The Professional Regulation Committee of the Birmingham Law Society (BLS) considers that the SRA’s proposals are wholly unnecessary. We consider that new conduct rules are not required as there are existing provisions that adequately address the professional conduct issues. We think that there is merit in the SRA introducing guidance to assist the profession in understanding professional conduct requirements when using or arranging third party litigation funding.
We think that the existing rules have been inadequately enforced by the regulator. In particular, we highlight the failure of the regulator to take appropriate enforcement action in respect of the SRA Accounts Rules and the Financial Services Rules.
Third party case funding is not money that belongs to the business. It is client money that should properly be held in client bank account until such time as the business raises a bill. The security for any funder should be that the funds are held in client bank account. There should be no circumstances where a third party litigation funder has security over the assets of the firm. The failure of the SRA to recognise this demonstrates a catastrophic failure of the regulator to enforce the most important rules to protect the public and the profession.
Cary Whitmarsh, Chair of the Professional Regulation Committee said:
“The SRA’s failure to adequately address litigation funding is not a new phenomenon. The issues that we saw in respect of SSB Law are similar to those that arose in Axiom litigation funding saga (not to be confused with the Axiom Ince debacle) about 15 years ago.
“The problem is not that new rules are needed. It is that the existing rules need to be properly explained and enforced. We think that guidance on the rules, tailored to suit those who use or arrange litigation funding, is the appropriate measure. This needs to be backed up by proper enforcement of those rules, so that the small number of law firms that fail to have due regard to them are held to account.
“The proposals in this consultation are a sledgehammer to crack a nut. They will impose a regulatory burden on honest, decent, hard working legal professionals whilst doing little to target the tiny minority that seek to exploit consumers and their fellow professionals”.
Consultation paper response here.