A recent board meeting would see the Solicitors Regulatory Authority (SRA) recommending that the traditional requirement on solicitors in the UK to refer clients in need of financial advice to ‘independent intermediaries’ should be done away with.
It would instead suggest that the regulator should change its rules so that solicitors put clients in a position to make informed decisions about referrals. This had followed after the decision of the FSA to change the definition of ‘independent advice’ at the end of this year.
The FSA had said that to qualify as an ‘independent’ adviser firms needed to consider more range of products not just ‘packaged products’ but structured investment products, all investment trusts and unregulated collective investment schemes.
A spokesman for the SRA said that there was a risk of underachievement if litigation solicitors referred clients only to advisers deemed independent. A consultation on the issue had closed in September, with the SRA maintaining its original stance on the best way forward.
Director of policy at the SRA Anieszka Scott said the consultation had provided some stimulation for the mind but had not changed the organization’s belief on the best way forward.
She said that it fits with the outcome focused regulation as solicitors, as highly qualified professionals, would be free to assess and discuss client’s needs, not be restricted by a prescriptive rule.
The SRA is recommending that outcome 6.3 of the SRA Code of Conduct 2011 should be amended so that clients were in a position to make “informed decisions” about referrals. Alternative options would have involved removing outcome 6.3 from the code of conduct and replacing it with a new ‘indicative behaviour’ or keeping outcome 6.3 but revising the language to bring it into line with the FSA’s new definitions.
Scott said the chosen option would reflect the possibility that under the new FSA regime, many firms currently described as independent advisers may no longer be able to describe their advice as independent.
She added that the proposal would remove restrictions on customer choice, where customers would like to access financial advice through a solicitor.
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