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Reading the Tealeaves: SRA update on Referral Fee Ban

The SRA have published a detailed response to the latest consultation document on the Referral Fee ban imposed by the Legal Aid, Sentencing and Punishment of Offenders Act 2012 [LASPO] and also held a workshop on 19th November 2012. It is difficult to understand the precise approach that will be taken towards enforcement however, one or two themes do seem to be emerging from The Birmingham Cube.

On 23rd October, the SRA posted a detailed explanation of the current position in respect of the formal consultation exercise that invites views on implementation of the ban that comes into effect on in April 2013.

A number of themes have emerged from the consultation so far which are:

Lack of Clarity in LASPO.  There is a general call for clear and unambiguious guidance to be issued about what activities will be covered and what will be acceptable. The SRA does not intend to provide ‘pre- approval of business models, but has issued new guidance in part 3 of the consultation ( below).

Policing the Ban.  The SRA intend to issue a Supervision and Enforcement Strategy, addressing a number of concerns. They repeat that outcomes focussed regulation will allow the SRA to look at the substance of an arrangement rather than just its form to assess if there is a plan to ‘dress up’ an arrangement to appear compliant.

ABS The SRA have reaffirmed their intention that only a genuine unified business will be granted ABS status. Applicants will need to demonstrate that they are truly operating as one entity.

Joint marketing arrangements. These will be scrutinised to examine what services the firm receives for the payment made.

 Part 3 of the paper sets out the draft guidance with some examples of permitted and non – permitted activity. Payment does not include the provision of hospitality that will be considered on a case by case basis.

Paragraph defines an example of a payment for advertising that would fall foul of the code, ie where the payment is related to the number of clients referred rather than to the cost of the advertising/marketing campaign. It is clear the onus of showing the payment is not a referral fee is on the person making the assertion.

Enforcement is dealt with in considerable detail. However, at para 10 the point is made that the SRA , as a risk – based regulator with limited resources, targets action at those who pose the highest risk to the public, consumers and the regulatory objectives.

Referral Fee Flowchart   In the true spirit of modern good management practice, the SRA have designed an easy to use flow chart, to help the would be applicant decide whether or not his or her planned ‘work round’ will contravene the ban and bring down the might of the SRA on their practice.

As those who attempt to navigate the chart will find, the outcome is currently unclear as the flow chart is heavy on graphics, but rather light on detail at this stage.


Originally posted 2012-11-23 00:00:00.

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