SRA recommends approval of restricted referrals

The Solicitors Regulation Authority is to recommend its board allows solicitors to refer clients to restricted as well as independent advisers for investment advice.

The SRA board is meeting on 28 November to decide whether to amend its code of conduct to allow referrals to restricted advisers. Currently the code states if clients are likely to need advice on investments they must be referred to an “independent intermediary”.

If approved, 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 its consultation in July, which closed in September. It says it decided to consult on referrals following the FSA changes to the definition of independence post-RDR. The FSA has defined independent advice as a personal recommendation of a retail investment product which is “based on a comprehensive and fair analysis of the relevant market” and is “unbiased and unrestricted”.

The SRA also argues there is a risk that only allowing solicitors to refer to IFAs might be contrary to its aim of ensuring the best client outcomes.

It consulted on 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.

SRA director of policy Agnieszka Scott says: “We had an excellent response to our consultation and we would like to thank all those who responded. We have taken on board the comments received, some of which have given us food for thought.

“However, nothing has changed us from our belief that the best way forward is to implement our preferred option, option three, and that is what we will be recommending to the board. This represents the best fit with outcomes-focused regulation as solicitors, as highly qualified professionals, would be free to assess and discuss clients’ needs, not be restricted by a prescriptive rule.”