The Law Society has urged solicitors not to comply with the Solicitors Regulation Authority’s new rules allowing clients to be referred to restricted advisers.
The professional body for solicitor firms argues last week’s decision by the SRA board to relax the requirement to refer clients to IFAs for investment advice could expose solicitors to negligence claims which could lead to solicitors becoming “embroiled in a misselling scandal”.
Chief executive Desmond Hudson says: “Under the new rules, solicitors will not be penalised for exercising discretion.We urge them to use that discretion to only refer and recommend IFAs to clients to avoid the risk claims.”
An SRA consultation in July put forward three options on referrals: aligning the code of conduct with the FSA’s definition of independence, removing the rule on referrals, and allowing clients and solicitors to make an informed decision.
The consultation received 62 responses. Of those who set out their preferred option, 26 responses favoured option one, one respondent favoured option two, and 22 responses favoured option three.
Sifa chairman Ian Muirhead says: “It appears the SRA made up its mind several months ago and has not been deflected by the majority of the responses which were in favour of retaining the independent requirement.”
IFA Centre managing director Gill Cardy says: “The SRA’s decision is flawed and defies the Law Society’s position. It is not in the best interests of solicitors’ clients and must be reconsidered”.
Aurora Financial Planning chartered financial planner Aj Somal says: “I would have preferred for the independence requirement to be kept. Referring to a restricted adviser may not be in the client’s best interests and at this stage we do not what the market split between independent and restricted will be.”