The Solicitors Regulation Authority has formally launched its consultation on whether it should relax rules which require solicitors to refer clients to IFAs for investment advice.
The consultation has now been approved and has been published on the SRA’s website.
Currently the SRA Code of Conduct states if clients are likely to need advice on investments they must be referred to an “independent intermediary”. The SRA is consulting on whether to amend this requirement in light of confusion around the definition of an independent intermediary. It has also been argued the rule pre-empts solicitors’ own judgement about appropriate referrals.
The SRA is considering three options for revising the rule’s wording.
The first is to alter the language to align it with the FSA’s definition of independence. Under the new independence definition post RDR IFAs have to consider a broader range of retail investment products and provide unbiased and unrestricted advice based on a comprehensive and fair analysis of the relevant market.
The second option is to remove the rule on referrals altogether. Solicitors will still be required to act in clients’ best interests.
The third option, and the option preferred by the SRA, is to amend the rule so that clients and solicitors can make an informed decision about whether an independent or restricted adviser would be the best choice to advise on the client’s investments.
SRA financial regulation policy manager Agnieszka Scott says: “In outcomes-focused regulation, the solicitor should make a judgement as to what is in the best interest of the client. Changes in the financial market and the definition of advisers means an adviser could not be classed as independent but still provide the client with the relevant choice of financial options.
“Solicitors, as highly qualified professionals, should be free to assess and discuss clients’ needs, not be restricted by a prescriptive rule. It is one of the reasons we are consulting on three options available to us, and we would like as many people as possible to provide their views to us.”
The consultation closes on 10 September.