Introduction to legal services and regulation - Role of the ...

Learning Outcomes

This article outlines legal services regulation in England and Wales and the SRA’s role, including:

• The regulatory structure and the statutory oversight function of the Legal Services Board (LSB)
• Definition and scope of reserved legal activities and consequences of unauthorised practice
• The SRA’s regulatory remit and authorisation of individuals and firms (practising certificates, higher rights of audience, firm authorisation)
• Entity-level compliance responsibilities, including COLP and COFA roles
• Application of the SRA Principles and Code of Conduct to practice scenarios (confidentiality, conflicts, undertakings, complaint handling, transparency, client money, anti-money laundering)
• Risk-based supervision and enforcement, including reporting obligations, inspection powers, interventions, and the role of the Solicitors Disciplinary Tribunal (SDT)
• Client protection measures (SRA Accounts Rules, professional indemnity insurance, Compensation Fund, Legal Ombudsman) and interaction of professional obligations with overriding legal duties

SQE1 Syllabus

For SQE1, you are required to understand the regulatory framework for legal services in England and Wales and the SRA’s role in regulating solicitors and firms, with a focus on the following syllabus points:

• the regulatory structure for legal services in England and Wales
• the concept and scope of reserved legal activities
• the SRA’s function as an approved regulator
• the SRA Principles and Code of Conduct
• enforcement and compliance mechanisms used by the SRA
• the importance of professional standards and risk-based regulation.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. What are reserved legal activities, and who can carry them out?
2. Name three of the SRA Principles and explain their significance.
3. What enforcement powers does the SRA have if a solicitor breaches the Code of Conduct?
4. True or false? The SRA regulates all legal service providers in England and Wales.

Introduction

The regulation of legal services in England and Wales is designed to protect the public, maintain professional standards, and ensure the proper administration of justice. The Solicitors Regulation Authority (SRA) is the main regulatory body for solicitors and law firms, operating under statutory powers to set, monitor, and enforce standards of conduct. Understanding the SRA’s role, its regulatory framework, and the principles it enforces is essential for all SQE1 candidates.

The Regulatory Structure for Legal Services

Legal services in England and Wales operate within a statutory framework created by the Legal Services Act 2007 (LSA 2007). The Act introduced a two-tier system:

• oversight by the Legal Services Board (LSB), which supervises approved frontline regulators; and
• day-to-day regulation by approved regulators (for example, the SRA, Bar Standards Board, CILEx Regulation, the Council for Licensed Conveyancers).

The LSB must advance eight regulatory objectives, including protecting and promoting the public interest, supporting the constitutional principle of the rule of law, improving access to justice, protecting consumers, promoting competition, encouraging an independent, strong, diverse and effective profession, increasing public understanding of legal rights and duties, and maintaining adherence to professional principles. Approved regulators must align their regulatory arrangements with these objectives and are held to account by the LSB.

Key Term: reserved legal activities
Reserved legal activities are specific legal tasks (such as litigation, advocacy, conveyancing, probate, notarial acts, and administering oaths) that only authorised persons may perform.

Key Term: authorised person
An authorised person is an individual or entity permitted by an approved regulator (such as the SRA) to carry out reserved legal activities.

The LSA 2007 defines six reserved activities: the exercise of a right of audience; the conduct of litigation; reserved instrument activities (mainly relating to land); probate activities (preparing probate papers); notarial activities; and the administration of oaths. Carrying on a reserved legal activity without authorisation or exemption is a criminal offence (LSA 2007, s 14). In the context of rights of audience or the conduct of litigation, acting when not entitled may also constitute contempt of court. Exemptions exist in limited circumstances (for example, court-granted rights of audience in a particular case, or supervised employees preparing probate papers).

Illustrative case law clarifies the boundaries. Laying information in a private prosecution was held to be the “commencing of proceedings”, amounting to conduct of litigation requiring authorisation, whereas merely assisting with online completion of divorce papers—where the parties themselves lodged the documents—did not cross into reserved activity. Continuing to “hold out” as a solicitor after being struck off has resulted in contempt findings and imprisonment.

The framework distinguishes between “reserved” and “unreserved” work: unreserved legal services (for example, most will writing and general legal advice) can lawfully be provided by unregulated providers. However, where services are provided by a regulated person or firm (such as a solicitor or SRA-authorised body), the entirety of their legal services—reserved and unreserved—must comply with their regulator’s standards and rules.

The Role of the SRA

The SRA is the independent regulatory arm of the Law Society of England and Wales. It authorises and supervises solicitors, registered European lawyers, registered foreign lawyers, and firms it regulates (including licensed bodies, often called alternative business structures (ABSs)). The SRA’s functions include:

• authorising solicitors and law firms to provide legal services
• setting and enforcing standards of conduct and competence
• monitoring compliance with regulatory requirements
• investigating breaches and taking enforcement action where necessary.

Key Term: alternative business structure (ABS)
An ABS is a law firm that allows non-lawyers to own, manage, or invest in the business, subject to SRA regulation.

In practice this means:

• Individuals: Admission to the roll and the annual issue of a practising certificate (subject to meeting character and suitability and continuing competence). Solicitors may not exercise higher rights of audience in the senior courts without the relevant advocacy qualification. Those practising outside authorised firms must fall within limited models (for example, freelance solicitors meeting specific conditions, or in-house solicitors advising their employer).
• Entities: Firms must be authorised (recognised bodies/licensed bodies) and must appoint compliance officers—a Compliance Officer for Legal Practice (COLP) and a Compliance Officer for Finance and Administration (COFA). The COLP oversees compliance with the SRA’s Standards and Regulations; the COFA ensures compliance with the SRA Accounts Rules.

The SRA is funded primarily by practising certificate and firm authorisation fees. It is governed by a board including both solicitors and lay members, reflecting the public interest focus of legal services regulation.

The SRA Principles and Code of Conduct

The SRA Principles are the core ethical standards that all solicitors and regulated firms must follow. There are seven Principles:

1. Act in a way that upholds the rule of law and the proper administration of justice.
2. Act in a way that upholds public trust and confidence in the solicitors’ profession and in legal services provided by authorised persons.
3. Act with independence.
4. Act with honesty.
5. Act with integrity.
6. Act in a way that encourages equality, diversity, and inclusion.
7. Act in the best interests of each client.

Key Term: SRA Principles
The SRA Principles are the fundamental ethical rules that underpin all professional conduct for solicitors and regulated law firms.

The Principles are supported by two Codes of Conduct: one for individuals (solicitors, RELs and RFLs) and one for firms. The Codes contain mandatory outcomes and rules across areas including service and competence, conflicts, confidentiality and disclosure, client money and assets, publicity and transparency, complaint handling, co-operation with regulators, reporting obligations, and responsibilities of managers and compliance officers. The Codes apply to conduct in practice; the Principles can be engaged by behaviour inside and outside practice where public trust, integrity or the rule of law are at stake.

Honesty and integrity are distinct: dishonesty is assessed against the objective standards of ordinary decent people, while integrity is a broader concept about adherence to ethical standards (so a solicitor can act without integrity even if not dishonest). Independence means freedom from external pressures as well as independence from the client. Principle 7’s duty to act in the client’s best interests is important but does not override duties to the court and the public interest when Principles conflict.

Key Term: Code of Conduct
The SRA Code of Conduct is the set of binding rules and outcomes that solicitors and regulated firms must follow in all aspects of legal practice.

Specific obligations of note include:

• Conflicts and confidentiality: do not act where there is an own-interest conflict or a significant risk of one. Client conflicts are prohibited unless a strict exception (substantially common interest or competing for the same objective) is met, with informed written consent, effective safeguards, and it being reasonable to act.
• Client care, competence and supervision: act only on proper instructions; deliver competent service in a timely manner; keep skills up to date; supervise work effectively.
• Publicity and transparency: publicity must be accurate and not misleading. The SRA Transparency Rules require specified information (scope, price, who does the work, timescales, and complaint routes) to be accessible for certain common services. Firm websites must display the SRA digital badge and authorisation number.
• Complaint handling: provide information at engagement, handle complaints promptly and fairly and signpost to the Legal Ombudsman (LeO) if unresolved within eight weeks.
• Client money: safeguard client assets and comply with the SRA Accounts Rules (for example, prompt banking of client money, no improper transfers, monthly reconciliations).
• Cooperation and reporting: co-operate with regulators and ombudsmen; report serious breaches promptly (internally to compliance officers and externally to the SRA where appropriate).

Enforcement and Compliance

The SRA uses a range of mechanisms to ensure compliance and enforce its rules:

• Risk-based regulation: The SRA focuses its resources on areas of greatest risk to the public or the profession.
• Proactive supervision: The SRA monitors firms through visits, reviews, and data collection, and may require remedial action plans.
• Reporting requirements: Solicitors and firms must report serious breaches or misconduct promptly (for example, criminal charge/conviction, serious systems failures, dishonesty).
• Investigative powers: Using statutory powers, the SRA can require documents and explanations, enter premises, and interview relevant persons to investigate suspected breaches.
• Disciplinary action: The SRA can issue advice, warnings or rebukes, impose fines, attach conditions to practising certificates or firm authorisations, and, for more serious cases, refer matters to the SDT.
• Intervention: In serious cases, the SRA can close a firm and take control of client money and files to protect clients.

Key Term: intervention
Intervention is the SRA’s power to close a law firm and take control of its client money and files to protect the public.

Key Term: Solicitors Disciplinary Tribunal (SDT)
The SDT is an independent tribunal that hears serious cases of professional misconduct by solicitors and can impose sanctions including striking off.

SRA enforcement is anchored in its Enforcement Strategy. The SRA applies an Assessment Threshold Test to determine whether allegations, if proven, would amount to a serious breach and whether there is a realistic prospect of establishing the facts. The SRA’s investigative powers are backed by the Solicitors Act 1974; failure to comply with requests can constitute misconduct and, in some circumstances, a criminal offence.

Financial penalties: the SRA can fine traditional firms and individuals up to £25,000; higher penalties and unlimited fines in some contexts are reserved to the SDT. For ABSs, the LSA 2007 permits substantially higher fines for entities and for managers or owners. Suspension or revocation of authorisation and conditions on practice (for example, no sole practice; accounts restrictions) are also used to mitigate ongoing risk.

Common triggers for intervention include abandonment of practice, serious breaches of the Accounts Rules, dishonesty, insolvency, or where it is otherwise necessary to protect clients. An intervention automatically terminates client accounts and practice rights in relation to client money; clients are protected through the Compensation Fund and the firm’s insurance.

Risk-Based Regulation

The SRA adopts a risk-based approach, prioritising its resources according to the likelihood and impact of risks to the regulatory objectives. This means that firms and individuals are expected to have systems in place to identify, monitor, and manage risks to compliance.

Key Term: risk-based regulation
Risk-based regulation means focusing regulatory attention and resources on the areas of greatest risk to the public, clients, or the legal system.

The SRA publishes a Risk Outlook identifying sector-wide risks—recent examples include anti-money laundering (AML) compliance, misuse of client accounts (for example, banking facilities), strategic litigation against public participation (SLAPPs), improper litigation conduct, sanctions compliance, and poor standards of service. Supervision activity and thematic reviews are then targeted at firms where the risk is higher (for example, high-volume conveyancing practices for AML/Source of Funds issues).

Risk-based regulation is closely linked to firm-based responsibilities. Managers must maintain effective governance, financial stability, and appropriate controls. Compliance officers (COLP/COFA) must record and report material breaches and ensure prompt remedial action is taken.

Professional Standards and Client Protection

The SRA’s regulatory framework is designed to ensure that solicitors:

• act with honesty and integrity
• maintain independence and avoid conflicts of interest
• safeguard client money and assets
• provide competent and timely service
• treat clients and others fairly and without discrimination
• cooperate with regulators and ombudsmen.

Firms must have effective systems for managing client money, handling complaints, and ensuring all staff are trained and supervised appropriately. Client protection is reinforced through minimum terms professional indemnity insurance (PII), the SRA Compensation Fund, and redress through the Legal Ombudsman (which can award up to £50,000 and require remedial action or fee refunds). The SRA Accounts Rules ensure money is held on proper trust accounting principles; breaches can lead to sanctions and, in serious cases, intervention.

Key transparency and complaint-handling duties underpin consumer protection. The SRA Transparency Rules require price and service information for defined services, the SRA digital badge confirms regulation and access to protections, and firms must advise clients at engagement about complaints routes and LeO timescales.

AML is an ongoing supervisory priority. Where the Money Laundering Regulations 2017 apply (as amended), firms must have a firm-wide risk assessment, policies, controls and procedures, a nominated officer (MLRO) and MLCO, provide training, conduct appropriate customer due diligence (simplified, standard or enhanced), maintain records, and carry out ongoing monitoring. Under POCA 2002, solicitors commit offences if they fail to report knowledge or suspicion of money laundering in the regulated sector, or if they tip off a client that a suspicious activity report has been made. The legal duty to report may override confidentiality.

Worked Example 1.1

A solicitor is instructed by two clients on opposite sides of a commercial transaction. What must the solicitor do to comply with SRA rules?

Answer:
The solicitor must check for a conflict of interest. If there is a conflict or a significant risk of one, the solicitor must not act for both clients unless a specific exception applies and all conditions (including informed consent and safeguards) are met. Otherwise, the solicitor must decline to act for one or both clients.

Worked Example 1.2

A law firm receives £50,000 from a client for a property purchase, but the transaction falls through. What are the firm's obligations under the SRA Accounts Rules?

Answer:
The firm must keep the client money separate from its own funds, maintain accurate records, and return the unused funds to the client promptly. Failure to do so may result in disciplinary action.

Worked Example 1.3

A client complains that their solicitor has overcharged and failed to communicate properly. What must the firm do under SRA rules?

Answer:
The firm must acknowledge and investigate the complaint promptly, provide a clear response, and inform the client of their right to escalate the complaint to the Legal Ombudsman if not satisfied.

Worked Example 1.4

A solicitor wants to practise on a freelance basis. They intend to advise on employment law (unreserved work) and occasionally conduct litigation for consumers.

Answer:
Freelance practice is permitted subject to conditions. The solicitor can offer unreserved services without being authorised as a recognised sole practice if regulatory conditions are met (for example, practising in their own name, no employees, appropriate insurance, limited categories of client money). However, reserved activities (such as the conduct of litigation) must be provided through an authorised body unless an exception applies. The solicitor should review the SRA Authorisation of Individuals Regulations and ensure PII is “adequate and appropriate” for their practice.

Worked Example 1.5

A firm discovers that a senior associate has altered a bank statement provided by a client to “clarify” a source of funds. What are the firm’s obligations?

Answer:
This is a serious red flag for dishonesty and AML breaches. The firm should immediately secure evidence, consider suspending the individual, and report the matter promptly to the SRA (and to the firm’s MLRO where appropriate). The COLP/COFA must assess the materiality of the breach, record it, and take remedial action. If the conduct suggests dishonesty or serious incompetence, external reporting is likely required. The firm must also consider whether a suspicious activity report to the NCA is required and avoid tipping off the client.

Worked Example 1.6

A conveyancing partner gives an oral undertaking to the buyer’s solicitors to redeem the seller’s mortgage on completion, but on completion discovers the redemption sum exceeds the sale proceeds.

Answer:
Undertakings are binding even if oral. The partner (and the firm) must perform the undertaking within the agreed or a reasonable time. The firm may have to fund the shortfall and seek recovery later. Failure to honour an undertaking can lead to court enforcement and disciplinary action.

Enforcement Actions and Sanctions

If a solicitor or firm breaches the SRA Principles or Code of Conduct, the SRA can:

• issue a warning or rebuke
• impose a financial penalty (with higher penalties for ABSs under the LSA 2007)
• place conditions on a practising certificate or firm authorisation
• require remedial action, training, or independent audits
• suspend or revoke authorisation
• refer the matter to the SDT for more serious cases, where sanctions can include suspension or striking off.

The SRA also has powers to intervene in a firm to protect clients and the public. A finding of dishonesty usually results in the most severe sanctions, reflecting the importance of public trust and the rule of law. The SRA publishes regulatory decisions to support transparency and consumer choice.

Exam Warning

The SRA does not regulate all legal service providers. Only solicitors, SRA-authorised law firms, and certain other regulated professionals fall under its jurisdiction. Unregulated providers may offer some legal services (such as will writing) without SRA oversight.

Key Point Checklist

This article has covered the following key knowledge points:

• The LSB oversees frontline regulators and promotes eight statutory regulatory objectives.
• Only authorised persons may carry out reserved legal activities; carrying on such work without authorisation is a criminal offence.
• The SRA regulates solicitors and authorised firms, including ABSs, and sets and enforces standards through the Principles and Codes of Conduct.
• Firms must appoint compliance officers (COLP/COFA) and maintain effective governance, systems, and controls.
• The SRA adopts risk-based regulation, with supervisory focus on higher-risk areas (for example AML, client money, litigation conduct).
• Transparency, complaint handling, and co-operation duties support consumer protection.
• Client money must be safeguarded under the Accounts Rules; minimum terms PII and the Compensation Fund provide safety nets.
• The Legal Ombudsman can award up to £50,000 and require remedial steps in service complaints.
• The SRA’s enforcement toolkit includes advice, warnings, rebukes, fines, conditions, SDT referral, suspension, and intervention.
• Reporting obligations require prompt notification of serious breaches; the SRA has strong investigation powers to obtain documents and information.

Key Terms and Concepts

• reserved legal activities
• authorised person
• alternative business structure (ABS)
• SRA Principles
• Code of Conduct
• intervention
• Solicitors Disciplinary Tribunal (SDT)
• risk-based regulation