A rule change proposed by the Solicitors Regulation Authority to enable firms to switch regulators more easily has been approved by the Legal Services Board.
Previously, the SRA required firms to obtain six years worth of indemnity insurance before they were able to change to another regulator. However, this has now been removed, potentially meaning that many firms may choose to leave the SRA.
Also, the new rule will mean that where the new regulator of the firm has signed a bilateral protocol with the SRA, run-off cover will no longer be needed.
According to the LSB, it will be the responsibility of the new regulator to ensure that there is sufficient insurance to cover any potential claims later down the line. It also stressed that this should account for claims that have taken place prior to the change of regulator.
The board has also stated that, as long as consumer protection is in place, it welcomes the removal of any barriers that firms face when it comes to changing regulator.
It went on to say that the intention of the change was not to alter arrangements in regard to the Compensation Fund. Something which has was confirmed by the SRA, an eligible claim would be considered as long the event which resulted in the loss took place under their regulation.
The full decision from the LSB can be accessed here.
