The board of the Solicitors Regulation Authority has agreed to allow solicitors to recommend restricted advisers for investment advice.
The board approved amending its code of conduct at a meeting in London today after the SRA recommended that referrals to restricted advisers should be allowed.
Currently the code states if clients are likely to need advice on investments they must be referred to an “independent intermediary”.
The new code will allow solicitors to put clients “in a position to make informed decisions about referrals in respect of investment advice”.
The SRA launched a consultation in July which put forward three options for revising the code’s wording: altering the language to align it with the FSA’s definition of independence, removing the rule on referrals altogether, and allowing clients and solicitors to make an informed decision about the type of adviser they refer to.
A total of 62 industry responses were submitted to the SRA. Of those who set out their preferred option, 26 responses were in favour of option one, one respondent was in favour of option two, and 22 responses were in favour of option three. Despite this feedback, the SRA has chosen option three, effectively opening up referrals to restricted advisers.
Sifa chairman Ian Muirhead says: “I think the decision is appalling. It will lead to solicitors permitting clients to engage with the wrong sort of financial advisers, which will give rise to misselling claims, which will damage solicitors, damage the profession, and damage the solicitors’ compensation fund.
“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 the retention of the independent requirement.”
IFA Centre managing director Gill Cardy says: “This decision is flawed and defies the Law Society’s position. It is not in the best interests of solicitors’ clients and it must be reconsidered”.
Cardy is considering whether the SRA’s decision can be judicially reviewed.
She adds: “I cannot believe we are in this bizarre situation where solicitors, who prize their professional independence above all else, have agreed it is no longer appropriate to retain the requirement to refer their clients to other professional financial planners and advisers who also prize their independence above all else.”