight and the need for legal firms to stay informed about structural changes and compliance requirements. As the legal landscape continues to evolve, staying abreast of these developments will be crucial for maintaining professional standards and ensuring regulatory compliance. Finally, liaising with your insurance broker partner is integral to ensuring your covers support and protect your businesses as they change and grow.
