The Solicitors Regulation Authority (SRA) has come under mounting pressure from advisers and lawyers to reverse its decision to allow solicitors to refer to restricted advisers.
Trade body the IFA Centre, which represents only independent advisers, is considering applying for a judicial review of the process, questioning the SRA’s understanding of the issue, its research and cost-benefit analysis.
In July the SRA launched a consultation on solicitor referrals in the light of the Financial Services Authority’s changes to the definition of independence. The three options it proposed were:
- maintain the current rules that only independent advisers can receive referrals;
- scrap the independent requirement altogether;
- clients choose what type of adviser they want, having discussed it with their solicitor.
After the SRA approved the third option last week, the Law Society, a trade body for solicitors, published a statement to its members urging them to ignore the new rule, warning restricted referrals could embroil them in mis-selling scandals.
Law Society chief executive Desmond Hudson questioned the outcome of the consultation, given that 26 responses had backed independent referrals, with only 22 supporting the third option.
‘We were in the [independent] camp. We don’t think the change is right and we believe the majority of the consultation responses they received said the same,’ said Hudson. ‘If that is right, it does raise questions about the completeness, the thoroughness and the rigour of the consultation process.’
The responses will be published in full in January 2013.
Hudson said if they showed the SRA to have been partial to one outcome, it would risk losing solicitors’ confidence. He said the Law Society might publish its own guidelines on the issue.
IFA Centre managing director Gill Cardy (pictured) said: ‘The basis on which the decision was made seems to me to offer sufficient grounds for challenge, but I will want to take independent legal advice before making a final decision.’
A spokesman from the SRA said: ‘The Law Society is the [solicitors] representative body and they are in their rights to advise their members they can carry on referring to IFAs as long as it’s in the best interest of the client to do so.’
Neil Bailey, director of Northamptonshire-based Fortitude Financial Planning, said he was disappointed by the decision. ‘There’s a risk of very poor outcomes for clients,’ he said.